Abe, Ben, and Cal decided that they would join together to make money by building and remodeling houses. They talked to Larry – a lawyer – who advised them that they should create a Limited Liability Partnership
) to protect Abe, Ben, and Cal from personal liability. All three agreed. For his fee Larry took a 10% interest in the new business
entity: ABC Building LLP (hereinafter ABC). Larry properly filed a LLP certificate with the Secretary of State’s office. The date of official formation for ABC is December 1, 2011. An LLP Agreement was completed, which amongst other things named Cal as the only Manager of ABC. Abe and Ben cannot make purchases in the name of ABC. Additionally ownership of ABC is as follows: Abe: 30%, Ben: 30%, Cal: 30%, and Larry 10%. Profits would be split according to ownership share.
On January 1, 2012, business was so good, Cal decided to hire Dave as an Independent Contractor to paint the houses ABC had completed building/remodeling. Cal would tell Dave which houses to paint, what color of paint to use, and when the painting needed to be completed. Cal, nor Abe nor Ben would supervise Dave; Dave was only required to complete the work on time. All of Dave’s income is derived from his work for ABC.
On February 2, 2012, Dave was up on a ladder doing some touch up painting to the trim of a house he was painting for ABC. Normally Dave has a device which attaches the paint can to the ladder so that the can of paint will not fall to the ground. On this particular day Dave did not use the device. A gust of wind came-up causing Dave to let go of the paint can so that he would not fall off the ladder. The 5 gallon can of paint fell to the ground and rolled out into the street. Pal, who was looking at the GPS on his EPhone, saw the can at that last moment. Pal swerved to the right to avoid the paint can, and struck a tree. Pal’s car was damaged, his nose was broken; and he had to rent a car for a month. Pal is 50% at fault for his harm.
On March 3, 2012 Ben’s work truck broke down. Ben went to a truck dealership and purchased a new work truck; cost $70,000. Ben purchased the truck in the name of ABC. ABC did not pay for the truck. The dealership has brought an action against ABC and Abe, Ben, Cal and Larry personally.
Cal needed to make more money. Cal on his own time decided to build a house for Hank. Abe found out about Cal’s work for Hank and has brought a breach of the Duty of Loyalty action against Cal. The questions are whether Dave had a Duty to Pal? whether Dave breached his duty to Pal? whether Dave’s actions were the actual and proximate cause of Pal’s harm? whether Pal was harmed? whether Pal’s actions contributed to his harm; and if so how much would Pal’s damages be reduced or would Pal not receive any damages because he is 50% at fault? whether Dave is an Independent Contractor or an Agent of ABC Building LLP? Who is liable to Pal: Dave, ABC Building LLP, or would Abe, Ben, Cal, and Larry be personally liable to Pal? whether Ben is personally liable for the purchase of the truck or is ABC Building LLP Liable? whether Cal breached his Duty of Loyalty to ABC Building LLP, Abe, Ben, and Larry? whether Larry breached the Rule of Professional Conduct by taking an interest in ABC?