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Wang v. Hennessy

A-3263-02T2 (N.J. Super. App. Div. 2003) (Unpublished)

LIMITED LIABILITY COMPANIES—Members of a limited liability company that always held itself out to be such, are not liable for the debts and obligations of the company and no analogy should be made to limited partners of a limited partnership who act as if they were general partners.

A seller sold computer hardware to a buyer. The buyer was a limited liability company. The seller and buyer never had a written contract, but had a regular business relationship over a five year period. The seller sent invoices to the buyer without the “LLC” designation. The buyer paid all bills with company checks with the “LLC” designation. When the buyer failed to pay the latest invoices, the seller sued the buyer’s members for payment of the past due invoices. The lower court found in favor of the seller. It decided that a limited liability company is analogous to a limited partnership, and that the members of a limited liability company can be liable for the company’s debts the same way a limited partner may be treated as a general partner if the limited partner acts as a general partner and others rely on it. The lower court then found that the seller assumed he would be paid by the limited liability company or the members individually. Therefore, it held the member personally liable for all of the seller’s invoices that he signed that did not include the “LLC” designation. The Appellate Division reversed. It noted that a limited liability company is not analogous to a limited partnership because under the New Jersey Limited Liability Company Act, no member is responsible for company debt even if the member also managed the company. It also found that the seller’s beliefs as to who would pay the bills was immaterial. The buyer always held itself out to be a limited liability company in its dealings with the seller. All faxes and checks contained the “LLC” designation. It also found that because the parties’ business practice remained unchanged for five years, it was improper for the lower court to view each invoice as a separate transaction. The Court distinguished this case from a case where a buyer may have started out as a sole proprietorship and later changed the nature of its business entity to a limited liability company or corporation without notifying the seller. That was not the case here. The buyer was always a limited liability company and always held itself out to be a limited liability company in its dealings with the seller. Therefore, the members could not be held personally liable.

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