1. How did this case come to be heard before the state’s supreme court?

2. What public policy reason(s), if any, exists to create separate standards for LLC veil piercing versus corporate veil piercing?

Flahive Oil & Gas was a Wyoming Limited Liability Company with no assets at the time of suit. Kaycee Land and Livestock (Kaycee) entered into a contract with Flahive Oil & Gas LLC allowing Flahive Oil & Gas to use the surface of its real property. Roger Flahive was the managing member of Flahive Oil & Gas at all relevant times. Kaycee alleged that Flahive Oil & Gas caused environmental contamination to its real property. Kaycee sought to pierce the LLC veil and disregard the LLC entity of Flahive Oil & Gas and hold Roger Flahive individually liable for the contamination. There was no allegation of fraud. The question presented to the Wyoming Supreme Court was whether, in the absence of fraud, the remedy of piercing the veil is available against a company formed under the Wyoming Limited Liability Company Act.

JUDICIAL OPINION

KITE, J.… Wyoming courts, as well as courts across the country, have typically utilized a fact driven inquiry to determine whether circumstances justify a decision to pierce a corporate veil. This case comes to us as a certified question in the abstract with little factual context, and we are asked to broadly pronounce that there are no circumstances under which this court will look through a failed attempt to create a separate LLC entity and prevent injustice. We simply cannot reach that conclusion and believe it is improvident for this court to prohibit this remedy from applying to any unforeseen circumstance that may exist in the future….

… We note that Wyoming was the first state to enact LLC statutes. Many years passed before the Internal Revenue Service’s approval of taxation of LLCs as partnerships led to other states adopting LLC legislation and the broad usage of this form for business organizations. Wyoming’s statute is very short and establishes only minimal requirements for creating and operating LLCs. It seems highly unlikely that the Wyoming legislature gave any consideration to whether the common law doctrine of piercing the veil should apply to the liability limitation granted by that fledgling statute….

… With the dearth of legislative consideration on this issue in Wyoming, we are left to determine whether applying the well established common law to LLCs somehow runs counter to what the legislature would have intended had it considered the issue. In that regard, it is instructive that: “Every state that has enacted LLC piercing legislation has chosen to follow corporate law standards and not develop a separate LLC standard.” Philip P. Whynott, The Limited Liability Company §11:140 at 11-5 (3d ed. 1999). Statutes which create corporations and LLCs have the same basic purpose—to limit the liability of individual investors with a corresponding benefit to economic development. Statutes created the legal fiction of the corporation being a completely separate entity which could act independently from individual persons. If the corporation were created and operated in conformance with the statutory requirements, the law would treat it as a separate entity and shelter the individual shareholders from any liability caused by ………………..