“Finally, the evidence did not show that Siva was misguided as to the fact he was dealing with a limited liability company.”  Brown, Judge 

Facts: Five members Richard Hess, Robert Haines, Lisa Hess, Nathan Hess, and Zack Shahin—formed a limited liability company called 1138 LLC. Ruthiran Siva owned a commercial building located at 1138 Bethel Road, Franklin County, Ohio. Siva entered into a written lease agreement with 1138 LLC whereby 1138 LLC leased premises in Siva’s commercial building for a term of five years at a monthly rental of $4,000. 1138 LLC began operating a bar on the premises. Six months later, 1138 LLC was in default and breach of the lease agreement. Siva sued 1138 LLC and Richard Hess to recover damages. Siva received a default judgment against 1138 LLC, but there was no money in 1138 LLC to pay the judgment. Hess, who had been sued personally, defended, arguing that as a member-owner of the LLC, he was not personally liable for the debts of the LLC. The trial court found in favor of Hess and dismissed Siva’s complaint against Hess. Siva appealed. 

Issue: Is Richard Hess, a member-owner of 1138 LLC, personally liable for the debt owed by the LLC to Siva? 

Language of the Court: Based upon the evidence presented, a reasonable trier of fact could have concluded that 1138 LLC became insolvent due to unprofitable operations. Moreover, even if the record suggests poor business judgment by Hess, it does not demonstrate that he formed 1138 LLC to defraud creditors. Finally, the evidence did not show that Siva was misguided as to the fact he was dealing with a limited liability company. Siva’s counsel drafted the lease agreement and Siva acknowledged at trial he did not ask any of the owners of 1138 LLC to sign the lease in an individual capacity. 

Decision: The court of appeals held that Hess, as a member-owner of 1138 LLC, was not personally liable for the debt that the LLC owed to Siva. The court of appeals affirmed the decision of the trial court that dismissed Siva’s complaint against Hess. 

Ethics Questions: Did Hess owe an ethical duty to pay the debt owed by 1138 LLC to Siva? Did Siva act ethically by suing Hess personally to recover the debt owed by the 1138 LLC?