1. What evidence did Billings claim indicate that the LLC was a continuing entity and not a separate entity? Why did the court reject his theory? 

2. The court pointed out that there was no evidence of fraud in the formation of the new entity. Why is that important? What kind of fraud could be committed in this context? 

3. Is this a case of business owners  using  the  law as a shield against a legitimate claim? Is this fair to Billings? What are the public policy implications of this decision?

Brumat was the sole proprietor of Snug Harbor Jazz Bistro of New Orleans (Snug Harbor), a restaurant, bar, and music club. Brumat had leased a building on Frenchmen Street in New Orleans. In July 2007, Brumat died and pursuant to his last will and testament, all of his property, except a piano, was left to his niece, Luana Brumat (Luana). In September 2007, Luana and Brumat’s former bookkeeper properly registered Snug  Harbor, L.L.C., a Louisiana limited liability company. The filing listed themselves as its officers and used the Frenchmen Street address as its domicile and mailing address. 

In 2009, Biller obtained an $80,000 judgment against Snug Harbor as a result of an accident that occurred at the Snug Harbor restaurant in April 2007. Seeking to enforce the judgment, Billers filed a petition alleging that the business entity Snug Harbor has operated continuously before and after the death of Brumat and that Snug Harbor, L.L.C., was a successor in interest to the Brumat sole proprietorship. On that basis, Billings argued that the LLC was liable for Brumat’s debts in connection with the operation the Snug Harbor restaurant.

Snug Harbor, L.L.C., denied liability for the judgment arguing that Snug Harbor was a sole proprietorship that terminated upon the death of Brumat, and Snug Harbor, L.L.C. was a limited liability company that was formed after Biller’s injury and after Brumat’s death and was a separate and distinct entity. The trial court ruled that Snug Harbor, L.L.C., was a not a successor in interest to Snug Harbor because at the time of the accident, Brumat owned and operated Snug Harbor as a sole proprietorship. Billings appealed. 

The Court of Appeals for the Fourth Circuit affirmed the trial court’s decision in favor of Snug Harbor, L.L.C. The court rejected Billings’s argument that Snug Harbor, L.L.C., continued operating Snug Harbor as usual following Brumat’s death because Snug Har-bor’s former bookkeeper was engaging in the same business at the same address. The court ruled that the business entity owned by Brumat terminated upon his death because it was a sole proprietor-ship. The parties (an heir and a former employee of Brumat) then properly and promptly formed a new entity that was a separate and distinct business entity (an LLC) from the sole proprietorship. The court pointed to the fact that the new entity entered into a new commercial lease agreement for the Frenchmen Street building and other necessary contracts as evi-dence that a new entity existed after Brumat’s death.

“After reviewing the record, we find no error in the trial court’s conclusion that Snug Harbor, L.L.C., is a separate, distinct entity from the late Mr.  Brumat and his estate, and therefore, not liable for the debts of the succession. The evidence supports the trial court’s finding that Snug Harbor, L.L.C., did not exist at the time of Mr. Biller’s accident and was formed after Mr. Brumat’s death . . . We also note that plaintiffs neither asserted nor offered evidence that Ms. Brumat and Mr. Schmidt formed Snug Harbor, L.L.C., with the intent to defraud any creditor(s) of the succession. Absent any evidence of fraud and considering the evidence before us, we find the trial court properly dismissed plaintiffs’ claims against Snug Harbor, L.L.C.”