LLC Not a “Mere Continuation” of Former Proprietorship

Author: Tyler A. Moore


Plaintiff went to Snug Harbor Jazz Bistro of New Orleans (“Snug Harbor”) to dine and listen to jazz music, but while dining, the chair in which he was seated collapsed. At that time, Mr. Brumat was the sole proprietor of Snug Harbor, and he employed Mr. Schmidt as his office manager. Mr. Brumat died testate after the accident and bequeathed most of his property to his niece, Ms. Brumat, a resident of Italy. Ms. Brumat and Mr. Schmidt then formed and registered Snug Harbor LLC. Subsequently, plaintiff filed a petition for damages against Snug Harbor LLC, Snug Harbor Inc., and, later, Mr. Brumat’s Succession. The trial court rendered a judgment against the Succession, awarding plaintiff $80,000.00.

In seeking to enforce the judgment, plaintiff alleged that Snug Harbor operated continuously before and after the death of its owner and that Snug Harbor LLC was liable for the debts of Mr. Brumat in connection with the operation of the business. The trial court, however, found that the proprietorship ceased with the death of Mr. Brumat and Snug Harbor LLC was completely separate entity from Mr. Brumat and his estate.

On appeal, plaintiff argued that the circumstances surrounding the creation of Snug Harbor LLC and its succession to the business and property of the “old” Snug Harbor were of such character as to warrant a finding that it was a “mere continuation.” The court of appeal affirmed that trial court’s ruling and held that Snug Harbor LLC was not liable for the debts of the Succession. The court of appeal relied on Mr. Schmidt’s testimony the he and Ms. Brumat formed the LLC with their own “seed money” and made major business decisions jointly, that he ran the day-to-day operations, received a salary and a percentage of the profits, and that Ms. Brumat shared in the profits. Further, Mr. Schmidt testified that he entered into a new commercial lease on behalf of Snug Harbor LLC. The court found this sufficient evidence to conclude that Snug Harbor LLC was a separate and distinct entity from the late Mr. Brumat and his estate.

Biller v. Snug Harbor Jazz Bistro of Louisiana, LLC, No. 2011-CA-1784, 2012 WL 3860030 (La. App. 2 Cir. 9/5/12).