New York State Court Finds that LLC Member Individually Liable In Discrimination Case Brought Under State Human Rights Law

In Pepler v. Coyne, 822 N.Y.S.2d 516 (2006), plaintiff Jeanine Pepler sued her former employer Rugged Land, LLC as well as two of its managing members after they terminated her employment as the LLC's director of publicity, claiming that they fired her because she had undergone surgery for throat cancer, which had left her with a "raspy voice." Plaintiff brought a claim under the New York State Human Rights Law, which prohibits an employer from terminating an employee because of a disability. Plaintiff specifically alleged in the complaint that managing members defendants Shawn Coyne and Webster Stone fired her because of her impaired speech, despite her past "exemplary" job performance.

Defendants filed a motion to dismiss, and the trial court dismissed the case as to defendant Coyne, finding that there was no allegation that Coyne had actually participated in plaintiff’s firing.

On appeal, a New York appellate court reversed the dismissal of plaintiff's claim against defendant Coyne. The court held that the complaint had alleged that defendant Coyne was a person "having any ownership interest or any power to do more than carry out personnel decisions made by others"; such that he could be an "employer" within the meaning of the Human Rights Law. The court further noted that plaintiff had categorized Coyne in the complaint as a co-founder and member of the LLC with the power to hire and fire employees such as plaintiff. Defendant Coyne had argued that he was exempt from liability under section 609(a) of New York's LLC Act, which provides that an LLC member is not personally liable for the debts and obligations of the LLC. The court held, however, that section 609(a) "does not extend to violations of [the New York Human Rights Law] by a person with an ownership interest in, or the power to make personnel decisions for, the organization." The court held that defendant Coyne was, therefore, subject to liability upon a showing by plaintiff that he became a party to the termination of plaintiff's employment by “encouraging, condoning, or approving it.” The court, therefore, reversed the lower court's dismissal of plaintiff's claim against defendant Coyne.

In holding that section 609(a) of the New York LLC Act does not apply in a case involving a claim for violation of the New York Human Rights Law, the court cited to Patrowich v. Chemical Bank, 63 N.Y.2d 541 (1984), as controlling authority. Patrowich involved a lawsuit against an officer of a corporation, and in that case the court held that a corporate employee is individually subject to suit under New York’s Human Rights Law if he or she has an ownership interest or power to do more than carry out personnel decisions made by others. The Pepler court, therefore, assumed without any discussion, that the precedent regarding individual liability under New York’s Human Rights Law applies in the same manner where an LLC and the LLC’s members are defendants as it does where a corporation and one of its corporate officers are the named defendants.

It seems that the way to reconcile the New York LLC Act and the New York's Human Rights Law turns on agency principles and not corporate law. If defendant Coyne "encourag[ed], condon[ed] or approv[ed]" plaintiff's firing as plaintiff purportedly alleged then he acted tortiously and could be held individually liable under agency principles. If he did not participate in plaintiff's firing in any way, then the LLC Act should trump, and defendant Coyne should not be individually liable.

[Gregory Duhl]