## Facts

- Racing Investment Fund 2000, LLC was formed to purchase, train, and race thoroughbred horses under an operating agreement with member capital contributions and a manager.
- The operating agreement authorized the manager, on an as-needed basis, to make pro rata capital calls on members to pay “operating, administrative or other business expenses.”
- Clay Ward Agency, Inc. provided equine insurance coverage to Racing Investment and was owed unpaid premiums.
- Racing Investment entered an agreed judgment in favor of Clay Ward for past-due premiums.
- Racing Investment partially satisfied the judgment by tendering its remaining assets after it became defunct, but a balance remained unpaid.
- The Fayette Circuit Court held the LLC in contempt for nonpayment and ordered Racing Investment to use the capital-call provision to satisfy the judgment or face further sanctions.
- The Kentucky Court of Appeals affirmed.

## Issues

1. Whether a court may invoke an LLC operating agreement’s capital-call provision to require members to contribute additional capital to satisfy a judgment debt of the LLC, despite statutory limited liability.

## Decision

- The Kentucky Supreme Court reversed the Court of Appeals and the circuit court.
- The court held that members could not be compelled, via judicial enforcement of a capital call, to fund payment of a judgment against the LLC.
- The court concluded that the operating agreement’s capital-call clause did not contain unequivocal language by which members agreed to personal liability for LLC debts.

## Legal Principles

- Under KRS 275.150, LLC members and managers are not personally liable for the LLC’s debts, obligations, or liabilities unless they clearly agree otherwise in writing.
- Any waiver or exception to statutory limited liability must be expressed in unequivocal language.
- A capital-call provision aimed at funding ongoing “operating, administrative or other business expenses” does not, without explicit language, constitute a member’s written assumption of personal liability to an LLC creditor.
- A court may not transform an internal contractual capital-call mechanism into a creditor collection device that effectively bypasses statutory limited liability.
- An LLC’s continued existence for winding up and liquidation does not alter the limited liability shield for its members.

## Conclusion

The Kentucky Supreme Court held that statutory limited liability barred courts from compelling LLC members to contribute additional capital to satisfy an LLC judgment based solely on a general capital-call clause, absent an explicit written agreement by members to assume personal liability for the debt.


Racing Inv. Fund 2000, LLC v. Clay Ward Agency, Inc., 320 S.W.3d 654 (Ky. 2010)