Des Moines, IA – DES MOINES, Iowa City Press-Citizen – The Iowa Supreme Court ruled Wednesday that members and managers of a limited liability corporation can be sued if their conduct injures consumers, giving a win to survivors of a deadly 1999 gas explosion.
The ruling caps years of litigation stemming from a Labor Day blast that leveled a house in Richland, killing seven and injuring six others. Propane gas leaking from a line behind the home ignited, causing the explosion.
Survivors and estates of those killed sued eight companies they blamed for the explosion and reached settlements with each. But a judge dismissed the Farmers Cooperative Association in Keota from the lawsuit, saying it could not be sued as the manager of a limited liability corporation. The association owns and manages Double Circle, a retailer that delivered the propane to the home. It failed to tell propane users to install gas detectors and didn’t add enough odorant to the odorless, colorless gas, the plaintiffs argued.
Justice Mark Cady, writing for the unanimous court, noted Iowa law does not give managers of an LLC immunity from lawsuits when they injure others.
The survivors, who have fought for compensation and to force companies to improve their safety practices, hailed the decision as a way to make companies more accountable for their subsidiaries.
“This is just a big milestone for us,” said Bev Gartner, 50, of Iowa City, who received burns over 70 percent of her body but survived after crawling out of the burning rubble. “Hopefully, this will change the way big companies operate. They will be more diligent as to the rulings and inspections they put onto people beneath them.”
The court ordered a new trial, but both sides said a settlement is imminent.
The victims’ lead attorney, Don Beattie of Des Moines, said 19 plaintiffs would split $3 million from the association’s insurance company, Farmland Insurance, and agree to end the litigation. He called the ruling a “huge victory for consumers,” saying it’s the first time a court has favored consumers instead of businesses in the few times the issue has been addressed nationwide.
Steve Dickinson, a corporate lawyer in Des Moines, said the LLC is a relatively new way to set up a corporation, popular with small and family-held businesses. It shields managers from assuming liability for corporate debts and from paying corporate income taxes. He said the ruling applies to LLCs the same doctrine that has been used to allow consumers to sue corporations.
The attorney for the association, Richard Fry of Cedar Rapids, said he was disappointed and that a settlement was likely.
Gartner, who now counsels burn victims at University Hospitals, said family and friends had gathered at her sister’s home to celebrate Labor Day. The blast killed Dale and Marjorie Countryman of Birmingham; Dorothy and Ed Cunningham of Fairfield; Marlene Countryman of Fairfield; and Juanita and Ashley Usovsky of Richland.
Officials say the homeowner, Jerry Usovsky, severed the gas line a day before the blast when he was building a dog pen. But the survivors say the explosion could have been avoided if companies had better safety procedures in place to warn consumers about the dangers.