Delaware Court of Chancery Reaffirms Default Fiduciary Duties in the Limited Liability Company Context Absent Contractual Modifications
By BARRY A. BROOKS, KEVIN C. LOGUE & LESLIE E. KERSEY
In its January 27, 2012 decision in Auriga Capital Corp. et al v. Gatz Properties LLC et al, C.A. 4390-CS (Del. Ch. Jan. 27, 2012), the Delaware Court of Chancery reaffirmed that limited liability company managers and other fiduciaries are charged with the equitable fiduciary duties of care and loyalty, similar to the obligations of officers and directors of a corporation, and that, in order to eliminate or limit those duties, the parties to the limited liability agreement must so agree in the agreement itself.
The Auriga opinion contributes an extensive examination of Delaware statutory provisions, legislative history and precedent case law supporting the default application of traditional fiduciary duties in the absence of contractual carveouts. In Auriga, Chancellor Strine likewise reaffirms that, like corporate directors, general managers and trustees, limited liability company managers fall within the definition of fiduciary."
The decision serves as a reminder to practitioners, fiduciaries and minority investors of limited liability companies that, where limitations or waivers of the traditional fiduciary duties of loyalty and care are desirable in the limited liability company context, the governing documents should expressly modify or eliminate such duties.