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Litigation: Delaware court rules LLCs owe fiduciary duties to the LLCs they manage

The Delaware Court of Chancery tries again

The Delaware Court of Chancery has once again issued an opinion holding that managers of Delaware Limited Liability Companies (LLC) owe fiduciary duties to the LLCs they manage, even in the absence of a provision in the operating agreement establishing the existence of the fiduciary duties.

In Auriga Capital Corp. v. Gatz Properties, LLC, Chancellor Leo E. Strine Jr. stated that default fiduciary duties exist, but in an opinion released on Nov. 7, in Gatz Properties LLC v. Auriga Capital Corp., the Delaware Supreme Court declared that part of the opinion to be “dictum without any precedential value” because the issue of whether the manager owed fiduciary duties was admitted by the manager, making the inquiry unnecessary. However, on Nov. 28, in Feeley v. NHAOCG, LLC, where the question was squarely presented, Vice Chancellor J. Travis Laster held that managers of Delaware LLCs do owe default fiduciary duties.


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John Reed

John Reed is a partner the Delaware office of DLA Piper, where he concentrates his practice on corporate litigation and counseling. He can be contacted...

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