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Limited Liability Company (LLC) Breach of Contract LLC Agreements

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Chancery Rejects Attempt to Disguise Breach of Fiduciary Duty Claim Where LLC Agreement Waived All Traditional Fiduciary Duties

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Delaware permits the elimination of fiduciary duties in limited liability company agreements. Notwithstanding, and just like in any other contract, parties to a limited liability company agreement are still subject to the...more

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Business Court of Texas Rebuffs Member’s Duty Claim, Reaffirms Freedom of Contract in LLC Agreement

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A recent opinion from the Business Court of Texas, Eighth Division (Fort Worth), provides a crisp reminder that an LLC’s company agreement can all but eliminate fiduciary duties among its members and managers. In Tall v....more

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Chancery Enforces LLC Agreement in Prince Estate Dispute

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McMillan v. Nelson, C.A. 2024-0016-KSJM (Del. Ch. July 5, 2024) - In a dispute over the management of Prince Legacy, LLC, an entity formed to manage assets from the estate of the late musician Prince, the Court of...more

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Chancery Finds Member Breached LLC Agreement in Unilaterally Dissolving the Company

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VH5 Capital, LLC v. Jeremiah Rabe, C.A. No. 2020-0315-NAC (Del. Ch. June 30, 2023) - The at-issue LLC had two members – the defendant and the plaintiff, both of whom also constituted the company's board. The company never...more

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There Is a Big Difference Between ‎‎“Void” and “Voidable”‎

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In the iconic “The Princess Bride,” Miracle Max observes that there is a big difference between “all dead” and “mostly dead” and then goes on to prove it. In Holifield v. XRI Investment LLC, 2023 WL 5761367 (Del. Supr. Sept....more

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Chancery Suggests Alternative Approach To Contracts Providing That Prohibited Acts Are Void Ab Initio

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XRI Investment Holdings LLC v. Holifield, et al., C.A. No. 2021-0619-JTL (Del. Ch. Sept. 13, 2022) - Under precedents such as CompoSecure, L.L.C. v. CardUX, LLC (Del. 2018), acts defined by an LLC agreement as “void” or...more

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Chancery Addresses Whether LLC Agreement Modified or Eliminated Fiduciary Duties

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In Re Cadira Group Holdings, LLC Litigation, Consolidated C.A. No. 2018-0616-JRS (Del. Ch. July 12, 2021) - The Delaware Limited Liability Company Act provides that “the fiduciary duties of a member, manager, or other...more

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Implied Covenant of Good Faith and Fair Dealing Saves Employee’s Claim for Improper Termination Under Company’s LLC Agreement

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Smith v. Scott, C.A. No. 2020-0263-JRS (Del. Ch. Apr. 23, 2021) - The Delaware LLC Act provides that fiduciary duties may be expanded or limited by the provisions of an LLC agreement. If the agreement is silent, then...more

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Chancery Finds Company Responsible for Advancing Costs of Defense to Its CEO in a Claim Brought by the Company

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International Rail Partners LLC v. American Rail Partners, LLC, C.A. No. 2020-0177-PAF (Del. Ch. Nov. 24, 2020) - The Delaware Limited Liability Company Act (the “LLC Act”) allows a limited liability company (“LLC”) to...more

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Delaware Supreme Court Clarifies When LLC Agreement Makes A Contract Void

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CompoSecure LLC v. Cardux LLC, C.A. No. 177,2018 (Del. November 7, 2018) - This is an important decision because it holds that an LLC agreement may make a contract void for failure to comply with the required provisions in...more

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Court of Chancery Awards Fair Value to Forced-Out LLC Member

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Domain Associates LLC v. Shah, C.A. No. 12921-VCL (Del. Ch. Aug. 13, 2018) - An LLC agreement may provide what payout a departing member receives for his or her interest. It also may provide that a member may be forced to...more

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Self-Dealing Conduct Supporting Fiduciary-Duty Claims Was Covered by Contractual Duties Imposed in the LLC Agreement

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The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements. The act permits parties to eliminate common-law fiduciary duties, and...more

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Chancery Court Nullifies Cancellation of Certificate of Formation of Delaware LLCs

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Parties who form Delaware limited liability companies to organize their business affairs do so to structure their relationships contractually. This enables them to organize the governance and economic rights in a manner...more

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Court of Chancery Explains What Is A Proper Claim Reserve When Dissolving

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Capone v. LDH Management Holdings LLC, C.A. No. 11687-VCG (April 25, 2018) - Under the LLC Act, as with the DGCL, an entity planning to dissolve and distribute its assets is required to set aside some reserve of assets to...more

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