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Court of Chancery Holds That Notice and an Opportunity To Be Heard Are Not Prerequisites to Dismissing an LLC Manager “For Cause”

Posted In LLC Agreements

A&J Capital, Inc. v. Law Office of Krug, C.A. No. 22018-0240-JRS (Del. Ch. July 18, 2018)

This decision holds that, absent contrary language in an LLC operating agreement, members do not need to provide notice and an opportunity to respond before dismissing a manager “for cause.” Note that the law governing when a corporate director can be dismissed “for cause” may require notice and an opportunity to contest the allegations against him.

Corporate principles extend to the alternative entity context with some frequency. But alternative entities are creatures of contract. And the parties’ rights (or lack thereof) usually derive exclusively from their agreement’s plain terms, as the Court held in this instance. Of course, just because LLC managers do not have such rights by default does not mean dismissed managers must go quietly into the night.  They may sue to contest the discharge as unsupported or a breach of contract.