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Court Of Chancery Again Upholds Fiduciary Duties In An LLC

Posted In LLC Agreements

Feeley v.  NHAOCG LLC, C.A. 7304-VCL (November 28, 2012)

For years the Court of Chancery has repeatedly held that the controllers of an LLC owe fiduciary duties to the members -  at least absent an express disclaimer of those duties in the LLC Operating Agreement.  Then on November 7, 2012 in the Gatz Properties decision, the Delaware Supreme Court said "not so fast" and indicated in no uncertain terms that the fiduciary duties of an LLC controller were not yet decided under Delaware law.  Well in this decision, the Court of Chancery decided that so long as the Supreme Court continued to not rule on the question,  the Court of Chancery would continue to hold those duties exist.  Maybe this will force the Supreme Court to decide that issue.

This decision is also interesting for its ruling on when a claim must go to arbitration.  If the claim might have been brought even without the contract having the arbitration clause in existence, then it need not be arbitrated.