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Court Of Chancery Explains When A Lie Is Just A Lie

Posted In LLC Agreements

Touch Of Italy Salumeria & Pasticceria LLC v. Bascio, C.A. 8602-VCG (January 13, 2014)

In this case, the defendant quit his employment, lied to his co-owners about why and then set up a competing business.  However, the LLC agreement did not have any limitation on competing with it. As a result, while the court was quick to condemn the lie, it held that competing was permitted. This is an example of how people in business together often feel there are some unwritten ethical rules that a court will enforce even if they are not part of the parties' agreement.  At least in the area of competition, that is just not so. You need to get it in writing to enforce an obligation to not compete after some one leaves your employment. Of course, this does not mean that there are no fiduciary or other duties that may require a course of conduct not spelled out in writing.  Hence, this decision should not be read too broadly

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