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Court of Chancery Refuses To Impose Costs on Proxy Loser

Posted In LLC Agreements

TravelCenters of America v. Brog, C.A. 3751-CC (Del. Ch. Dec. 5, 2008)

 

In this unusual case, the LLC sought to require the loser of a proxy contest to pay the costs. The LLC Agreement had a provision that imposed costs on those members who violated any of their obligations in the agreement. The LLC claimed that when the members put up unqualified candidates for office they should pay the costs of defeating them. The Court held that as the conditions to be a candidate were not obligations of the members, but "conditions," costs would not be imposed.

 

While the opinion does not say so, this may reflect a reluctance to discourage election contests by imposing costs on the loser.