Fiduciary Duties in Delaware LPs and LLCs.

Delaware Supreme Court Chief Justice Myron T. Steele has published an article in The Delaware Journal of Corporate Law,  that I just received in the mail today, entitled: Judicial Scrutiny of  Fiduciary Duties in Delaware Limited Partnerships and Limited Liability Companies, 32 Del. J. Corp. L. 1 (2007). Of course, this is must reading for anyone interested in Delaware Limited Liability Companies and the Delaware cases that construe fiduciary duties as they relate to Delaware LLCs and LPs. ( I have not yet seen an online copy of the article. When I do, I will post it.) It is supposed to be on the SSRN site soon, but in the meantime, I made a copy for my own personal use.

UPDATE: Coincidentally, last night I greeted Chief Justice Steele at a dinner hosted by the 5 Inns of Court in Delaware. It was also attended by Chief Judge Tacha of the U.S. Court of Appeals for the 10th Circuit,  the President of the American Inns of Court. I had the pleasure of being at the same table during dinner as Delaware Chancery Court Vice Chancellor John Noble and Judge Chris Sontchi of the Bankruptcy Court for the District of Delaware,  as well as other distinguished members of the Delaware Bar.

Supplement: This article had its genesis in a 2003 symposium but has been updated since then. There are many important aspects of the article that I do not have space or time to summarize here but there are 2 points in particular that I want to note:

First, His Honor emphasizes the need to distinguish between the "fiduciary duty aspects of good faith" and the separate "contractual implied duty of good faith and fair dealing".

Second, it is noteworthy that, as the article states,  there is no current Delaware case law addressing the implied contractual covenant of good faith and fair dealing in the context of the contractual relationship between partners and limited partners and managers and members. (Although there clearly is case law in Delaware discussing the implied contractual duty of good faith and fair dealing, it is in the context of employment, commercial or insurance contracts, as opposed to the context of allocating power or liability within a governance structure of a business entity.)

  • thomas ryan

    my question is how is the irs treating deleware series llc’s in massachusetts ? are they under attack or do you consider them an aggressive planning tool ?

  • http://www.delawarelitigation.com/2008/05/articles/chancery-court-updates/chancery-gives-victory-to-freedom-of-contract-and-refuses-to-find-fiduciary-duties-in-llc-agreement-when-not-clearly-stated/in Delaware Corporate and Commercial Litigation Blog

    Chancery Gives Victory to “Freedom of Contract” and Refuses to “Find” Fiduciary Duties in LLC Agreement When Not Clearly Stated

    Fisk Ventures, LLC v. Segal, 2008 WL 1961156 (Del. Ch., May 7, 2008), read opinion here. This Chancery Court opinion, I predict, will be cited often by scholars and practitioners alike as part of the ongoing discussion about the difference…