Chancery Grants Partial Summary Judgment on Fiduciary Duty Claim

Ross Holding and Management Company v. Advance Realty Group, LLC, C.A. No. 4113-VCN (Del. Ch. Feb. 28, 2013; revised on March 7, 2013).

What This Case is About: This case involved allegations that managers of an LLC breached their fiduciary duty in connection with a restructuring that adversely impacted the value of the interests of the plaintiffs.  Allegations also included a diversion of assets of the entity for the benefit of the managers.  Prior Chancery decisions providing additional factual background were highlighted on these pages here, here and here.

Highlights of Decision

The noteworthy aspect of this ruling involves a reference to the LLC operating agreement which provided that one particular member of the managing board had no discretion in how to vote as a member because he was required to follow the instructions of the person for whom he was a designee.  The court emphasized that fiduciary duties extend beyond mere voting, and may involve, for example, expressing a “dissenting view” to fellow board members and, in the proper circumstances, “informing unit holders about the potential adverse impact of a proposed action.”

Nonetheless, in the context of a motion for summary judgment, the plaintiffs failed to supply a minimum factual showing and were not successful in defeating the motion because they merely relied on denials which is not sufficient to create a dispute of material fact.

Another noteworthy aspect of this decision is that is distinguishes between a “civil conspiracy” based on a underlying breach of fiduciary duty, which is sometimes called “aiding and abetting.”  The court in footnote 28 itemized the separate elements of a civil conspiracy claim, and a claim for aiding and abetting, which are two distinct claims although they may be duplicative.