In Re: Atlas Energy Resources, LLC, Unitholder Litigation, Cons., C.A. No. 4589-VCN (Del. Ch. Oct. 28, 2010), read opinion here.
The Court determined that the LLC Agreement waived fiduciary duties for officers and directors but did not waive the fiduciary duty that a controlling majority owner owed to minority owners, similar to the duty that a majority shareholder owes to minority shareholders.
Brief Summary of Decision
This 40-page decision should be read by anyone who seeks to argue that the terms of an LLC Agreement either waived all fiduciary duties or one who seeks to argue that less than all of the fiduciary duties of the parties were waived. Citing prior decisions to support its reasoning, the Court of Chancery explained that because the parties to the LLC Agreement did not unequivocally contract for a different standard to apply, the corporate entire fairness standard, based on Kahn v. Lynch, would apply here to the controlling unitholder’s buyout of the minority.
The Court explained in a detailed analysis why the agreement did not explicitly waive the fiduciary duties owed by the majority owners towards the minority–even though those duties were waived for officers and directors. Due to the lack of a clear waiver, the Court applied the fiduciary duties that would govern in the corporate context. The issues addressed in the case are at the "cutting edge" of the law of alternative entities. Many cases highlighted on this blog, and much commentary discussed on this blog, have addressed this topic.