Florida R&D Fund Investors, LLC v. Florida DOCA/Deerfield R&D Investors, LLC, C.A. No. 8400-VCN (Del. Ch. Aug. 30, 2013).
Issue Addressed: This is a books and records action based on § 18-305 of the Delaware LLC Act. The court also had to address the issue of jurisdiction over the former manager of an investment entity based on either the LLC Act or the long-arm statute. The court also examined the terms of the LLC agreement and an asset management agreement in which the entity that served as a manager performed its services. For purposes of jurisdiction under the Delaware LLC Act, a determinative issue whether the activities of the former manager constituted “material participation in the management” of the LLC.
The court explained that the core of this dispute is the right of a member of an LLC to inspect the books and records not held by the LLC itself.
The court conducted an analysis under the LLC Act of the jurisdictional prerequisites for imposing personal jurisdiction on a person or entity that satisfies the definition of a “manager” of an LLC pursuant to § 18-101(10) and § 18-109(a)(i) of the LLC Act. See also § 18-109(a)(ii) for a catch-all definition.
Because the court concluded that it does not have personal jurisdiction over the former manager and that the complaint did not state a claim for relief against the other defendants, it did not need to address the question of whether a proper purpose was alleged in support of the inspection demand.
The court reasoned that neither the LLC Act nor a provision in the LLC agreement provided a right to inspect records allegedly held by other members or parties affiliated with other members of an LLC.