In connection with a recent dispute among LLC members, the Court of Chancery discussed an apparent issue of first impression in Delaware: The rights of the fiduciary of a debtor who seeks to help a creditor-entity that the fiduciary has an interest in. In Skye Mineral Investors, LLC v. DXS Capital (U.S.) Limited, C.A. No. 2018-0059-JRS (Del. Ch. July 28, 2021), the court discussed claims among LLC members in connection with an LLC Agreement that did not unambiguously waive fiduciary duties.
The court observed that no Delaware case appears to have dealt with the precise issue presented here: Namely, what is the impact of a tortious interferer acting in bad faith as a fiduciary to a debtor in service of a creditor counterparty in which the fiduciary holds an interest?
The court referred to Section 773 of the Restatement (Second) of Torts which requires that the protection of an interest be undertaken “by appropriate means” when a party is entitled to defend a legally protected interest. See Redbox Automated Retail LLC v. Universal City Studios LLLP, 2009 WL 2588748, at *6. See also Restatement (Second) of Torts Section 770, which provides that an actor “charged with the responsibility of a third person” who “intentionally causes that person not to perform a contract . . . does not interfere improperly with the other’s relation if the actor (a) does employ wrongful means, and (b) acts to protect the welfare of the third person.
Comment A to Section 773 also provides that the provisions in Section 773 requiring that the protection of an interest be undertaken by appropriate means is “of narrow scope and protects the actor only when (1) he has a legal and protected interest, and (2) in good faith asserts or threatens to protect it, and (3) the threat is to protect by appropriate means. See footnotes 167 and 168 and related text.
In this case the court found that at “a bare minimum” it was reasonably conceivable that the bad faith acts of a fiduciary resulting directly in the alleged interference with an existing contract are improper means to pursue the ends of the LLC, and that the allegations were sufficient for pleading purposes to demonstrate that the interference was unlawful and therefore executed by inappropriate means. See footnote 169.
This decision also features an extensive explanation of the “not always easy to understand” concepts embodied in the “savings statute.” See Slip op. at 23-32.
Finally, an always useful explanation of the analysis of pre-suit demand futility in the context of an LLC is provided at pages 55 to 57.