In a recent bench ruling, the Delaware Court of Chancery addressed an issue that it acknowledged had not been squarely decided by the court in a prior published decision: corporate counsel’s role and scope of engagement for a two-member deadlocked board. In Kundrun v. AMCI Group, LLC, C.A. No. 2025-0570-LM-VCL (Del. Ch. Oct. 22, 2025), in a transcript ruling and an Order encapsulating the decision, the court considered exceptions to a Magistrate’s Final Report and held that counsel for the company must remain neutral as between the two equal owners of the LLC who also comprised the two-member board of directors.

Key Background Facts

Defendant AMCI Group, LLC (the “Company”) was governed by an agreement (the “LLC Agreement”) that structured the governance of the LLC in a manner similar to a corporation to the extent that it provided for the board of directors (the “Board”) to exercise authority collectively over the business and affairs of the Company as its sole manager.

The LLC Agreement established an officer position, for one of the two equal owners who was also one of the two members of the Board, Hans Mende, with the title Executive Chairman. He was given authority over day-to-day operations of the business with the full powers of the Board—within that scope of authority limited to day-to-day operations. But outside that scope of authority he did not exercise the full powers of the Board, nor could he act on other matters where the operating agreement specifically required action by the Board.

The litigation involved requests for information by Fritz Kundrun who was one of the two directors comprising the Board, and one of the Company’s two equal members.

The court explained that some types of books and records actions might fall within the day-to-day operations of an entity, but an action, such as this one, by one of two directors who was also a 50% member does not.

The court reasoned that because the specific issues in this litigation fall outside the day-to-day operations of the Company, Mende lacked authority as Executive Chairman to address them on his own.

Highlights of the Order

• Company counsel cannot take instructions from Mende or from officers who report to Mende. Order at 2.
• The court also ruled that although the full Board can give instructions to Company counsel, which currently requires joint action by both Kundrun and Mende, the Board is deadlocked on governance issues that include whether and to what extent Kundrun can obtain the information in his capacity a director.
• The court held that the Board is also deadlocked as to whether the Board as sole manager will seek the information.

Key Rulings

• The court ruled that because the Board is deadlocked, Company counsel cannot take direction from the Board on those matters relating to the request for information by one of the two directors. The court also reasoned that Company counsel cannot side with one faction of the other,  citing to In re Aerojet Rocketdyne Holdings, Inc., 2022 WL 552653 at *4 (Del. Ch. Feb. 23, 2022). See Order at 3.
• The court also ruled that Company counsel must carry out any order from the court and that it must comply with discovery requests relating to matters such as what documents or information exist and the burden associated with providing that data. Id.
• The court held that Company counsel must provide neutral, complete, and accurate responses to requests about the basic information requested.
• The court explained that: “Otherwise, Company counsel must remain neutral in this action. Company counsel cannot take a position adverse to either Kundrun or Mende.” Id.
• The court concluded that although this matter is styled as a dispute involving Kundrun and the Company, it is actually between Kundrun and Mende. The court allowed Mende and his personal counsel leave to intervene for purposes of defending the proceeding, citing to Engstrum v. Paul Engstrum Asssocs., Inc., 124 A.2d 722, 723-24 (Del. Ch. 1956).
• Other cases that address similar issues but that did not involve identical facts include: Kalisman v. Fridman, 2013 WL 1668205 (Del. Ch. Apr. 17, 2013); In re Carlisle Etcetera LLC, 114 A.3d 592 (Del. Ch. Apr. 30, 2015); Hyde Park Venture P’rs Fund II, L.P. v. FairXchange, LLC, 292 A.3d 178 (Del. Ch. 2023); and In re Information Management Services, Inc. Deriv, Litig., 81 A.3d 278 (Del. Ch. 2013).

Highlights of the Transcript Decision

Many of the court’s rulings involved an interpretation of the LLC Agreement, including the following:

• Referring to one of the two board members, the court observed that: “Mende isn’t the company. The Board is the company.” Transcript at 108:13-14.
• The Vice Chancellor interpreted the LLC Agreement in the following manner: “the company is a series LLC that established a manager-managed structure in which a board of directors acts as the sole manager for the LLC and its series with a delegation of authority to conduct day-to-day matters to a senior officer.” Tr. 88:22-89:3.
• The Vice Chancellor further explained that: “I draw that inference from the following language in the operating agreement. It states, ‘As a general rule, governance is a company-level responsibility and in particular is the responsibility of the company’s board of directors.’ It further states, ‘The board of directors, acting as a body, will manage the business and affairs of the company, and unless the members of any particular series agree otherwise, “the series.”’ It then says, ‘The board collectively acts as the statutory manager of the company, and each company managed series under Delaware law, but no single director has the authority in that capacity to bind the company or any company-managed series unless the board has explicitly empowered him or her to do so.’” Id. at 91:10-24.
• The Vice Chancellor reasoned that: “Just as in the general corporate context, the officers are going to have a lesser and more limited scope of authority than the board, which has plenary authority over the entity.” Id. at 92:20-24.  Further, the Vice Chancellor also found: “The provision is then saying that within that scope of authority, the officer can also exercise board powers, but only within the day-to-day operation of the business.” Id. at 95:20-23. 
• The court further opined that: “The fact that Mende has control over the day-to-day operations as executive chairman doesn’t make him the company.” Id. at Tr. 106:19-21.
• The Vice Chancellor, importantly, held: “there’s even a deadlock over whether directors can get information because Mende supposedly won’t go along with his fellow director in exercising managerial information rights. I pause to say that I’m deeply skeptical of that argument. It seems to me that just as the board acting as a whole can exercise board-level authority to tell a company or its officers to provide information to the board, so too here the manager can exercise manager-level authority to tell the entity to provide information to the board/manager. I don’t think that inherently means that the director, who is one of the two human components of the manager, is frozen out of exercising a director-level information right simply because of that structure. I don’t think it makes sense as a governance model, and I do think that the settlement agreement is inconsistent with that assertion.”  Id. at 107:1-18.
• The Vice Chancellor elaborated that Kundrun is entitled to “information about the day-to-day management of the business” and noted that Mende could assert privilege or the work product doctrine regarding Mende’s own personal counsel.  Id. at 110:13-22. 
• But the court otherwise found that there was a limited privilege and work product concern for “the period of time when … [corporate counsel] have been operating in the belief that they could represent the company in active litigation.”  Id. at 110:23-111:8.

Over the last 20 years these pages have highlighted a few hundred or so decisions regarding the challenges of seeking corporate records, in both the corporate and LLC context–even for directors and managers. Although this ruling is most noteworthy for its solution for a deadlocked board, and the role of counsel for the deadlocked board, it also provides an example of why asserting a right to seek business books and records by a member/manager or shareholder/director is not for the fainthearted and is not as simple, or inexpensive, an exercise as it may seem to those not well-versed in the intricacies and nuances of enforcing those rights.

Postscript: The author was co-counsel for Kundrun in this matter. Other counsel are listed in the transcript ruling linked above.