Yesterday, the Delaware Supreme Court handed down its opinion in Gatz Properties, LLC v. Auriga Capital Corp., C.A. No. 4390 (Del. Nov. 7, 2012). As expected form oral argument, the Court affirmed Chancelllor Strine’s holding of earlier this year, but on other grounds.
In Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 839 (Del. Ch. Ct. 2012) (slip opinion), Chancellor Strine held that a controlling owner of the manager of an LLC violated its duty of loyalty in connection with a self-interested merger of the LLC. Chancellor Strine reasoned that, unless clearly eliminated by agreement, the managing and controlling persons of a Delaware LLC owe traditional “default fiduciary duties.”
The Delaware Supreme Court affirmed on the grounds that the LLC Agreement directly imposed a contractual duty of loyalty, and thus, entire fairness review. Slip Op, at 12-20. The Court reserved the question of default fiduciary duties, but noted that
whether the LLC statute does—or does not— impose default fiduciary duties is one about which reasonable minds could differ. Indeed, reasonable minds arguably could conclude that the statute—which begins with the phrase, “[t]o the extent that, at law or in equity, a member or manager or other person has duties (including fiduciary duties)”—is consciously ambiguous. That possibility suggests that the “organs of the Bar” (to use the trial court’s phrase) may be well advised to consider urging the General Assembly to resolve any statutory ambiguity on this issue.
Slip. Op., at 626-27. The Court then criticized Chancellor Strine for addressing an issue that, in the view of the Court, was not properly before him:
We remind Delaware judges that the obligation to write judicial opinions on the issues presented is not a license to use those opinions as a platform from which to propagate their individual world views on issues not presented. A judge’s duty is to resolve the issues that the parties present in a clear and concise manner. To the extent Delaware judges wish to stray beyond those issues and, without making any definitive pronouncements, ruminate on what the proper direction of Delaware law should be, there are appropriate platforms, such as law review articles, the classroom, continuing legal education presentations, and keynote speeches.
Slip. Op., at 27 (emphasis added).