Archive for the ‘LLCs’ Category

Series LLCs and 1934 Act Broker-Dealers

Friday, October 9th, 2009

In a  letter dated Sept. 1, 2009, the SEC staff responded to a Financial Industry Regulatory Authority (FINRA) request for guidance on the application of the financial responsibility rules to broker-dealer using LLC series.  In the view of the staff, the structure posed by FINRA would not be permitted.

The broker-dealer would be organized as an LLC with two series.  The Master LLC would have no business operations.  The LLC would have two Series:  (i) a series for retail broker-dealer operations; and a series for institutional activities.  Only the Master LLC would register as a broker-dealer.  The specific question was the treatment of series assets and liabilities for purposes of (i) the net capital rule, (ii) the consumer protection rule, and (iii) financial reporting purposes.  FINRA suggested a consolidated financial statements that included the assets and liabilities of the two operating series.

The SEC suggested the worst of all possible worlds when computing net capital:

…assets that are not available to all creditors would not be subject to the risks of the broker-dealer’s business and would be treated as non-allowable….

… liabilities, whether the liability of a Master LLC or a series, would be deducted from allowable assets…. 2.  Moreover, consolidated financial statement would not be permitted because

a user of the financial statements would be unable to determine which of the series controlled specific assets or was obligated to satisfy specific liabilities.

Id.  As to the consumer protection rules, a seireis LLC would also fall short:

… if the amount calculated for the special reserve account for customers included credits from one series and debits from another series the account could be underfunded. Therefore, a Series LLC that receives customer cash or securities would not be able to comply with the requirements of Rule 15c3-3. 3.  For similar reasons, the use of series LLCs would be

problematic for purposes of a liquidation proceeding under the Securities Investor Protection Act….


Gary Rosin

Discretion and Fiduciary Duties. Bernards v. Summit Real Estate Management, Inc. (OR 2009)

Friday, August 28th, 2009

Bernards v. Summit Real Estate Management, Inc., 229 Or. App. 357, 213 P.3d 1 ( Ct. App. 2009) involves a demand-refusal derivative suit by a member of two member-managed Oregon LLCs.  Each LLC owns an apartment complex that is managed by Summit Real Estate Management, Inc. (apparently unrelated to any of the members).  After Summit and one of its officers embezzled substantial sums from each LLC, Bernards demanded that each LLC sue them.  When other members refused “without explanation,” Bernards filed a derivative suit against Summit and its officer.  Later, Bernards joining the other members, alleging that breach of both contract and fiduciary duties.  213 P.2d at 360-362.

Section 63.801(b) of the Oregon LLC Act allows derivative suits on a showing of demand futility, but allows the operating agreement to change that rule.  Section 5.4(d) of the operating agreement of each LLC required unanimous member consent for a derivative suit.  213 P.2d at 360-61 & 366.  The Court rejected the argument that Section 5.4:

Section 5.4(d) cannot carry the freight with which defendants would load it.  There is no logical connection between the premise that the consent of every member is a contractual prerequisite for legal action, and the conclusion that every member has the unfettered authority to withhold consent.  That is particularly true in light of the well-settled rule that the parties to a contract are bound by a requirement of good faith and fair dealing.  Even more to the point, another provision of the operating agreement, Section 5.10 (as noted above), provides that a member can be held liable for action or inaction taken in bad faith, “gross negligence, fraud, or willful or wanton misconduct.”  The operating agreements, then, confirm rather than contradict the proposition that, although every member’s consent is required before another member may take legal action, that consent cannot be withheld except for a valid business reason.

Id. at 366-67 (emphasis added)(citations omitted).

As indicated by the court, Section 5.10 of the operating agreement provided that members were not liable

… for honest mistakes of judgment or for action or inaction taken in good faith for a purpose reasonably believed to be in the best interest of the Company; provided that such mistake, action, or inaction does not constitute gross negligence, fraud, or willful or wanton misconduct. 364 ( emphasis added) (internal quotations omitted).  The Court clearly saw good faith as that required of a fiduciary, rather than the contractual obligation of good faith and fair dealing. 

Although the Court did not discuss this, Section 63.160 of the Oregon LLC Act limits the use of operating agreements to eliminate member (and manager) liability of damages, and uses language similar to that of Section 102(b)(7) of the Delaware General Corporation Law to do so: 

However, no such provision shall eliminate or limit the liability … for … 

  1. Any breach of the member’s or manager’s duty of loyalty to the limited liability company or its members;
  2. Acts or omissions not in good faith which involve intentional misconduct or a knowing violation of law;
  3.  Any unlawful distribution …; or
  4.   Any transaction from which the member or manager derives an improper personal benefit.

Section 63.160.  Section 63.160(2) differs from DGCL Section 102(b)(7)(ii)

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law

(emphasis added).  Arguably, the omission in the Oregon statute of the word “or” limits the scope of “good faith.”  That said, the Oregon statute also prohibits elimination of liability for breaches of the duty of loyalty.  If it was not already clear that acts not in good faith breach the duty of loyalty, the Delaware Supreme Court has now settled that question as a matter of Delaware law (In re Walt Disney Litigation and Stone v. Ritter).

In any event, Section 5.10 of the operating agreement in Bernards arguably conditions the waiver of liability to acts taken in “good faith.”  Thus, the exclusion of “gross negligence, fraud, or willful or wanton misconduct”  applies only to acts taken in good faith.

The problem with complaint was that it did not plead any specific facts indicating misconduct by the members in rejecting the demand.  The court rejected that argument that the misconduct by Summit and its officer was clear that a failure to sue them could only be explained by misconduct.  213 P.3d at 267-70.

Gary Rosin

Attorneys of Aboite, LLC. In re Loomis (Ind. 2009)

Monday, August 24th, 2009

 In re Loomis, No. 02S00-0808-DI-422 (Ind. May 7, 2009), is a recent disciplinary case.  Three lawyers in Aboite, Indiana formed “Attorneys of Aboite, LLC.”  Although the three lawyers did not combine their practices, they

…used the names “Attorneys of Aboite, LLC” and “Attorneys of Aboite” in professional documents, communications, signage, telephone directory listings, numerous advertisements, and an internet website without revealing that they did not practice law as a firm.

Slip 1.  Unsurprisingly, they were disciplined for misleading clients as to whether they practiced as a firm.  Still …

What were they thinking?  I suppose that they wanted to share offices, and formed the LLC to lease or buy office space, and to share expenses. 

There may be some estoppel issues here, so that the LLC may be liable for malpractice, errors and omissions committed in the course of representing clients who thought they were dealing with a firm.

Hat tip, Mike Frisch (Legal Profession Blog).

Gary Rosin

Authority of LLC Agents Other Than Its Manager. T.W. Herring Investments, LLC v. atlantic Builders Group, Inc. (Md. Ct. Spec. App. 2009)

Monday, August 24th, 2009

T.W. Herring Investments, LLC v. Atlantic Builders Group, Inc.,186 Md.App. 673, 975 A.2d 264 (Md. Ct. Spec. App. 2009) raises an issue so basic that you wonder how it the trial court got it wrong.  An authorized agent of an LLC formed undder North Carolina law, but not its manager, filed an affidavit and a verified answer to a complaint by builder seeking a mechanic’s lien.  The trial court accepted the argument that only the manager had authority to act for the LLC in the litigation.  Slip Op., at 4. 

The Court of Special Appeals reversed:

There is no requirement in the above statutes or rules relating to the legal sufficiency of the affidavit other than that the affiant have the required knowledge. Thus, there is no Maryland statute or rule that prohibits a party from extending authority to a person with knowledge for the limited purpose of executing an affidavit on the party’s behalf.  In this case, the actual authority for that limited purpose was not contested by appellant; it was admitted.  

Slip Op., at 7-8.  Builder argued that Section 57C-3-25(c) of the North Carolina LLC Act only allowed managers to file official documents:

   (c) Any document or instrument required or permitted by law to be filed, registered, or recorded with any public authority and to be executed by a limited liability company … shall be sufficiently executed for such purpose if signed on its behalf by one of its managers.

Slip Op., at 9.  The Court rightly recognized that the purpose of that provision was only to assure the authority of the manger of act in that situation, not to limit the ability of other agents to act.  Id.  The Court then noted that Section 57C-10-03(c) of the North Carolina LLC Act incorporated the law of agency.  Id.  at 10.  Section 57C-3-24(a) permits a manager to delegate authority to other persons:

The delegation is without limitation, including authority to conduct the business of the company. The act of any person within the scope of the authority delegated is as effective to bind the limited liability company as would the act by a manager….

Id. (citations omitted).

Gary Rosin

Twist on Pre-Formation Contracts. Baltimore Street Builders v. Stewart (Md. Ct. Spec. App 2009)

Monday, August 24th, 2009

Baltimore Street Builders v. Stewart, 186 Md.App. 684, 975 A.2d 271(Md. Ct. Spec. App 2009), involves an interesting twist on pre-formation contracts.  Lenkey and Kunkel were contractors, with separate businesses, each conducted through separate LLCs.  Apparently, Lenkey and Kunkel also conducted business as partners under the name Baltimore Street Builders.  Lenkey signed a construction contract in the name of Baltimore Street Builders, LLC.  Work under the contract began in January 2006.  The LLC was not organized until March 2007, shortly before the completion of the work in June 2007.  When the homeowner refused to pay for the work as performed, the LLC sued to establish and enforce a mechanic’s lien on the property.  The problem?  Neither Lenky, who signed the conttract, nor the LLC, nor its predecessor partnership, had a home improvement license, either at the time of contracting, or before starting or completing work.  No license, no lien.

The Court rejected the argument that the licensing requirement was met because work under the contract was done by Kunkel’s LLC, which did have a home improvement license.  The court reasoned that the statute required “persons” acting as contractors to be licensed, and defined person to include any “partnership, firm, association, corporation, or other entity.”  Slip Op., at 8-9. 

Inasmuch as neither Robert Lenkey or BSB [the LLC?]  of the informal partnership known as BSB ever had a home improvement contractor’s license, it cannot be said that the “person” with whom appellee contracted complied with [the licensing statute]. (sic).

Slip Op., at 9.  The Court also rejected a substantial compliance argument

Because BSB’s counsel admitted at oral argument before us that it was Mr. Kunkel’s company … that had the license, we interpret the appellant’s argument to be that BSB substantially complied with the statute because at the time the contract … was signed, BSB was a partnership and Mr. Kunkel was one of BSB’s partners, and an entity controlled by Mr. Kunkel had a license.  Such an attenuated relationship with a license holder can scarcely be considered “substantial compliance” in light of the requirement that the partnership [BSB] that contracts to do the home improvement work must be licensed.

Slip Op., at 12-13.

And, the mere fact that [Kunkel’s LLC], a sub contractor, was licensed does not fulfill the purpose of the Home Improvement Law insofar as [the homeowner] s concerned. After all, [the homeowner] never contracted with that entity and thus could not have successfully brought a breach contract action against [it.]

Slip Op., at 20.

Gary Rosin

LLC Not Bound by Agreement Signed by Manager. Credit Suisse Securities (USA) LLC v. West Coast Opportunity Fund LLC (Del Ch. 2009)

Friday, August 21st, 2009

The facts in Credit Suisse Securities (USA) LLC v. West Coast Opportunity Fund, LLC, C.A. No. 4380-VCN (Del. Ch. Ct. July 30, 2009) are fascinating, though complicated. 

  • Evans was the sole member and manager of Investment Hunter LLC (“Holding LLC”), which was the sole member of WindHunter LLC. 
  • In December 2006, Holding LLC became the controlling shareholder of GreenHunter Energy, Inc. (“Operating Corp.”) after a reverse-merger of WindHunter into an insolvent corporation.  Evans became Operating Corp.’s CEO and President.
  • In March 2007, Operating Corp. entered into a PIPE transaction with group of investors.  That is, it issued shares, and agreed that “as soon as possible” (but within a year) register the shares for resale to the public (“registration rights”). 
  • In connection with the registration rights, all of the executive officers of Operating Corp., including Evans entered into a Lock-up Agreementagreeing that they would not, without the consent of the lead investor, pledge or sell, directly or indirectly, any shares of Operating Corp. until 360 days after the effective date of the registration statement covering the shares purchased by the investors.
  • Evans signed the Lock-Up Agreement in his own name, and described himself as “Chief Executive Officer”, but did not name either Operating Corp. or Holding LLC.
  • In July 2008, Holding LLC opened a margin account with, and borrowed substantial sums from, Credit Suisse.  At that time, Holding LLC pledged its shares of Operating Corp. to secure repayment of the loan.
  • “Within a few months” the value of the Operating Corp. shares dropped, and Credit Suisse issued a margin call.  Operating Corp. and the lead investor claimed that any sale of the pledged shares by Credit Suisse would violate the lock-up agreement.
  • On December 29, 2009, a registration statement covering the sale of the lead investor’s shares was declared effective.

In February, 2009, Credit Suisse sued, claiming, among other things, that the lock-up agreement did not prevent its sale of the pledged shares to meet the margin call.   Vice Chancellor Noble held that the Holding LLC was not bound by the lock- up agreement, and granted judgment on the pleadings on that claim.

Evans does not own the GreenHunter stock in question. It is entirely the property of [Holding LLC] , and Evans’s status as a member does not alter this fact.  Evans did not sign the Lockup Agreement in his capacity as a member or manager of Investment Hunter, and there is, as noted, no evidence of an intent to act in that capacity. Therefore, the Lockup Agreement does not serve to bind [Holding LLC]. ‘[T]he ordinary rule is that only the formal parties to a contract are bound by its terms.  Because [Holding LLC]  is not a party to the Lockup Agreement it is not bound by it. Evans cannot encumber property he does not own. 8-9 (footnotes omitted) (emphasis added).   It does not appear that Credit Suisse claimed that Evans acted on behalf of Holding LLC.  Because Evans was not designated as the ‘Chief Executive Officer’ of Holding LLC, the addition of that language does not show an intent to act on behalf of the LLC.  Still, given that the Chancellor was dismissing on the pleadings, it seems odd for him to refer to the lack of evidence that Evans was acting on behalf of Holding LLC.  I’m a transactional sort, but I thought that evidence came after the pleadings.

As to the argument that the “directly or indirectly” language of the lock-up agreement was broad enough to include the Holding LLC’s shares, Chancellor Noble responded

Perhaps [the parties] intended that the Lockup Agreement prohibit the very behavior Evans is alleged to have engaged in. Yet, nothing on the face of the Lockup Agreement evinces such an intent to bind [Holding LLC] or any other entity with which Evans has a relationship. Instead, it binds only Evans.

Slip Op., at 9.  Earlier, in a footnote, the Chancellor had noted that there were no allegations sufficient to make out a claim for disregard of the corporate fiction.  Id. at 9 n.23.


Hat-tip Francis G.X. Pileggi.

Deductibility of LLC Tax Losses. Garnett v. Commissioner (Tax Ct. 2009)

Friday, July 10th, 2009

Over on Tax Prof, Paul Caron notes the recent opinion in Garnett v. Commissioner, 132 T.C. No. 19 (June 30, 2009), that allows LLC members to apply its losses to offset other income.

posted by Gary Rosin

Buy or Sell Right in LLC Agreement Not Arbitrable. Gilbert Street Developers, LLC v. La Quinta Homes, LLC (Cal. App. 2009)

Wednesday, July 1st, 2009

Gilbert Street Developers, LLC v. La Quinta Homes, LLC, 94 Cal. Rptr. 3d 918 (Cal. Ct. App. 2009) the Court was called upon to interpret two parts of an LLC's operating agreement. The agreement provided for arbitration of "[a]ny controversy or dispute arising out of or relating to this agreement or the breach thereof (exclusive of matters which are expressly within the discretion of the Members)…."  94 Cal. Rptr. at 919 n.1; Slip Op. at 2 n.1 (emphasis added).  The agreement also provided that, under certain circumstances, one member could set a price, and demand that the other member buy or sell at that price.  94 Cal. Rptr. at 927-28; Slip Op. at 13-15. The question of arbitrability turned on whether the buy or sell provisions fell withing the exclusion for discretionary matters:

The Yee parties argue that there really isn‟t any discretion in the operation of the buy out agreement, other than, obviously the initial choice to invoke it. For them, it is essentially a machine that grinds to one of two inexorable results (you‟re bought out or you get bought out) once a lever is thrown.

   * * *

* * * A simple binary choice as here (shall I buy or shall I sell?) qualifies under the ordinary person‟s definition of discretion as well. Discretion is simply the act of separating or distinguishing, and that includes binary choices as well as ranges.

94 Cal. Rptr. at 928; Slip Op. at 15-16.

Interestingly, the buy-or-sell provisions could only be invoked "[i]n the event of a dispute among the Members which cannot be resolved[.]"   94 Cal. Rptr. at 927; Slip Op. at 13 (emphasis added).  To me, the real issue is whether arbitration would "resolve" the dispute.  In any event, the agreement provided for two dispute-resolution mechanisms, and did not clearly address how they related to each other.

posted by Gary Rosin

Dissolution, Cancellation and LLC Survival Statutes. Chadwick Farm Owners Ass’n v. FHC LLC (Wash. 2009)

Wednesday, June 24th, 2009

We all know how survival statutes work–or at least we think we do.  The recent opinion in Chadwick Farm Owners Ass'n v. FHC LLC,  207 P.3d 1251 (Wash. 2009) (en banc) (majority and dissenting opinions) may change that.

Under the Washington Limited Liability Company Act, Wash. Rev. Code, Chapter 25.15, dissolution of an LLC starts winding up.  § 25.15.270.  Dissolution does not impair remedies against the LLC, its managers or members, unless an action or proceeding is started within three years of dissolution.  § 25.15.303.  Those winding up the affairs have the right to bring or defend lawsuits after dissolution, but only until the filing of certificate of cancellation.  § 25.15.295(2).  The filing of a certificate of cancellation cancels the certificate of formation, § 25.15.080, and terminates the existence of the LLC as a separate entity, § 52.15.070(c). 

Chadwick Farm Owners Ass'ninvolved LLCs that had been administratively dissolved under Section 25.15.280.  An administratively dissolved LLC has two years to seek reinstatement.  § 25.15.290(1).  What happens if the LLC is not reinstated within two years?  Here the statutes conflict.  Under Section 52.15.270(6), that triggers dissolution (again?) of the LLC.  Under Section 25.15.290(4), the secretary of state "shall cancel the limited liability company's certificate of formation."  Which controls?  The majority in Chadwick Farm Owners Ass'n held that Section 25.15.290(4)controlled, and that pending suits against the LLC abated once a certificate of cancellation had been filed:

 Under the statutory scheme applying to limited liability companies that are administratively dissolved, if the company does not seek reinstatement it must wind up the company’s affairs within that two year period, because once the two years pass, the company no longer exists and has no power to act. While the company still exists, and during the time it is winding up (the time following dissolution and before cancellation of the certificate of formation), it has the power to prosecute and defend suits.  But once the company is canceled, it can no longer prosecute or defend suits; it no longer exists as a legal entity.

* * *

* * * The statutes do not permit an administratively dissolved limited liability company to continue winding up, including prosecuting and defending suits, on its own schedule after cancellation of the company’s certificate of formation.  * * *  There is no basis to treat a member canceled limited liability company differently than an administratively dissolved company.

207 P.3d at 1257-58 (citations and footnotes omitted).

What about three-year survival of actions under Section 25.15.303

By its plain language, RCW 25.15.303 provides that (1) dissolution does not affect any claim against a limited liability company and (2) there is a three-year limitations period from the date of dissolution in which to commence suit against a limited liability company. The statute never mentions “cancellation.” Of utmost importance, the legislature did not alter any provision in chapter 25.15 RCW and thus it left intact the statutes discussed above which provide that a limited liability company maintains its existence as a separate legal entity during dissolution but only until cancellation. In particular, as noted, RCW 25.15.295(2) unambiguously states that after a limited liability company is dissolved and before cancellation, i.e., during the winding up period, a manager or other representative who winds up the company’s affairs may “prosecute and defend suits” only until cancellation.

The Condominium Association in Emily Lane contends, however, that all canceled limited liability companies are also first dissolved companies, and logically the statute applies to dissolved companies that later cancel themselves. Amicus Washington State Trial Lawyers Association Foundation makes a similar argument.

However, there is a clear distinction between dissolution and cancellation.A dissolved company still exists for the purpose of winding up, during which it can sue or be sued. But once a limited liability company’s certificate of formation is canceled, it no longer exists as a separate legal entity for any purpose.  RCW 25.15.303 does not even mention cancellation, and the legislature did not alter any of the existing provisions in the Act. On its face, and read in the context of the entire Act, RCW 25.15.303 means that an action against a limited liability company, whether arising before or after dissolution, must be brought within three years of dissolution, but an action against a limited liability company will abate upon cancellation.

The plain language in RCW 25.15.303 and the other provisions in the Act resolve the statute’s meaning. * * *

207 P.3d at 1259 (emphasis added) (citations and footnotes omitted).

What happens after other dissolutions?  Could the members (or managers) file a certificate of cancellation, and stiff plaintiffs in pending suits?  Yes, but the Court warns:

* * * [That does] not take into account the whole statutory scheme, however. A dissolved limited liability company must, under the Act, properly complete the winding up process, which includes paying or making arrangements to pay known obligations and claims, even if unmatured or contingent. Members of a limited liability company who fraudulently attempt to use the provisions of the act to avoid liability and members who wind up a limited liability company improperly expose themselves to individual liability….

207 P.3d at 1261 (emphasis added); see also, id. at 1262-64 (discussing individual liability for improper winding up).

Finally, the Court rejected the argument that its interpretation was not the "bvest" result:

We recognize, however, that these arguments reflect the homeowners’ view that the statute is unfair when it is applied according to its express terms. However, if the result here is not what the legislature envisioned it is, nonetheless, what the statute plainly provides. We understand from the house and senate bill reports that a comprehensive review of the Act is underway. If the result here is not what the legislature wants, it will be positioned to make additional changes deemed necessary. It is not, however, the province of this court to rewrite RCW 25.15.303 or any other provision of the Act.

207 P.3d at1261.  So, the Washington legislature has some work to do.  I offer a couple of thoughts

  • If the legislature intended for dissolution, rather than cancellation of the certificate of formation, to apply to LLCs not timely reinstated, the statutes should be amend to provide for an initial administrative suspension of the right to do business, followed by an administrative dissolution.
  • Alternatively, it can change the survival statute to survival for three years after cancellation.

Also, the potential of personal liability, if widely known, may reduce the number of LLC "walk-aways," where the owners of an unsuccessful LLC abandon it to administrative dissolution, and make no attempt to wind up its affairs in an orderly fashion.

posted by Gary Rosin

LLCs and Fiduciary Duties: A Glimmer of Hope for Delaware

Wednesday, May 6th, 2009

I have criticized many Delaware opinions for dicta saying that there are no fiduciary duties in Delaware LLCs unless they are expressly contracted for (what I have called the "mere contractual entity" approach).  The recent opinion in Bay Center Apartments Owner, LLC v. Emery Bay PKI, LLC,C.A. No. 3658-VCS (Del. Ch. Ct. April 20, 2009) (Mem. Op.) ("Bay Center"), gives me reason to hope that Delaware has not lost its way.  In Bay Center,Vice Chancellor Strine denied a motion to dismiss, among other things, claims of breach of fiduciary duty.  In discussing the fiduciary duty claim, Strine began by emphasizing the inherently fiduciary character of the relationship between an LLC's manager and the LLC and its members.  Slip Op. at 17-18. 

Another important aspect of the opinion is VC Strine's treatment of a purported waiver of fiduciary duties in section 6.2 of the LLC Agreement:

Section 6.2  Liability of Members.  . . .  Except for any duties imposed by this Agreement . . . each Member shall owe no duty of any kind towards the Company or the other Members in performing its duties and exercising its rights hereunder or otherwise.

Slip 19 (emphasis in original).  Strine found that Section 6.2 conflicted with Section 6.1(b), which provided

Section 6.1  Relationship of Members. Each Member agrees that, to the fullest extent permitted by the Delaware Act and except as otherwise expressly provided in this Agreement or any other agreement to which the Member is a party: . . . (b) The Members shall have the same duties and obligations to each other that members of a limited liability company formed under the Delaware Act have to each other.

Slip Op. at 18-19 (emphasis in original).  As a result, the LLC Agreement was ambiguous.  Even though, to survive on a motion to dismiss, plaintiffs must offer only areasonable interpretation that supports their claim, VC Strine indicated that a reading of the LLC Agreement as allowing fiduciary duties under Section 6.1(b) was more reasonable than a reading that Section 6.2 controlled.  Accord to VC Strine, the latter reading would make Section 6.1(b) meaningless.  Slip 19-20.  Last, VC Strine invoked traditional principles of interpretation of fiduciary waivers:

And, the interpretive scales also tip in favor of preserving fiduciary duties under the rule that the drafters of chartering documents must make their intent to eliminate fiduciary duties plain and unambiguous.  As a result, the defendants’ interpretation of the fiduciary duty provisions of the LLC Agreement is not the most reasonable interpretation, let alone the only reasonable interpretation.

Slip Op. at 20 (footnote omitted) (emphasis added).

For additional discussion of various aspects of Bay Center, see analysis by Prof. Larry Ribstein, and by Francis G.X. Pileggi.

    posted by Gary Rosin