The Delaware Chancery Court held that the traditional fiduciary duties of loyalty and care are owed by managers of Delaware limited liability companies to their members in the absence of a contractual provision waiving or modifying those duties. In so holding, the court acknowledged that the Delaware Limited Liability Company Act (the "Act") does not expressly provide for fiduciary duties. However, according to the court, such duties can be inferred. In particular, Section 18-1104 of the Act provides that in any case not provided for in the Act, the rules of law and equity shall govern. The court found Section 18-1104 as statutorily requiring the application of fiduciary duties mandated by equity. Section 18-1101 of the Act permits members to expand, restrict or even eliminate fiduciary duties. In the case before the court, the members failed to avail themselves of the contractual flexibility afforded by Section 18-1101.
Auriga Cap. Corp. v Gatz Properties, LLC, No. 4390-CS (Del. Ch. Jan. 27, 2012)