The more things change, the more they stay the same. In our last issue of Business Law Quarterly we reported about a recent Delaware case in which the Delaware Chancery Court held that managers of a Delaware limited liability company have fiduciary duties of loyalty and good faith, except to the extent that the limited liability company agreement specifically provides otherwise. Auriga Capital Corporation v. Gatz Properties, LLC. Since then, however, the Supreme Court of Delaware has decided the appeal of the case. The Supreme Court affirmed the trial court’s ruling against Gatz, based on the evidence.
But the Supreme Court went on to hold that the lower court did not need to decide the statutory construction issue of whether the Delaware Limited Liability Company Act imposes “default” fiduciary duties upon the managers of a Delaware limited liability company. In the circumstances, said the Supreme Court, the dispute over whether fiduciary standards apply could be decided solely by reference to the limited liability company agreement and it wasn’t necessary to decide whether “default” fiduciary duties exist as a matter of statutory construction. Therefore, said the Court, the lower court should have avoided the issue and its opinion on the point “must be regarded as dictum without any precedential value.” Ergo, it can be ignored, at least as to this issue.
All the more reason, we think, for parties to a limited liability company agreement to exercise great care in preparing and reviewing it to understand what duties the managers will have to the company’s owners.