Court Of Chancery Limits Implied Duties

Posted on January 6, 2012 by Edward M. McNally

Gerber v. Enterprise Products Holdings LLC, C.A. 5989- VCN (January 6, 2012)

This is an important decision because it reaffirms the ability in an LLC agreement to severely limit the right to sue.  Here the LLC agreement first said that if the committee appointed to review conflict of interest decisions did so,  then there was no right to sue for breach of fiduciary duty by the controllers. The Plaintiff tried to argue that the implied duty to act in good faith and fairly still meant the controllers could not have acted in good faith by submitting the conflicted transaction to the committee.  However, the LLC agreement also said that if the controllers acted after receiving expert advice the transaction was fair, then they were conclusively presumed to have acted in good faith. The Court agreed that cut off the claim based on implied duties.

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