In the absence of a provision that excludes fiduciary duties, do the managers of a Delaware LLC have those duties? The Court of Chancery has long said "yes" but this decision of the Delaware Supreme Court says "not so fast." Instead, the Supreme Court held that the terms of the LLC agreement in this case imposed fiduciary duties on the manager in a self-dealing transaction. Thus, the Court held, it was premature to also hold, as the Court of Chancery did, that under the LLC statute such fiduciary duties existed absent a renunciation of those duties in the agreement.
Will the Supreme Court ever decide that issue and if it does, how will it come out? Is it time for the Delaware General Assembly to resolve this issue? If LLCs are ever to be used for more publicly traded entities, their managers will need to have a fiduciary duty. Trusting to the LLC agreement to protect investors is to ask too much of drafters of such agreements who cannot anticipate every circumstance that may occur. That calls for the legislature to act.