Delaware Supreme Court Addresses Default Fiduciary Duties
The Delaware Supreme Court recently released its per curiam opinion in the Gatz Properties, LLC v. Auriga Capital Corporation case. The opinion has garnered significant attention for its position on default fiduciary duties, that is, the duties that apply in the absence of applicable contract provisions. In this regard, the Court stated that the issue of whether the Delaware Limited Liability Company Act “does – or does not – impose default fiduciary duties is one about which reasonable minds could differ.” And it described the statute as “consciously ambiguous” on this point indicating that the Court did not consider the issue to be settled as a matter of Delaware law. However, the more lasting impact of the case may be its holding respecting fairly common language in the LLC agreement requiring a disinterested member vote for any affiliate transaction that was on terms and conditions “less favorable to the Company than the terms and conditions of similar agreements which could then be entered into with arm’s-length third parties.” This language, the Court held, constituted a contractually adopted “fiduciary duty standard of entire fairness, and the ‘fair price’ obligation which inheres in that standard.”
Click here to download the Morris Nichols analysis that includes a link to Court’s opinion.