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Court of Chancery Reaffirms That Minority Members of Manager-Managed LLCs Do Not Ordinarily Owe Fiduciary Duties
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Recent Contributors to The National Law Review
The Delaware Court of Chancery recently reaffirmed that minority members of a manager‑managed Delaware LLC generally do not owe fiduciary duties to the company or its other members in Ruby Hollow, LLC v. Tharp & Assocs., LLC, No.
The defendant, Tharp and Associates, LLC, held a 7% membership interest in Ruby Hollow, LLC and was not a manager.
Ruby Hollow was manager-managed, with two managers each holding 31% of its membership interests.
Where a minority member’s membership interest is considerably smaller than those of the managing members and it lacks no other contractual control over the LLC, the notion of the minority member’s control is impossible as a matter of law.
When seeking relief against minority LLC members, one should consider contractual or tort causes of action rather than relying solely on fiduciary‑duty claims.