Outline the fiduciary duties that the members of an LLC owe to each
other.
When Green Properties Group and Jones Group, Inc. entered into a
partnership and formed the NewGroup, LLC., the fiduciary duty that they
owed
...
Outline the fiduciary duties that the members of an LLC owe to each
other.
When Green Properties Group and Jones Group, Inc. entered into a
partnership and formed the NewGroup, LLC., the fiduciary duty that they
owed to the partnership is duty of loyalty and care. “The duty of loyalty can
be breached by self-dealing, misusing partnership property, disclosing trade
secrets, or usurping a partnership business opportunity” (Miller, 2014, p.
21). In this case, Green did not breach the loyalty of his partnership with
Jones due to the fact that Green contracted out to other parties to develop
parcels within the tract that NewGroup, LLC., owns in order to compete with
them. Green knowingly entered into the partnership agreement knowing
that either party could contract out parcels of land to be developed by
another competing companies.
Can the terms of the NewGroup, LLC., operating agreement alter
these fiduciary duties? Explain why or why not.
The operating agreements states, “no Member shall be accountable to the
LLC or to any other Member with respect to any other business or activity
even if the business activity competes with the LLC’s business”. In this
case since the agreement allows for either party to develop tacts with
competing company’s and not be held accountable to NewGroup, LLC., or it’s
members. I feel that in this case the fiduciary duties are altered given the
wording of the agreements. Wording in a contract or agreement can be
interpreted and loopholes found if it is not worded correctly or in a way that
would prevent a possible breach.
In whose favor should the court rule in the above scenario? Why?
In this case, I feel that the court should rule in the favor of Green Properties
group given that the operating agreement clearly alters the fiduciary duties
by allowing for either party to work with other businesses even if those
businesses are in competition with NewGroup, LLC.,
Reference:
Miller, R. L. (2014). Business Law: Text and cases – commercial law for
accountants. Mason, OH: South-Western Cengage Learning.
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