Also known as: duty of loyalty · duty of care · duties of loyalty · duties of care · fiduciary duties
Written by attorneys · grounded in primary & secondary sources — see below
Fiduciary obligations owed by members and partners in business entities to the entity and fellow owners. These duties prohibit self-dealing and require members and partners to refrain from grossly negligent or reckless conduct in managing the entity's affairs.
Dwight Dorsey and a co-partner operated a delivery partnership. Dorsey diverted a profitable route contract to his separate company without disclosure. The partnership sued Dorsey for breach. The court held that Dorsey owed duties of loyalty and care to the partnership and the other partner under the governing statute.
Dolores Diaz and Denise Donovan formed a member-managed LLC to operate a food distribution business. Diaz diverted a profitable supply contract to her separate company without disclosure. The LLC sued Diaz for breach. The court held that Diaz owed duties of loyalty and care to the LLC and the other member under the governing statute.
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David Dawson and Diana Delgado formed a limited partnership. Their agreement attempted to eliminate the general partner's duty of loyalty entirely. A limited partner challenged the provision. The court held that the agreement could not alter or eliminate the duty of loyalty or the duty of care.
Deborah Dunn and Dwight Dorsey operated a general partnership. Their agreement sought to remove the duty of care for all partners. A partner later engaged in grossly negligent management that harmed the business. The court held that the agreement could not alter or eliminate the duty of loyalty or the duty of care.
Dillon Energy and a co-member operated a member-managed LLC. Dillon diverted a profitable contract to a separate company without disclosure. The LLC sued for breach. The court held that Dillon owed duties of loyalty and care to the LLC and the other member under the governing statute.
Defense counsel for Denise Donovan learned that her client, a managing member, intended to divert an LLC opportunity. Counsel refused to assist and advised disclosure. The client claimed ineffective assistance. The court held that counsel's duty of loyalty did not require assisting in the breach and that the actions taken were proper.
No. Uniform acts applicable to partnerships and limited partnerships expressly prohibit agreements from altering or eliminating the duties of loyalty or care except in narrowly defined circumstances not applicable to outright elimination.
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The duty of care requires members to refrain from grossly negligent or reckless conduct, willful or intentional misconduct, or knowing violation of law in the conduct or winding up of the company's activities.
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The statutory statement of the duties applies directly to members in member-managed LLCs, while manager-managed LLCs impose parallel duties on managers under linked provisions of the uniform act.
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…to management. Perhaps the officers or directors of the corporation have the best claim to be the ones speaking, except their fiduciary duties generally prohibit them from using corporate funds for personal ends. Some individuals associated with the corporation must make the decision to place the ad, but the idea that these…