Also known as: lealty · leal · loyalty · fealty · fidelity
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary duty owed by partners and LLC members to the entity and co-owners that requires acting in the entity's best interest and accounting for any profits obtained through self-dealing.
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Lars Lindstrom, a member managing Linden Logistics LLC, used company funds to purchase equipment for his separate venture. The other members sued, claiming the transaction breached the duties owed to the company. The court held that Lars owed the duties of loyalty and care to the LLC and its members under the governing statute, requiring him to account for any profit derived from the self-dealing.
Liberty Trust LP's partnership agreement attempted to eliminate the general partner's duty of loyalty in self-interested transactions. A limited partner challenged the provision as invalid. The court ruled that the agreement could not alter or eliminate the duty of loyalty except as specifically permitted by statute.
Logan Lane, a partner in a general partnership, entered a contract with the firm on behalf of his own competing business. The other partners sought to void the deal. The court applied the rule that the partnership agreement may not alter or eliminate the duty of loyalty, leaving the statutory duties intact.
Defense counsel for Lillian Locke learned that she intended to commit perjury at trial. Counsel refused to present the false testimony and threatened to inform the court. The court held that the duty of loyalty did not require assisting in perjury, so the Sixth Amendment right to effective assistance was not violated.
Luis Lopez, a member of a member-managed LLC, derived a secret profit from a company opportunity. The LLC sued to recover the benefit. The court ruled that the fiduciary duty of loyalty required Luis to account to the company and hold the profit as trustee for it.
Leah Lamb, a general partner in a limited partnership, pursued a business opportunity that belonged to the partnership. The limited partners sued for an accounting. The court held that the general partner owed the duties of loyalty and care to the limited partnership and the other partners, requiring her to account for the benefit derived.
It denotes the fiduciary duty of loyalty requiring partners and LLC members to prioritize the entity's interests and account for profits from self-dealing transactions.
Supporting sources
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