Disputes between a former employee of a limited liability company and its board of managers can implicate both the LLC’s operating agreement and other ancillary agreements between the employee and LLC. These agreements generally differ in at least one significant respect: While an LLC’s board of managers may be subject to default fiduciary duties or to contractually explicit fiduciary duties in the operating agreement, ancillary documents typically do not contemplate or impose fiduciary duties.
In Stewart v. BF Bolthouse Holdco LLC, 2013 Del. Ch. LEXIS 215, the Court of Chancery examined contractually-mandated fiduciary duties in an operating agreement alongside an ancillary document that did not explicitly mandate fiduciary duties, but instead prescribed a standard of good faith for purposes of determining the fair market value of repurchased equity. The court’s analysis of the contractual standard of good faith demonstrates the evidence a court might find persuasive of potential bad faith, while the court’s conclusion that fiduciary duties described in an operating agreement could apply to conduct already governed by an ancillary agreement’s good-faith standard provides additional considerations for drafting equity repurchase provisions.
