Southern Update - Miller v. FiberLight, LLC

Miller v. FiberLight, LLC, 343 Ga. App. 593 (Ga. Ct. App. 2017)

A former minority member of a Delaware limited liability company sued the majority members and the chair of the board of directors of the company alleging breach of fiduciary duties owed to him as a minority member. The minority member claimed the defendants breached their fiduciary duties by unilaterally rejecting offers to purchase the company, using economic duress to coerce him into signing various amendments to the LLC agreement and terminating his employment and redeeming his interests in the company.

The Georgia Court of Appeals found that under Delaware law, default fiduciary duties of care and loyalty apply to LLC agreements that fail to plainly, unambiguously and explicitly eliminate such duties. The court, relying on prior cases holding that default fiduciary duties apply to LLC agreements, concluded that because the LLC agreements at issue did not eliminate those duties, a genuine dispute of fact remained regarding whether the defendants breached their fiduciary duty to the minority member by rejecting offers to purchase the company. Accordingly, the court reversed, in part, the trial court’s granting of defendants’ motion for summary judgment on the breach of fiduciary duty claims. The court also reversed the grant of defendant’s motion for summary judgment on the minority member’s claim for aiding and abetting a breach of fiduciary duty as well as for his claim for punitive damages and attorney fees.

The court affirmed the trial court decision granting the defendants’ motion for summary judgment on any breach of fiduciary duty claims based on coercion and redemption of the minority member’s interests upon his termination. The court concluded no coercion existed when they forced him to sign the third amended LLC agreement using threats of termination because at the time of the third amendment, the defendants were not majority members and did not have the authority to terminate him. Additionally, because the LLC agreement clearly authorized the redemption of the minority member’s interest upon his termination, the court affirmed the trial court’s grant of summary judgment on the claim that defendants breached the default fiduciary duties and the covenant of good faith and fair dealing owed to the minority member by redeeming his interest in the company upon his termination.