On the Elimination of Fiduciary Duties: A Theory of Good Faith for Unincorporated Firms

Abstract:     
Delaware recently amended its statutes to permit limited liability companies ("LLCs") and limited partnerships to eliminate fiduciary duties. At the same time, Delaware law makes clear that the implied contractual duty of good faith and fair dealing may not be eliminated for these business entities. In this context at least, fiduciary duties become contractual defaults. Accordingly, significant issues are raised as to when fiduciary duties have been successfully removed, and how broad any residual duty of good faith should be. Based on existing Delaware law, this is a problem of contract interpretation: courts must resolve the status of intra-firm duties in light of the firm's governing agreement. For a range of reasons, including statutory policy, avoidance of judicial error, and autonomy concerns, this article will suggest that a textualist mode of interpretation is appropriate when courts enforce LLC or limited partnership agreements which have eliminated fiduciary duties.

Number of Pages in PDF File: 65

Keywords: LLC, limited partnership, fiduciary duties, good faith

Accepted Paper Series