Two companies enter into agreement and form LLCs to develop parcels of a tract for residential purposes..?

Question

The operating agreements provided that "no Member shall be accountable to the [LLC] or to any other Member with respect to [any other] business or activity even if the business or activity competes with the [LLC's] business." The Westbury group entered into agreements with other parties to develop additional parcels within the tract in competition with the Bellemeade LLC. The Stokers filed a suit in a Georgia state court against the Westbury group, alleging, among other things, breach of fiduciary duty. What duties do the members of an LLC owe to each other? Under what principle might the terms of an operating agreement alter these duties? In whose favor should the court rule? Discuss.

Answer 1

I'm not about to do your homework for you. This is something you need to know how to sort out for your BAR Exam.

Answer 2

You probably should do your own homework. But, in most states, members of an LLC do owe a fiduciary duty to each other. This is a high standard requiring them to act for each other as they would for themselves.

But, this LLC agreement has specificallly carved out business competition. Westbury may defend that Stokers have waived the right to claim a breach based on competition and may also defend that Stokers have consented to competition.

Of course, Stokers will argue that the LLC contract was not integrated, doesn't mean what Westbury says it does, and so.

Based solely on the facts presented, I would rule for Westbury. Stokers made a deal that they didn't like later. Too bad, but they're stuck with it.