Minority Investors in LLCs: Contractual Limitations, Waivers of Fiduciary Duties, Other Key Provisions

Protecting Minority Interests, Choice of Entity in Litigation, Implied Covenants, Contractual Discretion and More

Recording of a 90-minute CLE webinar with Q&A

Conducted on Wednesday, July 11, 2018

Recorded event now available

or call 1-800-926-7926
Course Materials

This CLE course will provide guidance to counsel advising LLC planners, managers, and investors. The panel will discuss recent cases involving contractual waivers of fiduciary duties, the implied covenant of good faith and fair dealing, and contractual discretion by the board.


A recent Delaware court decision illustrates how the choice of entity form and the contractual freedom afforded by the Delaware Limited Liability Company Act to, among other things, eliminate default fiduciary duties can affect the rights and remedies of minority investors.

In Miller v. HCP & Co., the Court of Chancery dismissed a suit brought by a minority LLC investor against the entity’s controlling member and its board representatives claiming that the defendants breached the implied covenant of good faith and fair dealing by orchestrating a quick sale of the LLC that yielded the controller a substantial gain on its investment but provided the other LLC members little or no consideration for their interests. The court rejected the plaintiff’s argument that divergent incentives under the distribution waterfall in the LLC’s operating agreement supported an implied requirement that any sale be through an open-market auction process to ensure that all LLC members (not just the controller) received maximum value for their interests. The court reasoned, in part, that the LLC’s operating agreement eliminated all fiduciary duties and granted the controlled board unfettered discretion both to determine how the company would be marketed and sold and to approve a sale to an unaffiliated third-party buyer.

The court’s decision makes clear that the implied covenant cannot be used to rebalance economic interests or save a party from a bad deal. It therefore is important for parties to an LLC agreement to anticipate foreseeable scenarios and address them at the bargaining table. Careful drafting of contractual rights and protections is critical in the LLC context, particularly for minority investors and/or when fiduciary duties have been modified or waived

Listen as our panel discusses recent cases involving contractual waivers of fiduciary duties, contractual discretion, and best practices in protecting the interests of minority owners and challenging the board’s actions.



  1. Delaware law and recent cases involving contractual waiver of fiduciary duties
  2. Corporate vs. pass-through entity form in breach of fiduciary duty claims
  3. Issues for minority investors in challenging board decisions
  4. Avoiding pitfalls and protecting minority interests in LLCs


The panel will review these and other critical issues:

  • Challenging LLC transactions and board decisions through litigation;
  • Methods to protect minority investors in LLCs;
  • Choice of entity considerations from management and investor perspectives; and
  • Best practices for contractual waivers of fiduciary duties.


Kelly, Christopher
Christopher N. Kelly

Potter Anderson Corroon

Mr. Kelly focuses his practice on complex litigation and counseling matters involving Delaware corporations and...  |  Read More

Maxwell, Michael
Michael P. Maxwell

Potter Anderson & Corroon

Mr. Maxwell provides advice to clients on matters of Delaware corporate and business law for transactions involving...  |  Read More

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