L.L.C. Lawsuits – Member Liability

Duty to other Members

Member Managers owe a duty of loyalty to the LLC, to hold as trustee for it any profit or benefit derived by such person connected with the conduct of the business or from any personal use by such person of the property of the LLC, without the informed consent of more than one-half by number of disinterested managers. See RSMo § 347.088.

Claims for breach of any such duty should ordinarily be brought on behalf of the company, as a derivative suit.

However, Missouri’s Limited Liability Company Act also provides that members of a member-managed LLC owe a duty of care to its members and other parties bound by the operating agreement. Such duty requires action/inactions to be made in “good faith” with the care of a similar person in similar circumstances, in a manner “a reasonable person would believe to be in the best interest of the LLC.”

Unless these duties and liabilities are “restricted” by the operating agreement, a member will be able to sue a member managers directly, and such restrictions will almost certainly turn on factual questions that will survive pre-trial motions, and be determined by the judge or jury.

Attorneys who specialize in commercial litigation: Joshua M. Schindler, and Brian P. Doty.

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