On November 28, 2012, the Delaware Court of Chancery issued an opinion in Feeley v. NHAOCG, LLC that reaffirms the Court of Chancery's position that default fiduciary duties exist for managers and controlling members of limited liability companies (LLCs) under Delaware law. This is the first time this issue has been addressed since the Delaware Supreme Court's ruling in Gatz Properties, LLC v. Auriga Capital Corp, where the Supreme Court determined that it was unnecessary for the Court of Chancery to have decided the issue of default fiduciary duties under the Delaware LLC Act and that the question remains open (see Legal Update, Delaware Supreme Court Fails to Resolve Applicability of Default Fiduciary Duties to LLC Managers).

This case initially involved a control dispute where the managing member (AK-Feel, LLC) of Oculus Capital Group, LLC sued to block the non-managing member's (NHAOCG, LLC) attempt to take over the managerial role in Oculus. Although the control dispute had been resolved for the most part, the non-managing member's counterclaims remain at issue. AK-Feel filed a motion to dismiss NHAOCG's claims, which was granted for some claims and denied for others.

One of the counterclaims that was not dismissed alleged that AK-Feel breached its default fiduciary duties as managing member of Oculus. AK-Feel tried to dismiss this claim by arguing that an LLC's managing member only owes the duties expressly stated in the LLC agreement. However, the Court of Chancery agreed with NHAOCG's argument that AK-Feel owes default fiduciary duties as the managing member of Oculus. It relied on Chancellor Strine's reasoning in Gatz to find that the Delaware LLC Act contemplates a default fiduciary duty, finding Chancellor Strine's reasoning to be persuasive, even if not precedential.

Although Feeley seems to reinforce the existence of default fiduciary duties, practitioners wishing to create fiduciary duties for Delaware LLC managers and controlling members should remain wary of relying solely on default fiduciary duties and create express fiduciary duties in the LLC agreement until the Supreme Court rules on this issue.