Legal Memorandum: Breach of an LLC Member's Fiduciary Duty

Issue: Under Wyoming law, what legal causes of action does one member of a Limited Liability Corporation (LLC) have in a situation where two other members are attempting to oust the first member?

Area of Law: Business Organizations & Contracts, Personal Injury & Negligence
Keywords: Breach of fiduciary duty; Squeeze out or oust a member; Interference with contract
Jurisdiction: Wyoming
Cited Cases: 958 P.2d 1040; 937 P.2d 1337; 732 P.2d 1364; 594 P.2d 972; 721 P.2d 1059; 748 P.2d 713; 108 Cal. Rptr. 480; 510 P.2d 1032; 850 P.2d 607; 868 P.2d 211; 822 P.2d 849; 1 P.3d 615; 989 P.2d 634; 946 P.2d 417
Cited Statutes: Restatement (Second) of Torts §§ 766 and 766B, 767, 773, 777; Wyo. Stat. §§ 17-17-101 to -151 (1999); Restatement (Second) of Contracts § 206 (1981); Wyo. Stat. § 17-21-404 (1999)
Date: 07/01/2000

Wyoming recognizes the two basic interference torts set forth in Restatement (Second) of Torts §§ 766 and 766B:  intentional interference with contract and intentional interference with prospective contractual relations.  Lever v. Community First Bancshares, Inc., 989 P.2d 634, 639 (Wyo. 1999).  The elements for interference with an existing contract are “(1) the existence of the contract; (2) the defendant’s knowledge; (3) intentional and improper interference inducing or causing a breach; and (4) resulting damages.”  Id. at 639-40 (citing First Wyo. Bank v. Mudge, 748 P.2d 713, 715 (Wyo. 1988)).

The tort arises when a stranger to the contract interferes.  A party to the contract cannot “interfere”; instead, the party breaches the contract.  “A party to a contract cannot be liable for tortious interference with that contract.  Both tortious interference theories lie only against outsiders who interfere with the contractual expectancies of others.”  Ahearn v. Anderson-Bishop Partnership, 946 P.2d 417, 423-24 (Wyo. 1997) (citing Kvenild v. Taylor, 594 P.2d 972 (Wyo. 1979)).

In determining whether an interference is “improper,” Wyoming courts examine the factors listed in Restatement (Second) of Torts § 767.  Toltech Watershed Improv. Dist. v. Johnston, 717 P.2d 808, 814 (Wyo. 1986).  These factors include:

(a)        the nature of the actor’s conduct,

(b)        the actor’s motive,

(c)        the interests of the other with which the actor’s conduct interferes,

(d)       the interests sought to be advanced by the […]

margin-left:1.0in;margin-bottom:.0001pt;text-align:justify;line-height:200%; mso-pagination:widow-orphan’>

Subscribe to Litigation Pathfinder

To get the full-text of this Legal Memorandum ... and more!

(Month-to-month and annual subscriptions available)