Issue: What duty do the manager-members of an LLC have toward the members of the LLC and what governs how a member may bring a claim against the manager-members?
|Area of Law:||Business Organizations & Contracts|
|Keywords:||Members of the LLC; Duty; Derivative action|
|Cited Cases:||858 F.2d 233; 851 So. 2d 1255; 694 So. 2d 636; 118 So. 3d 442; 40 So. 3d 176; 723 So. 2d 1127; 744 So. 2d 731; 561 F.3d 377; 310 So. 2d 806; 895 So. 2d 28; 964 So. 2d 1095|
|Cited Statutes:||Louisiana Code of Civil Procedure; La. Rev. Stat. Ann. § 12:1365 (2010); La. Civ. Proc. Code art. 617; La. Rev. Stat. Ann. § 12:1314(A)(1); La. Rev. Stat. Ann. § 12:1314(E); La. Rev. Stat. § 12:1314(B); La. Civ. Proc. Code art. 611; La. Rev. Stat. Ann. § 12:1329; La. Civ. Proc. Code art. 615|
The Louisiana Limited Liability Act has a section entitled “Derivative Actions” which states: “A limited liability company shall be treated as an unincorporated association under Chapter 5 of Title II of Book I of the Louisiana Code of Civil Procedure.” La. Rev. Stat. Ann. § 12:1365 (2010). The members of the LLC are treated like corporate shareholders and the managers of the LLC are treated like corporate officers or directors. See Roth v. Voodoo BBQ, LLC, 2007-0295, p. 2 n.3 (La. App. 4 Cir. 8/1/07), 964 So. 2d 1095, 1097 n.3. Thus, a member of an LLC can present a legal claim against the managers on behalf of the LLC using the same procedure as a shareholder of a corporation. See also La. Civ. Proc. Code art. 617 (“unincorporated association” as used in statutes governing derivative actions means “any unincorporated business association that is treated by controlling substantive law as a separate juridical person”).
“The crux of a . . . derivative action is proof that mismanagement and breaches of fiduciary duties caused loss and damage to the corporation.” Thornton ex rel. Laneco Constr. Sys., Inc. v. Lanehart, 97-2871 (La. App. 1 Cir. 12/28/98), 723 So. 2d 1127, 1133 (minority shareholder alleged, inter alia, that defendants paid themselves excessive salaries, bonuses and directors’ fees and that particular sale of stock was for inadequate compensation). The manager-members of an LLC have a fiduciary duty toward all members to act in the best interest of the LLC. The relevant statute provides that a […]