Effectively Assessing Fiduciary Duties
Business owners may be surprised to find that it is always not so easy to determine the full scope of fiduciary duties owed by those who manage or run the day-to-day operations of a business, vis-a-vis the owners. The case law continues to develop in this area, and the type of entity selected may bring about different interpretations of how the law is to apply in this area. While Florida courts have often looked to Delaware for guidance, see First Am. Bank and Trust v. Frogel, 726 F.Supp. 1292, 1298 (S.D.Fla. 1989), the fact remains that Florida business statutes are quite unique, with the LLP having one source body of law, the LLC another source body of law, and the limited partnerships and LLLP still another source body of law. Florida Revised Uniform Limited Partnership Act of 2005, effective January 1, 2006 (Chapter 620, Part I, Sections 620.1101 through 620.2205); Florida Revised Limited Liability Company Act (Chapter 605 of the Florida Statutes); Florida Revised Uniform Partnership Act of 1995 (Chapter 620, Part II, Sections 620.81001 through 620.9902). Practitioners must be sure to carefully monitor developments both here in Florida, as well as in other states, like Delaware as the law continues to evolve.
The Florida statutes on business entities consistently focus on two primary duties: the duty of care and the duty of loyalty, and recent amendments to the law, suggest that at least with LLCs, these might not be "cabined in" insofar as such terms should not be restrictively defined in a manner that might lead to potentially narrow judicial interpretations or applications. See F.S. Section 605.04091; Cohn & Ames, Florida Business Laws Annotated, at 293-294. For further details, Cohn & Ames recommend that practitioners consider Conti, Un-cabined Fiduciary Duties in Florida LLCs: The Common Law and Equity Opens the Door to Expanded Liability and the Manifestly Unreasonable Standard, 91 Fl. Bar J. 32 (Sept/Oct. 2017).
In Florida, blanket, advance waivers of duties are thought to be invalid. See Tufts, "Evaluating LLC Operating Agreements Containing "Carte Blanche Authority and Right to Rely Provisions Purporting to Release Third Parties from Any Duty to Inquire," Tax Section Bulletin, Vol. XXIX, No. 2 (Fall 2013), at 20 (see also, fn. 73).
If you are an owner and have questions about fiduciary duties, inclusive of a duty of disclosure, please contact us.
- General Overview
- Direct & Derivative Actions
- Effective Assessing Fidiciary Duties
- Piercing the Veil & Charging Order Issues
- Evaluating Developments in Single-Member LLCs
- Successor Liability & Continuation of Business
- Workouts & Bankruptcy