McCoy v. Durden, ___ So. 3d ___, 40 Fla. L. Weekly D81 (Fla. 1st DCA December 31, 2014)
When an LLC borrowed $65 million to buy two radio stations in California, its operating agreement was amended to give the lender control over the board of directors and to modify the rules governing conflicts of interest. After the LLC defaulted on the loan, the non-lender members of the board of directors brought a derivative action for breach of fiduciary duty against the lender group. The trial court entered summary judgment for the defendants, but the appellate court reversed because an issue of fact existed whether the defendants engaged in willful misconduct under the operating agreement.
The fiduciary duty is an equitable concept. A fiduciary duty arises when one party reposes its trust in another party, who accepts the trust, or when “confidence has been acquired and abused.” A fiduciary has the duty to act in the utmost good faith and to subordinate its interests if they conflict with the duty. “[C]orporate officers and directors owe both a duty of loyalty and a duty of care to the corporation that they serve.”
Section 608.4225(1), Florida Statutes, provides that “each manager and managing member [of a limited liability company] shall owe a duty of loyalty and a duty of care to the limited liability company and all of the members of the limited liability company,” but the statute limits the duty of loyalty to three specific areas. “Section 608.4225(1)(b) also limits the duty of care to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.” Section 608.4225(1)(c), Florida Statutes, requires the managers and managing members of a limited liability company to exercise good faith and fair dealing in the discharge of their duties to the limited liability company and its members. Section 608.4226(1), Florida Statutes, defines a conflict of interests transaction as one involving a limited liability company in which a manager, managing member, director, or officer has a financial interest, but a conflict of interests transaction may not be void or voidable if the conflict is disclosed or known or the transaction is fair and reasonable. Under Section 608.423, Florida Statutes, the operating agreement may, within specific bounds, modify the duties of members and managers. In this case, the operating agreement sought to limit fiduciary duties and liability for a breach.
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