Fiduciary Duties Owed by Members of Texas Limited Liability Companies

The Texas Supreme Court has made it clear in a recent opinion that majority shareholders do not owe formal fiduciary duties to minority shareholders, even in closely held corporations. Cardiac Perfusion Services, Inc. v. Hughes, 436 S.W.3d 790 (Tex. 2014). However, a recent Texas appellate court held that managing members of a limited liability company (LLC) may owe a fiduciary duty to the non-managing member when the company agreement vests sole control of the company in the managing members.  Guevara v. Lackner, 447 S.W.3d 566 (Tex. App.—Corpus Christi 2014), reh'g overruled (Dec. 11, 2014).

The moral of the story is that in forming an LLC, careful attention should be paid to drafting the company agreement that governs the operation of the LLC.