Business Associations, Pages 985–993

McConnell v. Hunt Sports Enterprises

Court of Appeals of Ohio, 1999

Facts:

Hunt, McConnell, and others formed an LLC to invest in and operate a new team in the NHL. The operating agreement contained an express allowance for members to compete against the LLC. McConnell then did compete against the LLC and signed a franchise agreement before the LLC.

Issue:

Did McConnell breach his fiduciary obligation?

Rule:

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[M]embers of limited liability companies owe one another the duty of utmost trust and loyalty.

Note:

This is not the rule in Virginia, where members do not owe each other fiduciary duties.

Reasoning:

Ordinarily, this would be a breach of the fiduciary duty, but since the operating agreement specifically allowed its members to compete, it was not in this case. McConnell did not act secretly or otherwise engage in behavior which would constitute wrongful behavior.

Holding:

No, McConnell did not breach his fiduciary duty.

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