Business Associations

WAKA, LLC v. Humphrey

Circuit Court of Fairfax County, Virginia, 2007

Facts:

WAKA, the World Adult Kickball Association, was a member-managed LLC with four members. Three of the members terminated Humphrey's membership for not paying a required capital contribution. WAKA then sued Humphrey for allegedly violating the Virginia Computer Crimes Statute and other misconduct. Humphrey counterclaimed that the other members breaching their fiduciary duty to him, among other things.

Issue:

Did defendants breach a fiduciary duty to Humphrey?

Rule:

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The LLC Act establishes that a manager of an LLC owes a duty to the company, but the LLC Act does not impose fiduciary obligations towards, among, or between members.

Reasoning:

The legislature chose not to impose a fiduciary duty towards members upon managers. This decision should be respected, and partnership law should not not be applied in this case. If an LLC wants to impose a fiduciary duty upon its managers, it should include such a term in its articles of organization or operating agreement.

Holding:

No, defendants did not even owe a fiduciary duty to Humphrey. Humphrey's claim of breach of fiduciary duty dismissed.


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