Exiting Member Of LLC May Still Owe Fiduciary Duties – Corporate/Commercial Law

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Exiting Member Of LLC May Still Owe Fiduciary Duties

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In Villareal v. Saenz, two co-homeowners of a restricted
legal responsibility firm sued one another relating to conduct surrounding a
enterprise divorce. 5-20-CV-00571-OLG-RBF, 2021 U.S. Dist. LEXIS
94183 (W.D. Tex. May 18, 2021). After the events asserted
allegations in opposition to one another, they entered right into a launch
settlement. The events agreed that “Saenz would assign his
complete curiosity to ZroBlack LLC to Villarreal.” After the
launch, Saenz refused to return sure property to the corporate.
Villarreal sued for breach of fiduciary obligation and different claims.

Saenz filed a movement to dismiss, and the district court docket
Justice of the Peace choose beneficial that the claims that arose earlier than the
launch be dismissed, however beneficial that the claims that arose
after the discharge proceed. Regarding Saenz’s fiduciary duties
after the discharge settlement was executed, the court docket acknowledged:

As mentioned, any declare premised on Saenz’s conduct
as ZroBlack’s CEO earlier than the events executed the Release is
barred by the Release’s plain phrases. But Plaintiffs additionally argue
that Saenz violated his fiduciary duties by sustaining dominion
and management over ZroBlack’s area and e-mail server to the
firm’s detriment after the events executed the Release.
Citing case legislation on partnerships, Saenz contends that his fiduciary
duties to ZroBlack ceased as soon as he assigned his curiosity within the LLC
to Villarreal. See Dkt. No. 41 at 21. But underneath Texas  legislation,
“[a] member of a restricted legal responsibility firm might not withdraw or
be expelled from the corporate.” Tex. Bus. Org. Code §
101.107. Further, “an assignor member doesn’t stop to be a
member merely by assigning the member’s curiosity.” Miller
& Ragazzo, 13 Tex. Prac., Texas Methods of Practice § 59:2
(3d ed. 2021) (citing id. § 101.111(a)). At the identical time, the
Operating Agreement refers to an assignor as an “exiting
member” with out defining that time period or discussing its
implications. See Dkt. No. 33-3 at 9. Ultimately, Saenz hasn’t
addressed the interaction between Texas legislation on LLCs and the language
within the Operating Agreement. Accordingly, on the current briefing,
the Court cannot conclude as a matter of legislation that Saenz
did not owe ZroBlack any fiduciary duties after he assigned his
curiosity within the firm to Villarreal.


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