Exiting Member of LLC May Still Owe Fiduciary Duties | Winstead PC

In Villareal v. Saenz, two co-owners of a restricted legal responsibility firm sued one another concerning 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 whole curiosity to ZroBlack LLC to Villarreal.” After the discharge, Saenz refused to return sure property to the corporate. Villarreal sued for breach of fiduciary responsibility and different claims.

Saenz filed a movement to dismiss, and the district courtroom Justice of the Peace decide really helpful that the claims that arose earlier than the discharge be dismissed, however really helpful that the claims that arose after the discharge proceed. Regarding Saenz’s fiduciary duties after the discharge settlement was executed, the courtroom 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 corporate’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 could 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 can’t conclude as a matter of legislation that Saenz didn’t owe ZroBlack any fiduciary duties after he assigned his curiosity within the firm to Villarreal.

Id.