Policing Limited Liability Companies Under Contract Law

摘要

The enforceability of an elimination of fiduciary duties clause in LLC operating agreements rests upon the assumption that investors or minority members and controlling or managing members of the LLC freely negotiated the clause. Under this contractarian model of LLC governance, such clauses should be fully enforced subject only to contract law's good faith doctrine. This article argues that the adoption of the contractarian model subjects such clauses to all of the policing doctrines and rules of contract law and not just the good faith doctrine. For example, operating agreements can be analyzed as contracts of adhesion. As such, elimination clauses can be aggregated with other one-sided terms in the operating agreement to render the agreement unenforceable on unconscionability grounds.