Limitation of LLC Member Fiduciary Duties to Contractual Terms

1. Introduction

In 333 Johnson LLC v. Maple 333 Johnson Member, LLC (2025 NYSlipOp 02028), the New York Appellate Division, First Department, addressed the scope of fiduciary duties owed by one LLC member to another under a detailed Delaware‐law operating agreement. The principal question was whether the managing member’s fiduciary duties extended beyond the specific disclosure obligations set out in the agreement’s Right of First Offer (“ROFO”) provisions.

Parties:

Plaintiff‐Appellant: 333 Johnson LLC (owner of a 15% interest)
Defendants‐Respondents: Maple 333 Johnson Member, LLC and Normandy Real Estate (Maple holds 85% and acted as managing member after 2015)

Key Issues:

Did Maple owe a broader fiduciary duty of disclosure under § 9.3(a)(i) of the operating agreement?
Did the ROFO waiver letter agreement independently limit Maple’s representations and disclosures?

2. Summary of the Judgment

The court unanimously affirmed the trial court’s grant of summary judgment dismissing the complaint with prejudice. It held:

Under §§ 9.3(a) and 12.5(a) of the operating agreement, Maple’s disclosure obligations were limited to the specific notice, purchase‐and‐sale agreement, and due diligence materials required by the ROFO provision.
Default Delaware fiduciary duties could not expand those express contractual limits without rendering § 12.5(a) surplusage.
The separate ROFO waiver letter agreement constituted the sole source of Maple’s representations and warranties regarding the sale to Steel and precluded reliance on the underlying operating agreement for additional duties.

Because the plaintiff’s breach‐of‐fiduciary‐duty claim failed, the aiding‐and‐abetting claim also failed, and no further issues required resolution.

3. Analysis

3.1. Precedents Cited

The court relied primarily on Delaware precedent recognizing that sophisticated parties may “preempt” default fiduciary duties through detailed contractual terms:

R.S.M. Inc. v. Alliance Capital Management Holdings, L.P., 790 A.2d 478 (Del. Ch. 2001): Contractual provisions may limit or displace common‐law fiduciary obligations if parties so intend.
Related Westpac LLC v. JER Snowmass LLC, 2010 Del. Ch. LEXIS 158 (Del. Ch. Apr. 28, 2010): Contractual clarity is paramount; default duties do not override express carve‐outs.
Weinberg v. Waystar, Inc., 294 A.3d 1039 (Del. 2023): A separate waiver or letter agreement can independently define and limit the parties’ representations and warranties.

3.2. Legal Reasoning

The court’s reasoning proceeded in two steps:

Contractual Primacy: Reading §§ 9.3(a)(i) (general fiduciary duties of the managing member) and 12.5(a) (ROFO procedure) together, the court concluded that § 12.5(a) “narrowed Maple’s obligations to make disclosures with respect to the sale of the property.” If Maple had broader disclosure duties, § 12.5(a) would be meaningless. The parties, as sophisticated commercial actors, could have negotiated additional disclosure duties but did not.
Independent Letter Agreement: The December 21, 2018 letter agreement—by its plain terms—was “the sole source” of representations and warranties in connection with the waiver of the ROFO. It expressly disclaimed any reliance on the underlying operating agreement for additional duties. Under Delaware law, such a standalone commercial document is binding and restricts extrinsic fiduciary claims.

In sum, the court gave effect to the precise wording of the LLC agreement and the waiver letter and refused to graft on extra‐contractual fiduciary obligations.

3.3. Impact

This decision has important implications for LLC formations and sale transactions:

It reaffirms that Delaware‐law operating agreements, when carefully drafted, may preclude or confine fiduciary duties to the exact terms the parties agree on.
It underscores the importance of clear, explicit disclosure clauses and waiver provisions if a minority member seeks broader remedies or information rights.
It signals to practitioners that standalone letter agreements or waivers can be used to freeze the scope of representations and must be negotiated with care.
Future litigation over member duties will turn on strict contract construction rather than general equitable principles whenever the parties are “sophisticated commercial actors.”

4. Complex Concepts Simplified

Fiduciary Duty: An obligation to act in the best interests of another party; in LLCs, default duties mirror those of general partners unless modified by contract.
Right of First Offer (ROFO): A contractual mechanism giving one party the first opportunity to buy an asset at a specified price before it’s offered to third parties.
Managing Member: The member designated to manage the LLC’s affairs, here endowed with the powers of a Delaware general partner under § 9.3(a)(i).
Waiver Letter Agreement: A standalone commercial document in which both sides agree to specific representations, disclaimers, and waivers, independent of broader operating‐agreement terms.
Contractual Carve‐Out: An express provision in an agreement that removes or alters default rights or duties provided by law.

5. Conclusion

333 Johnson LLC v. Maple 333 Johnson Member, LLC illustrates the controlling power of a meticulously drafted operating agreement and related commercial documents to limit fiduciary obligations in a real‐estate sale context. By enforcing the express terms of the ROFO clause and the separate waiver letter, the court confirmed that default fiduciary duties will not be read into an agreement to override the parties’ clear, negotiated expectations. Going forward, practitioners should ensure that any desired disclosure or information rights are spelled out in operative documents—else risk being bound by more limited, pre‐agreed contractual terms.

Limitation of LLC Member Fiduciary Duties to Contractual Terms: 333 Johnson LLC v. Maple 333 Johnson Member, LLC