Managerial “Good-Faith” Is Not a Contractual Duty: Clinton v. Aspinwall and the Boundary Between Exculpation and Obligation

Introduction

In Clinton v. Aspinwall, 352 Conn. 597 (2025), the Connecticut Supreme Court reversed a multimillion-dollar jury verdict because the trial court misread an exculpatory clause in a Delaware limited liability company (“LLC”) operating agreement. The plaintiff, John B. Clinton, sued three former co-managers of CCP Equity Partners, LLC (“CCP”) for allegedly breaching the operating agreement when they:

adopted self-benefitting amendments in 2008;
removed Clinton as a member in 2013; and
maintained a $3 million capital reserve that reduced his redemption payout.

At trial, the court treated the second sentence of the agreement’s “duty of care” provision (§ 3.4) as though it imposed affirmative duties not to act in bad faith, with gross negligence, or with wilful misconduct. The jury was repeatedly told those were “elements” of Clinton’s contract claim and that the defendants bore the burden of disproving them. Relying on that instruction, the jury awarded Clinton roughly $1.12 million in damages plus more than $1.2 million in attorney’s fees, costs, and interest.

On appeal, the Connecticut Supreme Court—applying Delaware substantive law under the agreement’s choice-of-law clause—held that the disputed sentence is a pure exculpatory clause: it shields managers from damages unless their breach was the product of bad faith, gross negligence, or wilful misconduct. It does not, by itself, create a separate contractual obligation. Because the jury charge conflated exculpation with duty and shifted the burden of proof, the court ordered a new trial and vacated the fee and interest awards.

Summary of the Judgment

Holding: The second sentence of § 3.4 is an exculpatory provision that limits liability; it does not establish affirmative contractual duties. The trial court’s instructions were therefore legally incorrect and harmful. Judgment reversed; new trial ordered; fee, cost, and interest awards vacated.
Secondary Holding: The trial court did not abuse its discretion in admitting expert testimony on the propriety of CCP’s capital reserve.
Procedural Directive: On remand, the trial court must itself decide contractual ambiguity and, if necessary, delimit the jury’s role in weighing extrinsic evidence; it may not delegate those threshold questions to the jury.

Analysis

A. Precedents Cited

The court’s reasoning draws heavily on Delaware corporate and LLC jurisprudence:

Fisk Ventures, LLC v. Segal, 2008 WL 1961156 (Del. Ch.), aff’d, 984 A.2d 124 (Del. 2009): held that a clause eliminating liability “unless the loss resulted from gross negligence, fraud or intentional misconduct” is exculpatory, not duty-creating. The Connecticut court viewed § 3.4 as “quintessential Fisk.”
Metro Storage International, LLC v. Harron, 275 A.3d 810 (Del. Ch. 2022) and Gatz Properties, LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012): confirm that exculpation is considered after a breach is found; it does not itself furnish the standard of conduct.
Sunline Commercial Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836 (Del. 2019); GMG Capital Investments, LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776 (Del. 2012): establish Delaware’s “objective theory of contracts” and the rule that ambiguity is a question of law for the court.
Abercrombie v. Davies, 123 A.2d 893 (Del. Ch. 1956): cited for the narrow meaning of “best judgment” as requiring independent board deliberation rather than importing fiduciary good-faith concepts.

B. Legal Reasoning of the Court

Contractual Interpretation under Delaware Law
Delaware courts enforce contracts as written, looking first to the text; extrinsic evidence is admissible only if the court—not the jury—finds ambiguity. Applying these principles, the Connecticut Supreme Court found § 3.4’s second sentence unambiguous: it speaks only to liability.
Misclassification of Exculpatory Clause
The trial court told jurors that § 3.4 “prohibits actions in bad faith or with gross negligence,” converting conditions of liability into duties. This, the high court said, “improperly allowed the jury to find liability for duties that do not exist.”
Burden-Shifting Error
By labeling good faith, absence of gross negligence, and absence of wilful misconduct as “special defenses,” the charge placed the burden of proof on defendants, inverting normal contract principles.
Delegation of Ambiguity Determination to Jury
The trial court’s instruction invited jurors to decide whether provisions were ambiguous and then sift extrinsic evidence. Ambiguity is a legal determination reserved for judges; the instruction therefore compounded the clause-interpretation error.
Harmless-Error Analysis
Errors were deemed harmful because they touched the core liability question, influenced how the jury viewed every claim, and likely affected the dollar verdict.

C. Impact on Future Litigation and LLC Drafting

Clarifies Exculpation vs. Duty in Connecticut
Connecticut trial courts must treat Delaware-style exculpatory clauses as liability shields only. Plaintiffs cannot plead them as independent sources of affirmative obligations.
Judicial Gatekeeping on Ambiguity
Trial judges must rule pre-trial (or pre-charge) on whether contract language is ambiguous and delimit what evidence the jury may consider. This directive extends beyond Delaware-governed contracts.
Pleading and Charge Precision
Parties must isolate the actual duties they claim were breached. Counsel drafting LLC agreements may wish to separate “standard of conduct” clauses (e.g., a best-judgment covenant) from “limitation of liability” clauses to avoid confusion.
Potential National Persuasive Authority
Because many states borrow from Delaware’s LLC Act and case law, this opinion adds persuasive weight nationwide on the interpretive status of exculpatory provisions.

Complex Concepts Simplified

Exculpatory Clause: A contract term that eliminates or limits liability after a breach, unless specific aggravated circumstances exist (e.g., fraud, gross negligence).
Affirmative Duty vs. Condition of Liability: A duty is conduct the law or contract requires in advance; a condition of liability is a threshold that must be crossed before damages can be awarded.
Gross Negligence: Conduct showing reckless disregard or a gross deviation from ordinary care—not mere carelessness.
Wilful Misconduct: Intentional wrongdoing, often accompanied by a bad purpose.
Good Faith (Delaware context): Honesty in fact and adherence to reasonable commercial standards; its absence (bad faith) includes actions inexplicable except as self-interested or spiteful.
“Best Judgment” Covenant: Historically refers to directors using independent judgment, ensuring they do not cede decision-making to others; not necessarily co-extensive with good-faith or care duties.
Ambiguity (Contract): A provision is ambiguous only when it is reasonably susceptible to two or more plausible meanings to an objective observer; courts, not juries, make this initial call.

Conclusion

Clinton v. Aspinwall is a significant clarification for Connecticut courts applying Delaware law to LLC disputes. The Supreme Court underscored two principles: (1) exculpatory clauses are shields, not swords—they limit liability but do not create new duties; and (2) the question of contractual ambiguity and the admissibility of extrinsic evidence are for judges, not juries. Together, these holdings promote doctrinal consistency with Delaware jurisprudence, restore proper burden allocation in contract cases, and offer practical drafting guidance for business lawyers crafting operating agreements. As LLCs remain the dominant vehicle for closely held enterprises, this decision will likely be cited wherever parties debate the intersection between agreed-upon liability limitations and the substantive obligations of managers.