“Best-Judgment” as an Enforceable Contractual Duty and the Limits of Exculpatory Clauses:
Commentary on Clinton v. Aspinwall, Supreme Court of Connecticut, 2025

1. Introduction

Parties & Setting. John B. Clinton, a minority member of CCP Equity Partners, LLC (a Delaware-organized private-equity vehicle), sued its managers—Michael E. Aspinwall, Steven F. Piaker, and David W. Young—alleging that they had engineered his ouster and confiscated his economic interest through manipulation of the company’s capital reserve. The litigation, though filed in Connecticut, is governed substantively by Delaware limited-liability-company law pursuant to the operating agreement’s choice-of-law clause.

Issues on Appeal. Two central questions reached the Connecticut Supreme Court:

• Whether the trial court’s jury instruction incorrectly treated the exculpatory clause (second sentence of § 3.4) as creating an affirmative duty not to act in bad faith, with gross negligence, or with willful misconduct.
• Whether the first sentence of § 3.4—requiring managers to “exercise their best judgment” in operating the company—imposes a substantive duty capable of supporting liability for minority oppression.

Justice McDonald’s concurrence (the text provided) agrees with the majority’s ultimate disposition—ordering a retrial—but spotlights two additional themes: (i) the decision is not Connecticut precedent on LLC interpretation because Delaware law controls, and (ii) the Court should have resolved the plaintiff’s separate claim that the defendants breached the Delaware implied covenant of good faith and fair dealing, which had been struck below.

2. Summary of the Judgment

Although only the concurrence is reproduced, it recites the majority’s holdings:

1. The exculpatory clause (second sentence of § 3.4) does not create new affirmative duties; it merely shields managers from liability for certain categories of conduct if such duties otherwise exist.—Instruction was therefore wrong.
2. The “best-judgment” obligation (first sentence of § 3.4) does impose an affirmative duty. Because that language is ambiguous, it could reasonably be read—alone or contextually—to forbid oppressive conduct toward minority members. The improper jury instruction therefore tainted the verdict and necessitates a new trial.

Justice McDonald concurs but argues the Court should have simultaneously reviewed (and likely reinstated) Clinton’s implied-covenant claim, to avoid further delay and repetitive litigation.

3. Analysis

3.1 Precedents Cited

• Feeley v. NHAOCG, LLC, 62 A.3d 649 (Del. Ch. 2012) – Confirmed that clauses exculpating managers from liability do not themselves generate fiduciary duties; they simply carve out responsibility if some separate duty is breached.
• Nemec v. Shrader, 991 A.2d 1120 (Del. 2010) – Articulated the “bootstrapping” doctrine: where claims for breach of fiduciary duty merely duplicate breach-of-contract contentions, fiduciary claims are often dismissed.
• Bäcker v. Palisades Growth Capital II, L.P., 246 A.3d 81 (Del. 2021) – Clarified that overlapping fiduciary and contract claims survive when they rely on additional facts, invoke distinct legal principles, or provide different remedies.
• Gerber v. Enterprise Products Holdings, LLC, 67 A.3d 400 (Del. 2013) – The “foundational” case describing Delaware’s two-strand approach to the implied covenant: (a) true gap-filling and (b) policing arbitrary/bad-faith use of contractual discretion.
• Other Delaware cases anchoring the concurrence’s reasoning: Dieckman v. Regency GP LP, Cygnus Opportunity Fund, Bandera Master Fund, and Bay Center Apartments, all emphasizing contractually granted discretion is still bounded by implied duties of fair dealing.

3.2 Legal Reasoning

1. Interpreting “Best Judgment.” The Court treats “exercise of best judgment” as an affirmative standard of conduct. Justice McDonald notes that ordinary dictionary usage and scattered Delaware precedents equate failure to use one’s “best judgment” with bad-faith decision-making. Because the term is ambiguous, the jury must interpret its scope; the earlier instruction conflated “best judgment” with the separate exculpatory clause, confusing these concepts.

2. Exculpatory Clause Mischaracterization. Relying principally on Feeley, the Court holds that an exculpatory clause delineates what liabilities managers are insulated from; it does not give rise to the duties themselves. By telling the jury that the clause imposed a duty not to act in bad faith, the trial court effectively rewrote the contract.

3. Choice-of-Law and Precedential Caution. The concurrence stresses that because Delaware substantive law governs the operating agreement, the decision does not alter Connecticut’s common law of LLCs. This nuanced reminder preserves doctrinal clarity: Connecticut courts applied Delaware principles; they did not fashion new Connecticut rules.

4. The Implied Covenant Debate. McDonald criticizes the lower court’s reliance on Liberty Property (a D.C. case) for requiring that an implied contractual term be “clearly implied.” Under Gerber, the test is broader: would rational parties, at the time of contracting, have prohibited the now-challenged action, had they considered it? Furthermore, when a contract grants a party discretion (here, the size of capital reserves), Delaware law implies that such discretion be exercised reasonably and in good faith. Thus, the plaintiff’s claim should have survived a motion to strike.

3.3 Impact

• For LLC Drafting. Managers and counsel should carefully distinguish duty-creating language (“best judgment,” “reasonable efforts”) from exculpatory language (“no liability unless…”) and understand that Delaware courts will police ambiguity in the former while narrowly construing the latter.
• Minority-Member Protection. The decision signals that vague contractual standards like “best judgment” may suffice to submit minority-oppression claims to a jury, even absent explicit fiduciary-duty language.
• Litigation Strategy. Plaintiffs should plead both contract and fiduciary claims (when non-duplicative) and be prepared to rely on the implied covenant to fill discretionary gaps. Defendants cannot count on exculpatory clauses to block discovery or trial when the underlying duty stems from elsewhere in the agreement.
• Connecticut Procedure with Foreign Law. The concurrence’s call for addressing the implied-covenant issue now illustrates a growing preference for judicial efficiency when multiple retrials loom. Appellate practitioners should utilize Practice Book § 63-4(a)(1)(B) aggressively to preserve cross-appeals.

4. Complex Concepts Simplified

• Exculpatory Clause – A contractual provision that shields a party (here, LLC managers) from liability for certain conduct. It does not create duties; it immunizes against consequences if duties are breached.
• “Best Judgment” Standard – A flexible contractual benchmark requiring decision-makers to act prudently, honestly, and with an eye toward the enterprise’s best interests; falling short can constitute breach even without classical fiduciary language.
• Implied Covenant of Good Faith and Fair Dealing – A Delaware doctrine inserting terms the parties “would have” agreed upon or policing discretionary authority so it isn’t wielded arbitrarily or in bad faith.
• Bootstrapping Doctrine – Bars plaintiffs from re-labeling pure contract breaches as fiduciary-duty breaches unless additional factual or legal elements distinguish the two.
• Choice-of-Law – Contractual selection of governing law (Delaware here) binds courts in other states (Connecticut) to apply that law to substantive questions.

5. Conclusion

Clinton v. Aspinwall clarifies two pivotal points under Delaware LLC jurisprudence, as applied by Connecticut courts:

1. Exculpatory clauses merely limit damages; they do not themselves supply affirmative obligations.
2. An ambiguous—but express—“best-judgment” obligation is enforceable against managers and can support liability for minority oppression.

Justice McDonald’s concurrence deepens the opinion by urging courts to confront implied-covenant questions contemporaneously, emphasizing efficiency and fidelity to Delaware’s nuanced two-strand approach. Collectively, the judgment cautions drafters about the unintended potency of seemingly benign language, equips minority members with a textual footing for oppression claims, and reminds litigants that discretion, no matter how broadly stated, is not carte blanche for self-dealing.

Future Connecticut trial courts—and practitioners nationwide—must parse LLC agreements with heightened sensitivity to subtle duty-creating words and to the pervasive, gap-filling vigilance of the Delaware implied covenant.