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COMPANY GOVERNANCE UNDER FLORIDA’S LIMITED LIABILITY COMPANY ACT - page 13 / 28

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2002]

FLORIDA’S LIMITED LIABILITY COMPANY ACT

65

means in practice. The Official Comments tell us something about what the obligation is not. It is not intended to be free-standing, but rather is “ancillary.”50 Further, although the obligation takes its genesis from contract law, it is a mandatory term which may not be eliminated.51 The partnership agreement may, however, prescribe standards for measuring its performance if those standards are not “manifestly unreasonable.”52

On the most important question, however, the statute is silent. The meaning of “good faith and fair dealing” was left undefined;

vagueness was a deliberate choice.53 courts.

Further explication is left to the

It remains to be seen whethe

r the judiciary is more likely to

achieve clarity than the drafters were. As written, the obligation is a prettily wrapped empty box into which traditionalist judges can put the leftovers from the fiduciary banquet on which they used to feast.54 However, they cannot change the wrapping itself; presumably constructive trusts and punitive damages will not attend breaches of a mere “obligation.”55

It also remains to be seen whether judges will be given much op- portunity to try. Here, the crucial change may be the change in available remedies for breach. Incentives to litigate depend very much on possible outcomes. The smaller the pot, the fewer lawsuits. Damages for breach of contract come in a much smaller pot.

50. Hillman, Vestal, and Weidner say that this treatment “downgrades” the common law, HILLMAN ET AL., supra note 25, at 201, and was “motivated by a desire to thwart plaintiffs’ recoveries and judicial innovation.” Id. at 203. Once again, I detect the unalloyed hand of Professor Vestal, since the only citations are to his previously-written attacks on RUPA. His co-authors have been more generous elsewhere.

  • 51.

    R.U.P.A. § 103(b)(5).

  • 52.

    Id. § 103(b)(3)(i). Here, at least, there is some guidance as to meaning with which

commercial lawyers are familiar. According to the Official Comments, this provision is based on UCC § 1-102(3), and is meant to include procedural provisions like specific time periods that constitute “adequate” notice (5 days in the Comments example). Official Comments to R.U.P.A. § 103(b)(3)(i). Of course, lawyers familiar with the UCC’s treatment of standards for performance are probably also familiar with the UCC’s definition of good faith and fair dealing; that is, as honesty in fact and, in the case of merchants, the obser- vance of reasonable standards of fair dealing in the trade. However, that definition was re- jected by RUPA’s drafters as “too narrow.”

53. It seems to me that this intentionally amorphous obligation was a political bone thrown to the traditionalists unhappy with RUPA’s narrowing of fiduciary duties. The drafting history suggests as much. HILLMAN ET AL., supra note 25, at 47-49. Of course, it is also possible that the deliberate vagueness surrounding this obligation reflects a punt rather than a tossed bone. Perhaps the drafters simply could not reach consensus on spe- cifics and so left that chore to judges.

54. For an illustration of this form of argument, see Claire Moore Dickerson, Cycles and Pendulums: Good Faith, Norms, and the Commons, 54 WASH. & LEE L. REV. 399

  • (1997)

    .

  • 55.

    Weidner, supra note 28, at 908-10.

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