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COMPANY GOVERNANCE UNDER FLORIDA’S LIMITED LIABILITY COMPANY ACT - page 14 / 28

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FLORIDA STATE UNIVERSITY LAW REVIEW

[Vol. 30:53

2. FRUPA

RUPA was adopted in Florida with its treatment of the duties of care and loyalty and the obligation of good faith nearly intact. The one change was in the definition of the duty of loyalty. While RUPA says the duty of loyalty “is limited to” its three exclusive categories, FRUPA says the duty of loyalty “includes” them “without limita- tion.”56 The legislature was concerned that RUPA narrowed the duty of loyalty too severely, and wanted courts to be able to fashion other categories of loyalty violation.57

Nevertheless, partners remain free to enter into agreements that give categorical permission to engage in some kinds of activities (if not “manifestly unreasonable”) and which set forth procedures for authorizing or ratifying discrete transactions.58 Further, the stan- dard of care remains gross negligence; good faith remains an obliga- tion, not a fiduciary duty; and both are “mandatory minima” subject to some variation by agreement.

3.

The FLLCA

Now comes the first puzzle. The drafters of Florida’s LLC Act bor- rowed FRUPA’s “[g]eneral standards of partner’s conduct” for the section denominated “general standards for managers and managing members”59 almost verbatim—with one important exception. The words “only fiduciary” have been omitted. Thus, instead of saying

56. Section 620.8404(2), Florida Statutes, states:

A partner’s duty of loyalty to the partnership and the other partners includes, without limitation, the following:

(a) To account to the partnership and hold as trustee for the partnership any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity;

(b) To refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership, and

(c) To refrain from competing with the partnership in the conduct of the part- nership business before the dissolution of the partnership.

  • 57.

    COHN & AMES, supra note 24, at 242; Larson, supra note 11.

  • 58.

    FLA. STAT. § 620.8103 (2001). Because FRUPA has broadened the potential num-

ber of activities that could violate the duty of loyalty, it is difficult to know what kinds of activities require advance permission, whether categorical or discrete. However, the areas most likely to require focused attention from the parties and their counsel are those al- ready specified.

59. Non-managing members in a manager-managed LLC do not have duties under the statute. In this sense, they are “more like” shareholders or limited partners than part- ners. I suspect, however, that a court would treat a non-managing member with voting control like a controlling shareholder, and that such a member would therefore have duties (whether or not denominated “fiduciary”) by virtue of control. The fact that the FLLCA is silent on the issue is unlikely to present much of an impediment. After all, corporate stat- utes are silent on the duties of controlling shareholders, but that has not prevented courts from imposing them.

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