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COMPANY GOVERNANCE UNDER FLORIDA’S LIMITED LIABILITY COMPANY ACT - page 27 / 28

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2002]

FLORIDA’S LIMITED LIABILITY COMPANY ACT

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leave plenty of room for litigation about loyalty. One way around all this is to contract out of these duties entirely, which the statute does not permit.

Form entrepreneurs whose clients really want to contract out of fiduciary duties, and who want to be sure that a court will respect that choice, do have another option: Delaware. In a Delaware LLC,108 fiduciary duties are default rules that may be varied or eliminated in the operating agreement.109 If the parties anticipate the possibility of litigation in the future (as well they might, since they want to con- tract out of a trust relationship and the opportunities for litigation it provides), and do not want to travel to Delaware, in spite of its many charms, they may always include a choice of forum clause110 or an ar- bitration clause specifying Florida as the arbitral venue.111

If enough form consumers buy the Delaware product, then per- haps the Florida statute will be amended to make it clear that con- tracting out is permitted. That is certainly the route I would recom- mend.

B. The “Do-it-Yourselfers”

One way for an organizational form to create value is by setting default rules that most parties would choose if they bargained. Form consumers shopping for an economy model probably would not con- tract out of the duty of loyalty even if they could,112 so the default rules on duty serve them reasonably well. The FLLCA’s no exit de- fault rule is another matter entirely. That rule must—and I believe will—be bargained around if parties are represented by reasonably sophisticated professionals. If it turns out, as I think it will, that most competently-represented form consumers are bargaining around the no exit default, then the statute should be amended by adopting the Model Act’s exit provisions. As things stand, parties

108. Or, for that matter, a Delaware limited partnership. See, e.g., Sonet v. Timber Co., 722 A.2d 319 (Del. Ch. 1998).

109. Counsel should recognize, however, that it is important to make sure the parties fully understand, and acknowledge that they understand, both the fact and the conse- quences of contracting out. In this regard, the parties should also realize that full disclo- sure assumes additional importance in the absence of fiduciary duties. Sonet v. Plum Creek Timber Co., No. 16931, 1999 WL 160174 (Del. Ch. 1999).

110. While making it clear that Delaware’s substantive law is to apply, of course. I leave it to counsel to decide whether they really want to explain Delaware law to an al- ready overburdened Florida judge.

111. Delaware has already held that such arbitration agreements are enforceable. Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 293 (Del. 1999).

112. Nor, in my opinion, would they contract around the statutory impediments to en- forcing the duty of care or the obligation of good faith, since those duties serve no particu- larly useful purpose.

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