These highlights were prepared by Maliheh Zare, a corporate and commercial litigation associate in the Delaware office of Lewis Brisbois.
The Delaware Court of Chancery recently reaffirmed that minority members of a manager‑managed Delaware LLC generally do not owe fiduciary duties to the company or its other members in Ruby Hollow, LLC v. Tharp & Assocs., LLC, No. 2024‑0318‑DG (LWW), 2026 WL 2085808 (Del. Ch. July 20, 2026).
The defendant, Tharp and Associates, LLC, held a 7% membership interest in Ruby Hollow, LLC and was not a manager. Ruby Hollow was manager-managed, with two managers each holding 31% of its membership interests. Id. at *1. Ruby Hollow alleged that Tharp breached fiduciary duties by concealing information concerning operational failures at a mining site, that Tharp allegedly oversaw, from Ruby Hollow’s managers. Id.
Earlier in the litigation, Magistrate in Chancery Gibbs dismissed the operative complaint for failure to plead facts showing a transaction that Tharp controlled under the theory of “transaction-specific control,” which refers to a doctrine requiring allegations that a minority stockholder “exercised actual control over the board of directors during the course of a particular transaction.” No. 2024‑0318‑DG (LWW), Dkt. 33, at 12, 16-17 (Jan. 29, 2026) (citation omitted).
No Control and No Fiduciary Duty
Vice Chancellor Will however declined to engage with the “transaction-specific control” concept or to apply it to the minority members of a manager-managed LLC who lacked “the structural or functional authority necessary to be treated as a controlling member.” 2026 WL 2085808, at *3. The Court explained that to establish fiduciary duty, “a minority investor must possess ‘such formidable voting and managerial power that they, as a practical matter, are no differently situated than if they had majority voting control.’” Id. (emphasis in original) (citations omitted). Where a minority member’s membership interest is considerably smaller than those of the managing members and it lacks no other contractual control over the LLC, the notion of the minority member’s control is impossible as a matter of law. Id.
Because Tharp held only a 7% interest and lacked any contractual rights conferring control over Ruby Hollow, the Court concluded that it could not, as a matter of law, be treated as a controlling member subject to fiduciary duties. Accordingly, the Court rejected Ruby Hollow’s attempt to impose fiduciary obligations based on allegations that Tharp had provided “unfaithful service.” Id. at *4.
Takeaways
The key takeaway is that under Delaware law, in a manager-managed LLC, a non-managing minority does not owe fiduciary duties to the LLC or its members absent facts showing actual control comparable to majority ownership. When seeking relief against minority LLC members, one should consider contractual or tort causes of action rather than relying solely on fiduciary‑duty claims.
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