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Sept. 24 — Under Delaware law, a limited liability company can enforce provisions of its LLC agreement even if the company does not sign it, according to a Sept. 24 Delaware Chancery Court opinion.
Vice Chancellor J. Travis Laster wrote, “[b]y statute, a limited liability company is a party to its own limited liability company agreement, regardless of whether the limited liability company executes its own limited liability company agreement.”
Seaport Village Operating Company, LLC (the “Company”) requested attorneys' fees from Seaport Village Ltd. (“Limited”) for lawsuits that arose out of the Company's limited liability agreement. The LLC agreement provided that in disputes between the parties, the prevailing party shall be entitled to recover reasonable attorneys' fees for actions arising out of the agreement.
Limited claimed that the Company was not a “party” to the LLC agreement because the Company did not sign it.
The court, however, rejected this argument as a matter of law. Vice Chancellor Laster found that amendments to Delaware's Limited Liability Company Act “make clear that the LLC and its members are parties to and bound by the LLC agreement, regardless of whether they sign it.”
Vice Chancellor Laster cited § 18–101(7) of the DLLCA, which states, “[a] limited liability company is bound by its limited liability company agreement whether or not the limited liability company executes the limited liability company agreement.”
The court additionally found that basic principles of contract law support this rule.
Vice Chancellor Laster awarded $363,803.82 in fees and expenses to the Company.
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The opinion is available at http://courts.delaware.gov/opinions/download.aspx?ID=212120.
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