## Facts

- Oculus Capital Group, LLC was a Delaware, manager-managed LLC formed to pool investments.
- AK-Feel, LLC was Oculus’s managing member; NHAOCG, LLC was a non-managing member.
- Christopher J. Feeley controlled AK-Feel and ran Oculus’s day-to-day operations as president and CEO.
- A dispute arose after Feeley believed NHA sought to remove AK-Feel as managing member and replace Feeley as CEO.
- Earlier in the litigation, the Court granted partial judgment on the pleadings in favor of AK-Feel, holding NHA wrongfully attempted to remove AK-Feel and terminate Feeley.
- After most control-related issues were resolved, the remaining matters were NHA’s counterclaims seeking damages from AK-Feel and Feeley for conduct alleged to have caused the breakdown in relations and the control dispute.
- NHA asserted counterclaims for (i) a declaration that it could cause Oculus to cease operations under the LLC agreement, (ii) breach of the LLC agreement by AK-Feel (including alleged gross negligence/willful misconduct and other failures), (iii) “aiding and abetting” liability against Feeley tied to AK-Feel’s alleged breaches, (iv) breach of fiduciary duty by AK-Feel and Feeley, and (v) gross negligence and related theories.
- Feeley and AK-Feel moved to dismiss; certain claims potentially overlapped with Feeley’s separate employment agreement containing an arbitration clause.

## Issues

1. Whether managers or managing members of a Delaware LLC owe default fiduciary duties absent a clear contractual elimination in the LLC agreement.
2. Whether the LLC agreement granted NHA a contractual right to cause Oculus to cease business operations.
3. Whether Delaware law permits liability against an individual controller for “aiding and abetting” a breach of a commercial contract, and if not, whether controller liability can attach for breaches of contractually imposed fiduciary-type duties.
4. Whether claims implicating Feeley’s employment agreement were subject to arbitration and should be stayed in court.

## Decision

- The Court of Chancery (Laster, V.C.) granted the motion to dismiss in part and denied it in part.
- The court dismissed NHA’s declaratory judgment claim seeking a ruling that NHA could cause Oculus to “cease business operations,” finding no support in the LLC agreement’s plain language.
- The court dismissed most of NHA’s breach-of-contract allegations against AK-Feel, while allowing a limited portion tied to specific contractual duties to proceed.
- The court recognized Delaware does not provide a free-standing cause of action for aiding and abetting breaches of commercial contracts, but allowed claims to proceed against Feeley as a controller where the pleadings supported breaches of fiduciary-type obligations imposed by contract.
- The court held default fiduciary duties applied to AK-Feel because the LLC agreement did not clearly eliminate them and provided only limited exculpation from monetary liability.
- The court held Feeley could face fiduciary-duty liability based on allegations that, as AK-Feel’s decision-maker, he exercised sufficient control over Oculus to be treated as an “actual manager.”
- The court stayed certain claims pending arbitration to the extent they implicated Feeley’s employment agreement.

## Legal Principles

- In a Delaware LLC, default fiduciary duties of loyalty and care apply to the manager or managing member unless the LLC agreement clearly eliminates or modifies those duties.
- Contractual exculpation from monetary liability is distinct from elimination of fiduciary duties; limited exculpation does not, by itself, waive fiduciary obligations.
- Delaware law does not recognize “aiding and abetting” liability for breach of a standard commercial contract as an independent claim.
- A controller may be liable to parties to whom the controlled entity owes contractually imposed fiduciary-type duties, where the controller’s conduct is alleged to cause the breach.
- The plain language of an LLC agreement governs members’ rights; drastic powers (such as a unilateral right to shut down operations) must be clearly conferred.
- Claims covered by a valid arbitration clause may be stayed in court pending arbitration.

## Conclusion

The Court of Chancery rejected NHA’s asserted contractual right to force the LLC to cease operations, reaffirmed that LLC managers owe default fiduciary duties absent clear contractual waiver, permitted potential liability for an individual who effectively controlled the manager, and routed employment-related disputes to arbitration while dismissing inadequately pleaded or legally unavailable theories.


Feeley v. NHAOCG, LLC, 62 A.3d 649 (Del. Ch. 2012)