## Facts

- Bonnie Sue Strickland and her late husband formed the Strickland Family Limited Liability Company (LLC) under the Alabama Limited Liability Company Act as part of an estate plan.
- The parents transferred 83% of the LLC equity to their daughter, Suzy Strickland Harbison, while retaining 17% and serving as co-managers.
- After the father’s death, Strickland became the sole manager and retained a 17% ownership interest; Harbison remained the 83% equity owner.
- Strickland caused the LLC to convey three parcels of LLC real property to her son, a nonmember of the LLC.
- Harbison alleged the conveyances were for less than fair market value and benefitted Strickland and her son at the expense of the LLC and Harbison’s majority interest.
- Harbison sued, alleging Strickland breached fiduciary duties and violated the operating agreement through self-dealing and failure to seek fair value for LLC assets.
- The trial court granted summary judgment for Strickland, reasoning that the operating agreement did not impose a duty of loyalty requiring the manager to obtain fair value.

## Issues

1. Whether, under the Alabama Limited Liability Company Act and the LLC’s operating agreement, an LLC manager owes fiduciary duties—especially duties of loyalty and care—to the LLC and its members.
2. Whether fiduciary duties recognized by statute exist independently of the operating agreement such that the agreement’s silence cannot eliminate those duties and support summary judgment.

## Decision

- The Supreme Court of Alabama reversed the summary judgment and remanded.
- The Court held that, under the Alabama Limited Liability Company Act, LLC managers owe fiduciary duties, including duties of loyalty and care, to the LLC and its members.
- The Court rejected the trial court’s treatment of the operating agreement as dispositive of whether fiduciary duties existed.
- Viewing the evidence favorably to Harbison, the Court concluded a factfinder could determine Strickland breached fiduciary duties by transferring LLC property to a close family member on allegedly below-market terms, making summary judgment improper.

## Legal Principles

- Under the Alabama Limited Liability Company Act, an LLC manager stands in a fiduciary relationship to the LLC and its members and owes duties of loyalty and care.
- Statutory fiduciary duties are baseline obligations that do not disappear solely because an operating agreement is silent or narrowly drafted.
- An operating agreement may inform and structure managerial authority, but it does not, without statutory authorization, extinguish core fiduciary obligations arising from the manager’s control over LLC property and affairs.
- Related-party transactions and self-dealing allegations can present material fact questions on loyalty and fairness that preclude summary judgment when supported by evidence and reasonable inferences.

## Conclusion

The Alabama Supreme Court held that LLC managers owe statutory fiduciary duties of loyalty and care to the LLC and its members and that those duties are not eliminated by an operating agreement’s silence; allegations of below-market transfers to a manager’s family member presented triable issues, requiring reversal of summary judgment and remand.


Harbison v. Strickland, 900 So. 2d 385 (Ala. 2004)