## Facts

- Viper Execution Systems, L.L.C. was formed in 1997 by four members with equal ownership interests to commercialize the “Viper” software, which two members assigned to the LLC.
- The LLC’s articles and operating agreement made the company manager-managed and named Peter Katris and William Hamburg as the sole managers.
- A written consent executed by the managers (in lieu of an initial managers’ meeting) designated Stephen Doherty as “director of technology.”
- The operating agreement allowed amendments only by a majority vote of the members.
- Katris and Hamburg worked for Ernst & Company; Patrick Carroll also worked for Ernst; Doherty later worked for Ernst and Carroll and helped develop a separate program (WWOW).
- Katris alleged WWOW was functionally similar to the Viper software and that Doherty breached fiduciary duties to Katris and the LLC, with Carroll and Ernst colluding in that breach.
- After Doherty settled, Carroll and Ernst moved for summary judgment, arguing Doherty (as a non-managing member) owed no fiduciary duty under the Illinois Limited Liability Company Act and the operating agreement.
- The trial court granted summary judgment to Carroll and Ernst, and Katris appealed.

## Issues

1. Whether, under 805 ILCS 180/15-3(g)(3), a member of a manager-managed LLC owes fiduciary duties to the LLC and its manager absent proof that the member exercised some or all manager authority pursuant to the operating agreement.
2. Whether a “director of technology” designation by written consent established or evidenced the exercise of manager authority sufficient to impose fiduciary duties.
3. Whether an aiding-and-abetting (collusion) claim against third parties can survive when the alleged primary actor owed no fiduciary duty.

## Decision

- The appellate court affirmed summary judgment for Carroll and Ernst.
- The court held that § 15-3(g)(3) imposes fiduciary duties on a member of a manager-managed LLC only if the member exercises some or all manager authority pursuant to the operating agreement.
- The operating agreement vested management exclusively in Katris and Hamburg, and there was no evidence the agreement was amended to add Doherty as a manager.
- The “director of technology” designation did not satisfy the operating agreement’s amendment requirements and did not show Doherty exercised manager authority under the agreement.
- Because Doherty owed no fiduciary duty to Katris or the LLC on the undisputed record, the collusion claim against Carroll and Ernst failed as a matter of law.

## Legal Principles

- In a manager-managed Illinois LLC, fiduciary duties are not imposed on all members; they arise for a member only if the member exercises some or all authority of a manager pursuant to the operating agreement. (805 ILCS 180/15-3(g)(3))
- Whether a member owes fiduciary duties turns on the LLC’s governing documents and the member’s exercise of manager-level authority under those documents, not on job titles or operational importance.
- A claim premised on aiding and abetting (collusion in) a breach of fiduciary duty requires an underlying fiduciary duty and breach; without that predicate duty, the claim fails.

## Conclusion

The court held that in a manager-managed LLC, a member does not owe fiduciary duties under § 15-3(g)(3) unless the member actually exercises manager authority pursuant to the operating agreement; a technical title conferred by nonconforming written consent was insufficient, so the third-party collusion claim failed and summary judgment was affirmed.


Katris v. Carroll, 842 N.E.2d 221 (Ill. App. Ct. 2005)