A recent opinion from the Business Court of Texas, Eighth Division (Fort Worth), provides a crisp reminder that an LLC’s company agreement can all but eliminate fiduciary duties among its members and managers. In Tall v. Vanderhoef, Cause No. 25-BC08A-0002 (Apr. 21, 2025), Judge Jerry D. Bullard dismissed the plaintiff-member’s individual breach of fiduciary duty claim under Rule 91a, finding that it was “legally baseless.”
The LLC Agreement Disclaimed Fiduciary Duties
The LLC Company Agreement contained a clear disclaimer of fiduciary duties:
“Furthermore, no special relationship shall exist between any Manager and the Members, and no Member or Manager shall have any duty to any Member, whether fiduciary or otherwise, except as expressly set forth herein (or in other written agreements). No Member, Manager, or Officer shall be liable to the Company or to any other Member for any loss or damage sustained by the Company or to any Member, unless the loss or damage shall have been the result of gross negligence, fraud or intentional misconduct by the Member, Manager, or Officer in question.”
Relying on that language, the Court determined that the parties “chose to contractually eliminate fiduciary duties between them and liability for losses or damages sustained by them, except for those arising from gross negligence, fraud, or intentional misconduct.”
Relying on the LLC Agreement, the Court Dismissed the Breach of Fiduciary Duty Claim
The Court first underscored the statutory basis for eliminating fiduciary duties in Texas LLCs. Section 101.401 of the Texas Business Organizations Code addresses the ability of members and company agreements in an LLC to expand, restrict, or eliminate certain duties, including fiduciary duties, owed by or to members, managers, or other persons.
As a result, Judge Bullard emphasized three points:
- “Under Texas law, courts must honor the contractual terms that parties use to define the scope of their obligations and agreements, including those that restrict fiduciary duties that might otherwise exist.”
- “This is especially true when the contractual limitation arises from an arms-length business transaction between sophisticated businesspeople.”
- “This principle adheres to Texas’s longstanding public policy of freedom of contract.”
Because the plaintiff did not allege gross negligence, fraud, or intentional misconduct, the disclaimer was fatal to her breach of fiduciary duty claim.
The Plaintiff’s “Informal Fiduciary Duty” Argument
Anticipating the contractual roadblock, the plaintiff asserted that she was owed an informal fiduciary duty arising from “a special relationship of trust and confidence.” That proposition is correct in the abstract, but Texas law requires that the special relationship exist “before, and apart from, the agreement made the basis of the suit.” The petition, however, alleged no pre-existing relationship independent of the LLC. Without that factual predicate, the informal fiduciary duty theory could not survive the Rule 91a motion.
Result: Fiduciary-Duty Claim Dismissed as a Matter of Law
Given the LLC Agreement’s broad waiver and the absence of facts showing an informal fiduciary relationship predating the LLC agreement, the court concluded that the fiduciary-duty cause of action “is legally baseless under Rule 91a.1.” No discovery was required; the pleadings alone doomed the claim.
Other Claims: TTLA and Fraud Survive
It should be noted, however, that the Court did preserve certain of the plaintiff’s claims, at least at the pleadings stage. First, Judge Bullard declined to dismiss the individual Texas Theft Liability Act claim, finding that there was a reasonable drawn inference—which must be taken as true at the pleading stage—that a member’s entitlement to distributions is personal property that can be “stolen.” The Defendants contended that the plaintiff’s TTLA claim hinges on the premise “he misappropriated funds belonging to [the company], not to her.” But the plaintiff alleged that “the distributions and profits she should have received as a member of [the company] but for [the defendant’s] malfeasance.” As a result, the Court concluded “that distributions are discretionary under the [LLC agreement] does not negate the nature of the interest in said distributions.”
The Court likewise let the fraud counts proceed, noting that the alleged misrepresentations were extrinsic to the LLC agreement and therefore not barred by the economic loss rule.
Key Takeaway
When drafting or reviewing an LLC agreement, pay close attention to fiduciary-duty waivers. Courts will enforce them according to their terms—even at the Rule 91a stage—and an informal fiduciary duty theory will not fill the gap unless a pre-agreement relationship of trust and confidence existed.
