covery of the names and addresses of the discharged employees…the discovery was relevant to the subject matter of the action.”) 18. See Young v. Energy Drilling Co., No. Civ. A. 4:20-cv1716, 2021 WL 1550343 (S.D. Tex. Apr. 20, 2021); T.S. v. The Burke Foundation, No Civ. A. 1:19-cv-809, 2021 WL 1807994 (W.D. Tex. Feb. 22, 2021). 19. Swales, 985 F.3d at 442. 20. See id. 21. Id. at 441-42. 22. See id. at 443. 23. See Young v. Energy Drilling Co., No. Civ. A. 4:20-cv1716, 2021 WL 1550343 (S.D. Tex. Apr. 20, 2021) (granting certification of a collective action following Swales); T.S. v. The Burke Foundation, No Civ. A. 1:19cv-809, 2021 WL 1807994 (W.D. Tex. Feb. 22, 2021) (same); Hernandez v. Pritchard Indus. (Southwest), LLC, No. Civ. A. 20-cv-0508, 2021 WL 1146005 (W.D. Tex. Mar. 25, 2021) (same); Badon v. Berry’s Reliable Resource, LLC, No. Civ. A. 19-cv-12317, 2021 WL 933033 (E.D. La. Mar. 11, 2021) (affirming certification of a collective action following Swales); but see Hebert v. Technipfmc USA, Inc., No. 4:20-CV-2059, 2021 WL 1137256, at *2, 5 (S.D. Tex. Feb. 5, 2021) (denying certification).
preme Court may hand down the final word. The uncertainty on these questions has grown from the Texas Business Organizations Code. While the Code does not expressly impose any duties on the members or managers of a limited liability company, it does make a related, cryptic statement: The company agreement of a limited liability company may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has to the company or to a member or manager of the company. TEX. BUS. ORG. CODE § 101.401.
Straehla’s Presumed Duties
This language does not seem to beget “any duties” itself. That said, if a formational agreement may expand or contract the scope of fiduciary duties, does that assume they necessarily exist in the first place? Understandably, this question has caused pause—and, in a series of mostly unpublished decisions, Texas courts of appeals have made broad statements about it but decided little of substance, and, when pushed, either left the question to a jury or found other ways to decide the case.4 And so has this question, along with the scope of any underlying duties, remained unsettled. Straehla has provided long-awaited answers. To shorten a complicated tale, Straehla involved the aftermath of Hurricane Maria in Puerto Rico; alleged selfdealing by a member of a limited liability company hired to provide security for the repair of Puerto Rico’s electric utility system (self-dealing which arose, allegedly, from an affair that caused business to go to a competitor, owned partly by an affairee); a subsequent lawsuit by the company; a motion under the Texas Citizens’ Participation Act; its denial; and an interlocutory appeal.5 The allegedly self-dealing member argued, on appeal, that the district court erred in denying the TCPA motion because he did not owe fiduciary duties.
By Ryan Philip Pitts
he rule in Texas has long been that general partners and corporate officers and directors owe fiduciary duties to look after the interests of the legal entity that they represent.1 But what of limited liability companies in Texas? Do their managers and members owe similar duties of loyalty, care, and good faith? And should they? In what may come as a surprise, these questions have persisted without a firm answer from the Texas courts—leaving the managers and members of limited liability companies to wonder at their duties and the scope of them, and the federal courts to guess at them, too.2 In a recent decision, the Fourth Court of Appeals at long last addressed these questions head on in Straehla v. AL Global Services, LLC and fashioned a presumption that both members and managers of limited liability companies do owe fiduciary duties of care, loyalty, and good faith, to the company.3 While this presumption would align Texas law with that of jurisdictions such as Delaware, the Texas Su-
The Fourth Court disagreed. Relying on the “assumption” inherent in Section 101.401 of Texas Business Organizations Code and the “corporate-like” benefits of limited liability companies, it fashioned a presumption that the member “owed the same fiduciary duties that a corporate executive or partner would owe a corporation or partnership, unless the LLC agreement shows otherwise.”6 The Straehla rule is thus that the members (and managers) of limited liability companies do owe fiduciary duties, the same as partners and corporate officers, unless the company’s formational agreement says otherwise. The rule set out in Straehla aligns Texas law with that of jurisdictions like Delaware, which courts have looked to for guidance on questions of corporate law.7 Under law like Delaware’s, the managers and members of limited liability companies owe fiduciary duties to the company by default, but these duties may be modified or eliminated by language in the formational agreement.8 The Straehla presumption, working with Section 101.401 of the Texas Business Organizations Code, would bring Texas and Delaware law very close, with little space between. Yet Texas law could still shift in a different direction. The two appellants in Straehla have individually filed petitions for review of the Fourth Court’s decision with the Texas Supreme Court.9 Among other things, they argue the Fourth Court erred by presuming that members of a limited liability company owe fiduciary duties, because, in their view, such a presumption lacks a basis in the Texas Business Organizations Code.10 While it is unclear whether the Texas Supreme Court will grant review, if it did, members and managers of Texas limited liability companies may finally know for certain what duties they owe the company. Ryan Philip Pitts is an associate in the appellate practice group of Haynes and Boone LLP’s Houston office. thehoustonlawyer.com