A recent Delaware Court of Chancery ruling suggests drafters of LLC operating agreements may want to consider establishing a process by which managers of LLCs can be deemed to act in good faith and avoid application of the implied duty of good faith.

The Nevada Supreme Court ruled in Weddell v. H2O, Inc., 128 Nev. Adv. Op. #9, (Nev. March 1, 2012) that a judgment creditor is like an assignee of a membership interest. The creditor is entitled to only the share of the distributions the member would otherwise have received. The managerial interest of the debtor remains with the debtor.

On January 27, 2012, the Delaware Chancery Court issued a 75-page opinion explaining how fiduciary duties are owed by a manager to an LLC’s members absent an expressed limitation or elimination in the operating agreement.

The formation of Iowa LLCs continues to outpace corporations. In 2009, 8,422 LLCs were organized in Iowa compared to just 2,571 for-profit corporations. This is a better than 3 to 1 ratio. This is consistent with almost every other state in the Union save California and New York.