May 30, 2013 Articles

The Enforceability of Fiduciary Duty Waivers

A careful review of the underlying agreements is critical before taking any court action

by Zachary G. Newman and Alison M.C. Schrag

Fiduciary duty claims involve substantial legal work given the intricate pleading requirements, intensive discovery, and extensive motion practice common to these claims. Indeed, the very existence of a fiduciary relationship is typically a hotly contested issue. While many fiduciary relationships are not challengeable as they arise by statute, agreement, or the common law, in other circumstances, the fiduciary relationship inherently involves a factual determination and requires significant discovery before a resolution is reached. 

Parties have been attempting to mitigate risks against fiduciary duty claims by including exculpatory language and waivers in contracts, limited liability company (LLC) operating agreements and articles of organization, and releases.  Waivers of fiduciary duties and breaches thereof, however, are not always enforced or permitted by governing law, and a number of recently issued decisions merit a discussion as to the enforceability of these waivers and related exculpatory provisions. These decisions, discussed below, provide valuable insight to the efficacy and enforceability of fiduciary duty waivers.

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