Parties to Delaware LLC Agreements Cannot Circumvent Fiduciary Duty Waivers via Implied Covenant of Good Faith and Fair Dealing

The Delaware Supreme Court recently affirmed that, with respect to limited liability companies (LLCs), courts will not fill gaps with implied duties that parties chose not to include in the LLC’s operating agreement. In Khan et al. v. Warburg Pincus, LLC, the court found that minority LLC members could not use the implied covenant of good faith and fair dealing to challenge the outcome where the LLC agreement expressly waived fiduciary duties, authorized self-interested conduct by the majority investor, and provided a specific amendment mechanism for differential consideration. The court refused to import corporate-style fairness and disclosure obligations where parties had negotiated a detailed contractual governance scheme, reinforcing Delaware’s highly contractarian approach to LLCs.