Nevada’s trial-level business courts are not as heavily observed as the Delaware Court of Chancery. Our in-state ecosystem does lacks anything quite like The Chancery Daily. But we do have Our Nevada Judges which has a broader focus.
With that in mind, I wanted to highlight a very recent Nevada Business Court decision from Judge Gall that considers whether the business judgment rule applies in the limited liability company context.
Nevada limited liability companies are governed by Chapter 86 of the Nevada Revised Statutes. Unlike Chapter 78, which governs corporations, there is no statutory business judgment rule. So what does this mean for limited liability companies? Should their management get business judgment rule protection?
Judge Gall faced a dispute where one party argued that the corporation statute’s business judgment rule and exculpation provisions should apply and the other party argued that because the operating agreement did not specifically set out a business judgment rule, that there should be no business judgment rule.
The Court found that “by adopting fiduciary duties . . . the members incorporated the business judgment rule to assess whether they breached those duties.” After reviewing some literature on the subject, the Court reasoned that when