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In re Sky Harbor Hotel Properties, LLC

Supreme Court of Arizona

June 25, 2019

In re: Sky Harbor Hotel Properties, LLC, Debtor.
v.
Patel Properties, LLC, Defendant. Sky Harbor Hotel Properties, LLC, Plaintiff, In re: Swift Air, LLC, Reorganized Debtor, MorrisAnderson & Associates, Ltd., Litigation Trustee for the Reorganized Debtor, Plaintiff,
v.
Redeye II, LLC, et al., Defendants.

          Certified Questions from the United States Bankruptcy Court for the District of Arizona Nos. 2:17-bk-08082-PS; 2:12-bk-14362-DPC

          John R. Clemency (argued), Lindsi M. Weber, Maria F. Hubbard, Polsinelli PC, Phoenix, Attorneys for Sky Harbor Hotel Properties, LLC

          Paul M. Levine (argued), Paul M. Levine, P.C., Scottsdale, Attorneys for Patel Properties, LLC

          Dale C. Schian (argued), Scott R. Goldberg, Schian Walker, P.L.C., Phoenix; Kim. R. Maerowitz, The Maerowitz Law Firm, Scottsdale, Counsel for MorrisAnderson & Associates, Ltd. Litigation Trustee

          Thomas J. Salerno, Alisa C. Lacey, Christopher C. Simpson, Anthony P. Cali (argued), Stinson Leonard Street LLP, Phoenix, Attorneys for Redeye II, LLC, et al.

          CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE CHIEF JUSTICE BRUTINEL and JUSTICES TIMMER, BOLICK, GOULD, LOPEZ and PELANDER (Retired) joined.

          OPINION

          BALES CHIEF JUSTICE

         ¶1 These consolidated cases involve alleged breaches of fiduciary duties. To address these claims, the United States Bankruptcy Court for the District of Arizona certified the following questions to this Court:

1. Does a manager of an Arizona limited liability company ("LLC") owe common law fiduciary duties to the company?
2. Does a member of an Arizona LLC owe common law fiduciary duties to the company? 3. Can an Arizona LLC's operating agreement lawfully limit or eliminate those fiduciary duties?

         ¶2 We answer the first question in the affirmative. We answer the second question in the affirmative, provided that the member is an agent of the LLC. We answer the third question in the affirmative but note that the operating agreement may not eliminate the implied contractual duty of good faith and fair dealing.

         I.

         A.

         ¶3 Arizona enacted its first limited liability company act ("LLC Act") in 1992. See 1992 Sess. Laws 395 (2d Reg. Sess.). The statutory scheme is codified at A.R.S. § 29-601 et seq. Last year, Arizona's legislature enacted a new Arizona Limited Liability Company Act ("ALLCA") to eventually replace the LLC Act. See 2018 Ariz. Sess. Laws 833 (2d Reg. Sess.) (to be codified at A.R.S. ยง 29-3101 et seq.). ALLCA will first apply only to LLCs formed on or after September 1, 2019, but will ...


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