Managers of LLCs have similar duties to members of LLCs. A breach of these fiduciary duties can lead to a lawsuit and personal liability for directors, officers and LLC managers.

Frequently, lawsuits against corporate directors and officers and LLC managers are filed by the company in a derivative action brought by a corporate shareholder or LLC member. Recently, however, the Michigan Supreme Court in Murphy v. Inman clarified that lawsuits against corporate directors and officers (and by implication, managers of LLCs) may, in certain circumstances, be brought directly by a corporate shareholder. The Michigan Supreme Court further clarified that, in addition to statutory duties, corporate directors, officers and LLC managers must also abide by common law fiduciary duties.

This ruling may increase the risk of personal liability for corporate directors and officers and LLC managers. By expressly permitting individual shareholders who have suffered damages to file lawsuits directly against corporate directors and officers, the Michigan Supreme Court has increased the risk that corporate directors, officers and LLC managers may be held personally liable for breaches of fiduciary duties – including common law obligations.

In light of this recent ruling, corporate directors, officers and LLC managers will want to be sure they are protected. In addition to the obvious practice of acting in a reasonable and ethical manner to promote the best interests of the company, directors, officers and managers will want to secure a contractual promise from the company to indemnify the individual for any personal liability arising out of their role for the company. Directors, officers and managers will also want to insist that the company maintain robust Director and Officer insurance.