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No. 1-04-3639

PRESIDING JUSTICE McNULTY delivered the opinion of thecourt:

This case concerns the applicability of fiduciary duties toa member of a manager-managed limited liability company under theIllinois Limited Liability Company Act (805 ILCS 180/1-1 et seq.(West 2002)) (Act). Plaintiff-appellant Peter Katris,individually and in a derivative capacity on behalf of ViperExecution Systems, L.L.C. (the LLC), asserted a cause of actionfor collusion against defendants-appellees Patrick Carroll andErnst & Company (Ernst). Katris, a manager of the LLC, contendedthat Carroll and Ernst colluded with a member of the LLC in themember's breach of his fiduciary duties to Katris and the LLC. The circuit court of Cook County granted summary judgment infavor of Carroll and Ernst, finding that the LLC member did notowe the LLC or Katris any fiduciary duty.

In affirming the circuit court's grant of summary judgment,we follow the plain meaning of section 15-3(g)(3) of the Act. 805 ILCS 180/15-3(g)(3) (West 2002). This section imposesfiduciary duties only on a member of a manager-managed limitedliability company who exercises some or all of the authority of amanager pursuant to the operating agreement. 805 ILCS 180/15-3(g)(3) (West 2002). The facts in this case showed that themember did not exercise any such authority pursuant to theoperating agreement. Accordingly, the member did not owe anyfiduciary duties, and, as a result, the collusion claim fails andsummary judgment was proper.

BACKGROUND

In the early to mid-1990s, Stephen Doherty wrote a softwareprogram called "Viper" for Lester Szlendak. Subsequently, Katrisand William Hamburg, both Ernst employees, expressed interest inViper, and on February 14, 1997, they joined Szlendak and Dohertyin forming the LLC to exploit the capabilities of the software. On that date, they filed the LLC's articles of organization withthe Secretary of State. In it, they indicated that management ofthe LLC was vested in its managers, Katris and Hamburg, and notretained by its members.

Pursuant to the LLC's operating agreement, signed by thefour members on February 14, 1997, each member held a 25%interest, and as a condition of the operating agreement, Szlendakand Doherty assigned their rights, interest and title to Viper tothe LLC. The operating agreement provided that the "business andaffairs of the [LLC] shall be managed by its [m]anagers" and thatthe members agreed to elect Katris and Hamburg as the "sole[m]anagers" of the LLC. The operating agreement also enumeratedthe powers of the managers and set forth the rights andobligations of the members. However, none of the provisionssetting forth the rights and obligations of the members providedthe members with any managerial authority. Pursuant to itsterms, the operating agreement could "not be amended except bythe affirmative vote of [m]embers holding a majority of the[p]articipating [p]ercentages."

Also on February 14, 1997, Katris and Hamburg, as managersof the LLC, prepared a written consent adopting certainresolutions in lieu of holding an initial meeting of themanagers. They resolved, inter alia, to adopt the operatingagreement dated February 14, 1997, as the operating agreement ofthe LLC and to elect the following: Hamburg as chief executiveofficer, Katris as chief financial officer, Szlendak as directorof marketing, and Doherty as director of technical services. Thewritten consent contained signature lines for Hamburg and Katris,who were identified as "all of the [m]anagers" of the LLC.

Prior to and at the time of the LLC's formation, Dohertyworked as an independent contractor for Hamburg and Carroll (alsoan Ernst employee); however, in late 1997, Ernst hired Doherty towork for Carroll. As part of his duties for Carroll, Dohertyworked with a programmer hired by Ernst to adapt a softwareprogram ultimately called "Worldwide Options Web (WWOW)."

Katris initiated this action on January 16, 2002, andultimately asserted a breach of fiduciary duty claim againstDoherty and a claim for collusion against Doherty, Carroll andErnst. He alleged that WWOW was functionally similar to Viperand contended that Doherty usurped a corporate opportunity of theLLC by working in secret with Carroll and the programmer hired byErnst to develop competing software for Ernst. He furthercontended that Carroll and Ernst colluded with Doherty in thebreach of Doherty's fiduciary duties to the LLC.

Doherty subsequently settled with Katris, providing Katriswith an affidavit setting forth his involvement in the case inexchange for his dismissal. As a result of Doherty's dismissalfrom the case, only Katris' claim for collusion againstdefendants-appellees Carroll and Ernst remained.

Carroll and Ernst filed a motion for summary judgmentasserting, inter alia, that Katris' collusion claim failedbecause Doherty, as a nonmanager member of the manager-managedLLC, did not owe Katris or the LLC a fiduciary duty under section15-3(g) of the Act (805 ILCS 180/15-3(g) (West 2002)), and thusthey could not collude with Doherty to breach a fiduciary dutyunder that section.

In response, Katris filed an affidavit attaching theFebruary 14, 1997, written consent. Katris stated that thewritten consent constituted an amendment to the operatingagreement and that, pursuant to the terms of that amendment,Doherty was named "Director of Technology" and "given the solemanagement responsibility for developing, writing, revising andimplementing the Viper software." According to Katris'affidavit, Doherty "was in charge of adapting the software toroute options orders, in addition to stock orders," and the "LLCrelied on him totally to develop the Viper software." Katriscontended that pursuant to section 15-3(g)(3) of the Act (805ILCS 180/15-3(g)(3)(West 2002)), Doherty was thus subject to thestandards of conduct imposed upon managers under the Act andbreached those duties by usurping a corporate opportunitybelonging to the LLC.

On October 1, 2004, the circuit court entered an ordergranting Carroll and Ernst's motion for summary judgment. Thecourt subsequently denied Katris' motion for reconsideration, andthis appeal follows.

ANALYSIS In this appeal, Katris contends that the trial court erredin granting summary judgment on his collusion claim againstCarroll and Ernst. We review the circuit court's grant ofsummary judgment de novo. Morris v. Margulis, 197 Ill. 2d 28, 35(2001). Summary judgment is appropriate where the pleadings,depositions, affidavits, admissions, and exhibits on file, whenviewed in the light most favorable to the nonmoving party, showthat there is no genuine issue as to any material fact and themoving party is entitled to judgment as a matter of law. Buschv. Graphic Color Corp., 169 Ill. 2d 325, 333 (1996).

Here, Katris asserted a cause of action for collusionagainst Carroll and Ernst. He contended that Carroll and Ernstcolluded with Doherty in breaching Doherty's fiduciary duty toKatris and the LLC. Accordingly, Katris' claim against Carrolland Ernst depended upon a finding that Doherty owed Katris andthe LLC a fiduciary duty. Chicago Park District v. Kenroy, Inc.,78 Ill. 2d 555, 564-65 (1980). In this appeal, Katris contendsthat summary judgment was improper because Doherty owed Katrisand the LLC such a fiduciary duty.

We look to the applicable provisions of the Act indetermining the fiduciary duties owed by the managers and membersof the LLC. Anest v. Audino, 332 Ill. App. 3d 468, 475-76(2002); see also Harbison v. Strickland, 900 So. 2d 385, 389(Ala. 2004) ("Like corporations and limited partnerships, limitedliability companies are creatures of statute"). The parties hereagree that section 15-3(g) of the Act (805 ILCS 180/15-3(g) (West2002)) applies to determine Doherty's fiduciary duties.

Katris acknowledges that theirs was a manager-managed LLCand that, pursuant to the Act, a member of a manager-managed LLC"who is not also a manager owes no duties to the company or tothe other members solely by reason of being a member." 805 ILCS180/15-3(g)(1) (West 2002). Katris thus concedes that Dohertydid not owe any fiduciary duties solely by reason of being amember of the LLC.

Katris contends, however, that Doherty owed fiduciary dutiesto the LLC pursuant to section 15-3(g)(3) of the Act. Section15-3(g)(3) provides:

"[A] member who pursuant to the operatingagreement exercises some or all of the authorityof a manager in the management and conduct of thecompany's business is held to the standards ofconduct in subsections (b), (c), (d), and (e) ofthis Section to the extent that the memberexercises the managerial authority vested in amanager by this Act[.]" 805 ILCS 180/15-3(g)(3)(West 2002)). Katris contends that Doherty exercised some of the authorityof a manager in his capacity as director of technology for theLLC and thus falls within the ambit of this section. Carroll andErnst disagree, contending that pursuant to the plain terms ofthe statute, Doherty was only subject to fiduciary duties if heexercised managerial authority pursuant to the operatingagreement. 805 ILCS 180/15-3(g)(3) (West 2002). They maintainthat Doherty did not have any such managerial authority under theoperating agreement. We agree.

"'The cardinal rule of statutory construction is toascertain and give effect to the intent of the legislature.'" Inre Application of the County Collector, 356 Ill. App. 3d 668, 670(2005), quoting People ex rel. Ryan v. McFalls, 313 Ill. App. 3d223, 226 (2000). The plain meaning of the language used by thelegislature is the best indication of legislative intent, andwhen the language is clear, this court should not look toextrinsic aids for construction. Department of Transportation v.Drury Displays, Inc., 327 Ill. App. 3d 881, 888 (2002). Ifpossible, a statute should be construed so that no part isrendered superfluous or meaningless. In re Application of theCounty Collector, 356 Ill. App. 3d at 670.

Looking at the plain language of section 15-3(g)(3) of theAct, Doherty was subject to fiduciary duties if he exercised someor all of the authority of a manager pursuant to the LLC'soperating agreement. 805 ILCS 180/15-3(g)(3) (West 2002). TheAct provides for the creation of an operating agreement, statingthat "[a]ll members of a limited liability company may enter intoan operating agreement to regulate the affairs of the company andthe conduct of its business and to govern relations among themembers, managers, and company." 805 ILCS 180/15-5(a) (West2002). The four members of the LLC here entered into such anoperating agreement on February 14, 1997.

Looking to that operating agreement, it specificallyprovides that the business and affairs of the LLC "shall bemanaged by its [m]anagers," provides for the election of Katrisand Hamburg as the "sole [m]anagers" of the LLC, and sets forththe powers of the managers of the LLC. Although the operatingagreement also sets forth the rights and obligations of themembers, these provisions do not provide for any managerialauthority. Accordingly, Doherty did not exercise any managerialauthority pursuant to the LLC's operating agreement. 805 ILCS180/15-3(g)(3) (West 2002) (imposing fiduciary duties on memberwho exercises some or all of the authority of a manager pursuantto the operating agreement); 805 ILCS 180/15-5(a) (West 2002)(operating agreement governs relations among members, managers,and company; Act applies to the extent not otherwise provided inoperating agreement).

Katris contends, however, that the managers amended theoperating agreement by passing the February 14, 1997, writtenconsent wherein they elected Doherty "Director of Technology." He contends that Doherty's designation as "Director ofTechnology" elevated him to a position beyond that of a meremember of the LLC and was sufficient to impart on him somemanagerial authority. This argument fails for two reasons.

First, Katris has provided no authority for his contentionthat the written consent constituted an amendment to theoperating agreement. Pursuant to its own terms, an amendment tothe operating agreement required the "affirmative vote of[m]embers holding a majority of the [p]articipating[p]ercentages." Katris and Hamburg were the sole participants tothe February 14, 1997, written consent and held only a combined50% interest in the LLC. They thus could not amend the operatingagreement without an additional vote. See 805 ILCS 180/15-5(West 2002) (setting forth applicability of operating agreementin regulating affairs of the LLC). Accordingly, the facts do notsupport Katris' contention that the written consent constitutedan amendment to the operating agreement.

Second, even if the written consent were viewed as part ofthe operating agreement, it did not change and, indeed, itreaffirmed the terms of the operating agreement. Katris andHamburg executed the written consent in their capacities as themanagers of the LLC. In it, they specifically resolved to adoptthe operating agreement the four members had executed that day asthe operating agreement of the LLC. In the signature lines tothe written consent, Katris and Hamburg designated themselves as"all of the [m]anagers" of the LLC. In light of these facts,something more than the managers' designation of Doherty as"Director of Technology" was required to change the terms of theoperating agreement and grant Doherty managerial authoritypursuant to it. 805 ILCS 180/15-3(g)(3), 15-5 (West 2002).

In reaching this conclusion, we find Katris' contentions inhis affidavit, wherein he enumerates the managerial authorityDoherty held as a result of being named "Director of Technology"in the written consent, inapposite under section 15-3(g)(3) ofthe Act. By its terms, that section applies where the non

manager member exercises some or all of the authority of amanager pursuant to the operating agreement. 805 ILCS 180/15-3(g)(3) (West 2002). To look beyond the operating agreement toKatris' affidavit would be to ignore the plain meaning of thestatute and to render the express words used therein superfluousor meaningless. This we cannot do. In re Application of theCounty Collector, 356 Ill. App. 3d at 670; Drury Displays, Inc.,327 Ill. App. 3d at 888.

The undisputed facts of this case show that Doherty was amember of a manager-managed LLC and exercised no managerialauthority pursuant to the LLC's operating agreement. Accordingly, the undisputed facts show that Doherty owed nofiduciary duties to Katris or the LLC pursuant to the Act andKatris' collusion claim against Carroll and Ernst fails as amatter of law. We therefore conclude that the circuit courtproperly granted the motion for summary judgment and affirm itsjudgment.

Affirmed.

TULLY and O'MALLEY, JJ., concur.