On November 25, 2025, the North Carolina Business Court issued an opinion in Estevez v. C&S Commerce, LLC, 2025 NCBC 73, and reaffirmed the enforceability of fiduciary duty waivers in LLC operating agreements.
Minority Members Dispute with Managing Member
The case arose from a business dispute between the owners of C&S Commerce, LLC—specifically between minority owners, brothers Julian and Oscar Estevez (the “Estevez Brothers”), and the majority owner and sole manager, Cameron Chad Clay (“Clay”). The Estevez Brothers, along with Clay and another member, Barbara Chambers, formed C&S Commerce to acquire and operate the business Warp Development Corporation. The operating agreement, signed by all parties, gave Clay a 70% ownership stake and broad managerial authority. Importantly, it included explicit waivers by the minority members (the Estevez Brothers and Chambers) of any fiduciary duty claims against Clay as the manager or majority member.
After a series of disagreements, including failed attempts by Clay to purchase the Estevez Brothers’ minority interests, threats by Clay to make the Estevez Brothers’ interest in the Company “worth nothing[,]” and Clay’s subsequent termination of the Estevez Brothers—the Estevez Brothers filed suit, and included, among other claims, an alleged breach of fiduciary duty.
In support of their claim for breach of fiduciary duty, the Estevez Brothers alleged (1) that Clay failed to follow the operating agreement concerning the attempted purchase of their interest and in the Estevez Brothers without cause, (2) that Clay failed to follow the operating agreement’s provisions regarding the termination of the Estevez Brothers’ interest in the company, (3) that Clay refused to provide the company’s financial data to the Estevez Brothers when requested, and (4) that Clay engaged in self-dealing.
Fiduciary Duty Waivers in LLC Operating Agreements are Enforceable
Under North Carolina law, LLC members generally do not owe fiduciary duties to each other unless the operating agreement or circumstances create such a duty. However, in recent years, some North Carolina law has suggested that there may be an exception for “a holder of a majority interest who exercises control over [an] LLC” and that such a majority member may “owe[] a fiduciary duty to minority interest members.” Strategic Mgmt. Decisions v. Sales Performance Int’l, 2017 NCBC 69. The Business Court briefly addressed this argument, but ultimately stated that it didn’t matter. The Business Court explained that because LLC operating agreements are “primarily creatures of contract” and because the parties’ operating agreement contained a waiver of fiduciary claims, the issue of whether Clay owed the Estevez Brothers a fiduciary duty as minority members was easily resolved.
In this case, the operating agreement expressly waived fiduciary duties from Clay (the majority member) to the Estevez Brothers (the minority members). The Business Court stated that such waivers are enforceable because, in North Carolina, there is a general freedom to enter into contracts, even harmful ones. The Estevez Brothers argued that the waiver was contrary to public policy and unconscionable. But the Business Court rejected this argument because (1) their attorney did not argue public policy in their brief and (2) because there were no allegations within the Estevez Brothers’ complaint to support an unconscionability determination.
The Business Court also distinguished between the waived fiduciary duties and the unwaivable duty of good faith and fair dealing (which sounds in contract, not tort/fiduciary duty). The Business Court did state that the Estevez brothers may have a claim for breach of contract through the duty of good faith and fair dealing despite the waiver. However, the breach of fiduciary duty claim was dismissed with prejudice.
Minority Member Rights are Easy to Lose
This case is a timely reminder that North Carolina Courts will enforce clear contractual waivers of fiduciary duties in LLC operating agreements. Minority members should carefully review and negotiate these provisions before signing.
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If you have questions about LLC operating agreements, fiduciary duties, or business litigation in North Carolina, contact our Business Disputes & Litigation Practice Group today.
