Estate of Calderwood v. ACE Group Intl. LLC, 2017 NY Slip Op 8750

Decedent Alexander Calderwood founded Ace hotels and held a majority interest (51.74%) in ACE Group International LLC (AGI) at his death in Nov. 2013; plaintiff is his estate.
AGI was formed under a Delaware LLC Agreement; Ecoplace (controlled by Economou) put in $10M for a 33.33% interest with preferred return and veto rights; Calderwood retained operational control.
The Estate sought AGI books and records and valuation information after Calderwood's death; defendants limited Estate's rights under the LLC Agreement and offered to buy the Estate's interest for $200,000.
The Estate sued (AC) seeking declarations that it is a member with full rights, that defendants owe fiduciary duties, access to books and records, an accounting, and imposition of a constructive trust; defendants moved to dismiss.
The LLC Agreement contains §9.7(b) providing that upon a member's death the withdrawing member "shall cease to be a Member" and that successors-in-interest have only rights of an assignee limited to distributions unless waived.
The Estate relied on Del. Code § 18-705 (personal representative may exercise "all of the member's rights") and argued that the Estate thereby steps into the decedent's member rights; the court held the LLC Agreement governs and §18-705 does not override §9.7(b).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Member status after death	Estate: Del. Code §18-705 lets personal representative exercise all member rights; thus Estate is a member with Calderwood's rights	Defs: LLC Agreement §9.7(b) makes decedent a Withdrawing Member; successor only has assignee/distribution rights	Court: LLC Agreement controls; Estate is not a member with full rights; declaratory judgment for defendants
Fiduciary duties owed to Estate	Estate: as party bound by LLC agreement, default fiduciary duties under Del. Code §§18-1101/1104 run to it	Defs: Estate is not a member; statutes do not automatically impose duties to nonmembers; fiduciary duties context limited	Court: Dismissed claim; declared defendants do not owe fiduciary duties to the Estate
Inspection of books and records	Estate: needs records to value interest for probate and to pursue litigation	Defs: Inspection rights limited to members under LLC Agreement and Delaware law; Estate is not a member	Court: Estate not entitled to inspect AGI books and records (not a member)
Accounting and constructive trust	Estate: equitable remedies appropriate based on alleged rights and conduct	Defs: Accounting and constructive trust require fiduciary relationship/unjust enrichment; no basis here	Court: Claims dismissed — accounting requires fiduciary relationship; constructive trust not warranted (legitimate purchase by Ecoplace; no inequity)

Achaian, Inc. v Leemon Family LLC, 25 A.3d 800 (Del. Ch. 2011) (LLC agreements govern member relations and the Act fills gaps).
Elf Atochem N. Am., Inc. v Jaffari, 727 A.2d 286 (Del. 1999) (statutory language like "may" denotes permissive options; Act provisions often subject to modification by agreement).
Feeley v NHAOCG, LLC, 62 A.3d 649 (Del. Ch. 2012) (discussing fiduciary duties between managing and nonmanaging members under Delaware law).
Gatz Props., LLC v Auriga Capital Corp., 59 A.3d 1206 (Del. 2012) (questioning whether Delaware LLC statute imposes default fiduciary duties).
Milford Power Co., LLC v PDC Milford Power, LLC, 866 A.2d 738 (Del. Ch. 2004) (permitting passive co-investors while restraining involuntary co-management).
Simonds v Simonds, 45 N.Y.2d 233 (N.Y. 1978) (constructive trust is equitable remedy to prevent unjust enrichment).
New York Pub. Interest Research Group v Carey, 42 N.Y.2d 527 (N.Y. 1977) (declaratory relief regarding future contingencies is not necessarily advisory).
Nicholas v Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 83 A.3d 731 (Del. 2013) (definition of ambiguity in contractual interpretation).