Stephen Doherty wrote for Lester Szlendak a software program called Viper. Doherty and Szlendak, along with Peter Katris and William Hamburg (both employees of Ernst & Company), formed Viper Execution Systems LLC to exploit the software. Each member held a 25 percent interest in the LLC. Szlendak and Doherty assigned all their rights in Viper to the LLC. The operating agreement provided that the “business and affairs of the LLC shall be managed by its managers” and that the members agreed to elect Katris and Hamburg as the “sole managers” of the LLC.

The operating agreement also listed the powers of the managers and the rights and obligations of the members. None of the rights and obligations of the members provided the members with any managerial authority. The operating agreement also stated it could “not be amended except by the affirmative vote of members holding a majority of the participating percentages.” Katris and Hamburg, as sole managers of the LLC, adopted resolutions naming Hamburg as chief executive officer, Katris as chief financial officer, Szlendak as director of marketing, and Doherty as director of technical services. The written consent to the resolution contained signature lines for Hamburg and Katris, who were identified as “all of the managers” of the LLC.

Prior to and at the time of the LLC’s formation, Doherty worked as an independent contractor for Hamburg and Patrick Carroll (also an Ernst employee). In late 1997, Ernst hired Doherty to work for Carroll. Working for Carroll and Ernst, Doherty helped to adapt a software program, Worldwide Options Web (WWOW). By 2002, Katris came to believe that WWOW was functionally similar to Viper.

Required:

On what grounds did Katris sue Doherty? Was his action successful?

Answer rating: 100% (QA)

Katris sued Doherty on the grounds of the breach of his fiduciary duties under the Illino... View the full answer