In Terminal Properties, Inc. v. Hampton Propane Terminal, L.C., 2009 Iowa App. LEXIS 231 (March 26, 2009) the Court of Appeals applied the Business Judgment Rule to LLCs formed under Iowa Code Chapter 490A. The BJR protects corporate boards of directors from liability for their actions if they are disinterested, informed and there is a rationale basis for the actions. It is not applicable to partnerships. There probably wasn't much doubt that the rule applied to LLCs in light of the many similarities between the entities (limited liability, often centralized management, perpetual existence) but this case removes all doubt.
This is not important news to 489 LLCs because the BJR was codified in Iowa Code Chapter 489.409(7).
By the way, the trial court used a delightful phrase one will only find in Iowa when he likened the plaintiff's claims of conflict of interest to a "frog calling a garter snake green." I believe that is the English translation of pari delicto.
-Marc Ward
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