Last week, the Delaware Court of Chancery ruled that because a limited liability company (LLC) agreement did not contain a provision precluding or restricting competition, i.e., a non-compete provision, a former member did not violate the agreement by opening a competing business nearby. In 2009, Louis Bascio (Bascio) formed Touch of Italy Salumeria & Pasticceria, LLC, an Italian grocery store, with several other members. They entered into an LLC agreement and, subsequently, an amended LLC agreement, which lacked any restrictions regarding competition. In late 2012, after the business had become successful and profitable, Bascio informed his fellow members that he planned to withdraw from the LLC. According to the complaint, Bascio assured his fellow members that he would not open a competing business nearby.

However, after his departure from the LLC, Bascio opened a competing Italian grocery store down the street. The LLC and its members brought nine claims against Bascio, including breach of contract. breach of fiduciary duty, fraud and negligent misrepresentation, and they sought monetary damages and injunctive relief. The court dismissed all nine claims, holding that the LLC provided each member with a right of withdrawal and contained no provisions restricting Bascio from competition. Plaintiffs’ claims for fraud and negligent misrepresentation failed because plaintiffs failed to show detrimental reliance on Bascio’s supposedly actionable misrepresentation. 

Touch of Italy Salumeria and Pasticceria, LLC v. Bascio, C.A. No. 8602-VCG (Del. Ch. Jan. 13, 2014).