Katris v. Carroll

Peter Katris (plaintiff), Stephen Doherty, Lester Szlendak, and William Hamburg were the members of Viper Execution Systems, LLC (Viper), which they formed to market a software program written by Doherty. Each member held a one-fourth interest in the company. Viper’s operating agreement identified Katris and Hamburg as its sole managers. The operating agreement also provided that it could be amended only by a majority vote. In place of an initial meeting of the managers, Katris and Hamburg prepared a written consent adopting certain resolutions in which they designated Doherty as director of technology. At the time, Katris and Hamburg were employees of Ernst & Company (Ernst). Doherty worked as an independent contractor for Hamburg and Patrick Carroll (defendant), who was also an Ernst employee. Later, Ernst hired Doherty to work for Carroll, and in that capacity, Doherty worked with an Ernst programmer on a program called Worldwide Options Web (WWOW). Katris filed suit, individually and derivatively on behalf of Viper, against Doherty, Carroll, and Ernst, alleging that WWOW was functionally like the Viper software and that Doherty, Carroll, and Ernst colluded in violation of Doherty’s fiduciary duties to Katris and Viper. Doherty settled with Katris. Carroll and Ernst moved for summary judgment, arguing that Doherty did not owe Katris or Viper fiduciary duties. Katris argued that the written consent constituted an amendment of the operating agreement that effectively made Doherty a manager of Viper. The trial court entered summary judgment in favor of Carroll and Ernst, and Katris appealed.