Carmen Fonda and Samantha Jonjo explore the implications of the Maryland Supreme Court's ruling in Porter v. Jacobson in their Maryland Bar Journal article, “Mind the Comma – Porter v. Jacobson and Fiduciary Duties.” The following is an excerpt:
In Porter v. Jacobson, No. 1861, Sept. Term, 2021, 2026 Md. App. LEXIS 37 (Md. App. Mar. 31, 2026) (unreported), following decisions in Wasserman v. Kay, 197 Md. App. 586 (Md. App. 2011), and Plank v. Cherneski, 469 Md. 548 (Md. 2020), the Appellate Court of Maryland reaffirmed a core principle of Maryland LLC law: that Maryland agency law remains the primary source of duties of managers and managing members of Maryland LLCs. Porter applied the Maryland common law agency duty of candor to the actions of a board of managers of a Maryland LLC, held that the plaintiff must not have independent knowledge of the undisclosed information in order to establish actual harm and, therefore, be entitled to recovery for breach of the duty of candor and declined to apply a Delaware-style “entire fairness” review of the board’s decisions.
Porter arose from an internal dispute among the managers of a Maryland LLC managing a cannabis business. Plaintiff Porter, a founding member and manager of the company, failed to disclose his permanent bar from the Financial Industry Regulatory Authority (“FINRA”) on the company’s cannabis license application. After concluding that Porter’s bar, and the conduct resulting in the bar, would jeopardize the company’s ability to obtain a cannabis license, the remaining managers expelled Porter as a member and manager of the company in accordance with the operating agreement, triggering an obligation for Porter to offer his units for purchase to the other members. Porter, however, claimed that he had transferred his units to his mother before the meeting, purportedly expelling him and, therefore, the units were not subject to the remaining members’ purchase right. After trial, Porter appealed several facets of the judgment, including (i) that the remaining board members did not breach duties of candor or entire fairness by failing to inform Porter in advance of their intent to consider the effects of his undisclosed FINRA ban and (ii) that Porter’s purported transfer to his mother was prohibited by the operating agreement and ineffective.
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