bad faith exception in Delaware

2026The Court will not, in hindsight, single out one party’s conduct as so exceptional as to warrant reallocating fees where the overall course of the case reflects mutual escalation rather than unilateral abuse.69 66 “Generally, the bad faith exception for the American Rule for attorneys’ fees ‘does not apply to the conduct that gives rise to the substantive claim itself.’ Accordingly, ‘an award of fees for bad faith conduct must derive from either the commencement of an action in bad faith or bad faith conduct taken during litigation, and not from conduct that gave rise to the underlying cause o

2026One of these exceptions “is the bad faith exception.” Id. “[C]ourts have found bad faith where parties have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.” Id. at 546 (citation modified).

2026Delaware courts have shifted fees under the bad faith exception where defendants “forced the plaintiff to engage in litigation that would not have been 415 Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007). 416 Montgomery Cellular Hldg.

2026ATTORNEY’S FEES Delaware follows the American rule which states that “[l]itigants are normally responsible for paying their own litigation costs.” 90 An exception to this rule is the bad faith exception, which requires the party seeking to shift fees to satisfy “the stringent evidentiary burden of producing ‘clear evidence’ of bad faith.” 91 None of the parties have engaged in conduct that would justify an award of bad faith fee shifting. 90 See Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007). 91 Dearing v. Mixmax, Inc., 2023 WL 2632476 , at *5 (Del.

2025Under the American Rule, each party bears its own attorneys’ fees absent a contractual provision, statutory authorization, or recognized exception.66 The exception to this rule is narrow, including fee-shifting for bad-faith conduct.67 The bad-faith exception only applies in “extraordinary circumstances” “to deter abusive litigation and protect the integrity of the judicial process.”68 Byborg concedes the Agreement contains no fee-shifting provision and cites no statutory basis for recovering fees.69 Instead, Byborg argues it included the fee request to preserve its right to seek fees should c

2025Under the American Rule, each party bears its own attorneys’ fees absent a contractual provision, statutory authorization, or recognized exception.66 The exception to this rule is narrow, including fee-shifting for bad-faith conduct.67 The bad-faith exception only applies in “extraordinary circumstances” “to deter abusive litigation and protect the integrity of the judicial process.”68 Byborg concedes the Agreement contains no fee-shifting provision and cites no statutory basis for recovering fees.69 Instead, Byborg argues it included the fee request to preserve its right to seek fees should c

2026Bad faith or vexatious conduct might also support fee shifting under the bad faith exception to the American Rule, see Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017), but it is not necessary to shift fees under Rule 37(a)(4)(A).20 19 Id. ¶ 14. 20 See also Foley v. Session Corp., 345 A.3d 537 , 562 (Del.

2025C. § 3584. 122 Under the American rule “each party is generally expected to pay its own attorneys’ fees.” 123 A court may shift fees under limited circumstances “for bad faith conduct ‘to deter abusive litigation and to protect the integrity of the judicial process.’” 124 This Court does not, however, lightly shift fees under the bad faith exception.125 “A party seeking to shift fees must satisfy the stringent evidentiary burden of producing clear evidence of bad faith.”126 “To capture the sorts of vexatious activities that the bad-faith exception is intended to address, this court employs the

2026Ch. 2005) (citations omitted) (emphasis added). 13 Lawson v. State, 91 A.3d 544, 552 (Del. 2014) (quoting Dover Historical Soc'y, Inc. v. City of Dover Planning Comm'n, 902 A.2d 1084, 1093 (Del. 2006)) (also quoting Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 839, 880 (Del.Ch.2012), aff'd, 59 A.3d 1206 (Del. 2012)) (internal quotation marks omitted). 6 have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.” 14 “Bad faith conduct also can include reversing position on issues and changing testimony to suit the moment.” 15 However,

2024Cole Corp., 884 A.2d 500, 506 (Del. 2005) (“One well-recognized exception to the American Rule is where the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” (cleaned up and citations omitted)); Lawson v. State, 91 A.3d 544, 552 (Del. 2014) (the party seeking to invoke the bad-faith exception must demonstrate by “clear evidence that the party from whom fees are sought . . . acted in subjective bad faith” (internal quotations and citations omitted)).

2026“The bad faith exception is not lightly invoked.” Beck v. Atlantic Coast PLC, 868 A.2d 840, 851 (Del.

2022Ch. 2005) (explaining the American Rule that “litigants are expected to bear their own costs of litigation absent some special circumstances that warrant a shifting of attorneys’ fees” and the bad faith exception thereto). 19 Id. at 851 . 20 In re First Interstate Bancorp Consol.

2025No. 2023-0869-LM July 3, 2025 Page 18 of 20 ‘clear evidence’ of bad faith.”63 The conduct of the party against whom fees are being sought must be “glaring[ly] egregious.”64 The Court has shifted fees under the bad faith exception for conduct “such as forcing a plaintiff to file suit to secure a clearly defined and established right, unnecessarily prolonging or delaying litigation, falsifying records, or knowingly asserting frivolous claims.”65 The bad faith exception is not to be applied lightly, especially against a self-represented party.66 Defendant cites Kuang v. Cole National Corporation,

2024These actions warrant fee shifting under the bad faith exception to the American Rule.564 This court’s “discretion is broad in fixing the amount of attorneys’ fees to be awarded.”565 The pervasive bad-faith conduct here—coupled with the risk that damages prove limited—support treating Encompass’s fees as an element of its 562 See supra Section II.B. 563 See Johnston, 720 A.2d at 546 (“[C]ourts have found bad faith where parties have unnecessarily prolonged or delayed litigation, falsified records, or knowingly asserted frivolous claims.”). 564 See Cantor, 2000 WL 307370 , at *31 (shifting fees

2022The Horns argue that they should be awarded attorneys’ fees under the bad faith exception to the American Rule.87 “Delaware follows the ‘American Rule,’ which provides that each party is generally expected to pay its own attorneys’ fees regardless of the outcome of the litigation.”88 A well-recognized equitable exception to the American Rule, which applies only in “extraordinary cases,” is where the “losing party has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons.’”89 Courts have “found bad faith where parties have unnecessarily prolonged or delayed litigation, falsified

2022The Lawrence Respondents asked that the Court “reserve decision on attorneys’ fees claims for all parties until [Twin Willows’] claims are finally determined.” D.I. 155, at 19. 200 Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (citation omitted); see also ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 558 (Del. 2014); Mahani v. Edix Media Grp., Inc., 935 A.2d 242, 245 (Del. 2007). 41 contrary or an equitable doctrine exception, such as the bad faith exception.201 “The bad faith exception is applied in ‘extraordinary circumstances’ as a tool to deter abusive litigation and to protect th

2021Mkts, LLC v. Jervis, 129 A.3d 816, 877 (Del. 2015) (explaining that the bad faith exception to the American Rule “is premised on the theory that when a litigant imposes unjustifiable costs on its adversary by bringing baseless claims or by improperly increasing the costs of litigation through other bad faith conduct, shifting fees helps to deter future misconduct and compensates the victim of that misconduct” (internal quotation marks omitted)). 113 Respondents’ contention that the Custodian is barred from recovering fees and expenses incurred with respect to the Omnibus Objection would render

2021Jan. 13, 2009). 207 RBC Cap., 129 A.3d at 877 (internal quotation marks omitted). -46- According to Xynomic, this trial exposed the fact that Parexel hadn’t engaged and provided the required reconciliation that would have avoided double billing had Xynomic not resisted and pressed its defense.209 And as to Mr. Xu’s declaration, Xynomic claims it was made to the “best of his knowledge at the time[,]” and not in bad faith.210 Under the American Rule, the bad faith inquiry is fact-intensive and reserved for the most serious and extraordinary circumstances that, if not sanctioned, would harm the j

2025Under the American Rule, each party bears its own attorneys’ fees absent a contractual provision, statutory authorization, or recognized exception.66 The exception to this rule is narrow, including fee-shifting for bad-faith conduct.67 The bad-faith exception only applies in “extraordinary circumstances” “to deter abusive litigation and protect the integrity of the judicial process.”68 Byborg concedes the Agreement contains no fee-shifting provision and cites no statutory basis for recovering fees.69 Instead, Byborg argues it included the fee request to preserve its right to seek fees should c

2022The Horns argue that they should be awarded attorneys’ fees under the bad faith exception to the American Rule.87 “Delaware follows the ‘American Rule,’ which provides that each party is generally expected to pay its own attorneys’ fees regardless of the outcome of the litigation.”88 A well-recognized equitable exception to the American Rule, which applies only in “extraordinary cases,” is where the “losing party has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons.’”89 Courts have “found bad faith where parties have unnecessarily prolonged or delayed litigation, falsified

2026The Court will not, in hindsight, single out one party’s conduct as so exceptional as to warrant reallocating fees where the overall course of the case reflects mutual escalation rather than unilateral abuse.69 66 “Generally, the bad faith exception for the American Rule for attorneys’ fees ‘does not apply to the conduct that gives rise to the substantive claim itself.’ Accordingly, ‘an award of fees for bad faith conduct must derive from either the commencement of an action in bad faith or bad faith conduct taken during litigation, and not from conduct that gave rise to the underlying cause o

2025It is unlikely that a non-lawyer would 26 See Versata Enter., 5 A.3d at 608 (affirming the Court of Chancery’s decision to deny fee shifting under the bad faith exception when the substantive basis for fee shifting arose from plaintiff’s amended complaint). 27 Cf. 10 Del.

2026Ch. 2005) (citations omitted) (emphasis added). 13 Lawson v. State, 91 A.3d 544, 552 (Del. 2014) (quoting Dover Historical Soc'y, Inc. v. City of Dover Planning Comm'n, 902 A.2d 1084, 1093 (Del. 2006)) (also quoting Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 839, 880 (Del.Ch.2012), aff'd, 59 A.3d 1206 (Del. 2012)) (internal quotation marks omitted). 6 have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.” 14 “Bad faith conduct also can include reversing position on issues and changing testimony to suit the moment.” 15 However,

2025Comm’n, 902 A.2d 1084, 1093 (holding the bad faith exception applies in “extraordinary cases” to “prevent future abusive litigation” tactics).

2026Ch. 2005) (citations omitted) (emphasis added). 13 Lawson v. State, 91 A.3d 544, 552 (Del. 2014) (quoting Dover Historical Soc'y, Inc. v. City of Dover Planning Comm'n, 902 A.2d 1084, 1093 (Del. 2006)) (also quoting Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 839, 880 (Del.Ch.2012), aff'd, 59 A.3d 1206 (Del. 2012)) (internal quotation marks omitted). 6 have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.” 14 “Bad faith conduct also can include reversing position on issues and changing testimony to suit the moment.” 15 However,

2018“The American Rule applies in Delaware.” 271 “Under the American Rule, litigants are expected to bear their own costs of litigation absent some special circumstances that warrant a shifting of attorneys’ fees, which, in equity, may be awarded at the discretion of the court.”272 “[Delaware] courts have, however, recognized bad faith litigation conduct as a valid exception to that rule.” 273 “To justify an award under the bad faith exception, ‘the Court must conclude that the party against whom the fee award is sought has acted in subjective bad faith.’”274 271 Gatz Props., LLC v. Auriga Capital

2024Kuramo Post-Trial Opening Br. at 145; McGowan v. Empress Ent., Inc., 791 A.2d 1, 4 (Del.

2021To the extent that 14 See AmerisourceBergen, 243 A.3d at 437. 15 Dkt. 121 ¶ 2 16 Id. (emphasis in original). 17 See, e.g., McGowan, 791 A.2d at 4 (holding that the defendant “acted in subjective bad faith by failing to honor its promises to produce its books and records, and later by opposing [the plaintiff’s] § 220 action to enforce his legal right to inspect those books and records,” despite there being no record of the defendant’s state of mind).

2020Those include charges for hearing, deposition, and trial transcripts and video; translation services for documents, depositions, and trial; trial technology support and services; technology support for document collection and production; photocopying charges; courier services and process services for subpoenas; computerized legal research; travel and meal expenses for attorneys and witnesses for hearings, depositions, and trial; and teleconference services. 60 Staffieri, 2013 WL 4038110 , at *6 (distinguishing expenses awarded under the bad faith exception from expenses awarded as a matter of

2015No. 3940-VCN May 7, 2015 Page 4 $130 million, plus interest, after the Company was acquired for approximately $175 million in 2006.9 This Court has “equitable power to award fees in a proper case.”10 However, equitable fee shifting is “unusual relief” because of the American Rule, under which each party generally must pay its own attorneys’ fees.11 The American Rule is subject to a number of well-established exceptions, such as “cases where the underlying (pre-litigation) conduct of the losing party was so egregious as to justify an award of attorneys’ fees as an element of damages.”12 There i

2026Ch. 2005) (citations omitted) (emphasis added). 13 Lawson v. State, 91 A.3d 544, 552 (Del. 2014) (quoting Dover Historical Soc'y, Inc. v. City of Dover Planning Comm'n, 902 A.2d 1084, 1093 (Del. 2006)) (also quoting Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 839, 880 (Del.Ch.2012), aff'd, 59 A.3d 1206 (Del. 2012)) (internal quotation marks omitted). 6 have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.” 14 “Bad faith conduct also can include reversing position on issues and changing testimony to suit the moment.” 15 However,

2024Corp. v. Gatz Props., LLC, 40 A.3d 839 , 880–81 (Del.

2024The bad faith exception to the American Rule may apply if a party’s underlying fraudulent conduct causes the litigation, but that is a “quite narrow exception [that] is applied in only the most egregious instances of fraud or overreaching.” Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 231 (Del.

2022Corp., 884 A.2d 500, 506 (Del. 2005) (quoting Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 546 (Del. 1998)) (internal quotation marks omitted); see also RBC Capital Markets, LLC v. Jervis, 129 A.3d 816, 877 (Del. 2015) (citation omitted). 91 Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 232 (Del.

2021Jan. 25, 2013). 256 Pl.’s Opening Post-Trial Br. at 58. 257 Tandycrafts, Inc. v. Initio P’rs, 562 A.2d 1162, 1164 (Del. 1989). 68 litigation conduct.”258 The bad faith exception may be invoked only where there is “clear evidence” that the party against whom the sanction is sought has acted in subjective bad faith. 259 I deny Pearl City’s request for a fee shift as I am satisfied the General Governors’ asserted defenses fall well short of the “bad faith conduct” that would warrant an award of attorneys’ fees.260 III.

2017She is entitled to litigation expense-shifting. 126 Tandycrafts, Inc. v. Initio P’rs, 562 A.2d 1162, 1164 (Del. 1989). 127 Barrows v. Bowen, 1994 WL 514868 , at 81 (Del.

2020Hutton Grp., Inc., 681 A.2d 1039, 1044 (Del. 1996). 89 Auriga Capital Corp. v. Gatz Properties, 40 A.3d 839, 880 (Del.

2019Hutton Group, Inc., 681 A.2d 1039, 1043 (Del. 1998). 2 conduct during the litigation.3 Although there is no single, comprehensive definition of “bad faith” that will justify a fee-shifting award, Delaware courts have previously awarded attorneys’ fees where a party has unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.4 As stated in Dobler, “the bad faith exception is applied in ‘extraordinary circumstances’ as a tool to deter abusive litigation and to protect the integrity of the judicial process.5 The Complaint fails, beyond conclusory al

2019“To state a claim for waste, a stockholder must allege, with particularity, that the board authorized action that no reasonable person would consider fair.”180 The Plaintiff argues that the Director Defendants consciously made a choice to avoid learning that the Otto transaction was an illegal attempt to steal Google’s IP.181 Therefore, per the Plaintiff, the 179 Stone v. Ritter, 911 A.2d 362, 373 (Del. 2006). 180 Freedman v. Adams, 58 A.3d 414, 417 (Del. 2013). 181 Pl.’s Omnibus Answering Br., at 65. 44 transaction lacked a legitimate and legal purpose.182 But this is simply the bad faith cla

2014Instead, good faith is a subsidiary element or condition of the duty of loyalty, as the Delaware Supreme Court stated in Stone v. Ritter.146 As examples of conduct that would establish a failure to act in good faith, the Supreme Court listed the following: where the fiduciary intentionally acts with a purpose other than that of advancing the best interests of the corporation, where the fiduciary acts with the intent to violate applicable positive law, or where the fiduciary intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties.147 146

2015Co., 878 A.2d 434, 441 (Del. 2005) (“Existing contract terms control, however, such that implied good faith cannot be used to circumvent the parties’ bargain, or to create a free-floating duty . . . unattached to the underlying legal document.”) (internal quotations omitted). 29 frivolous and advanced in bad faith, that could also be remedied under the bad faith exception to the American Rule.73 The Superior Court’s finding that Nationwide breached the implied covenant by making a large withdrawal from the NorthPointe NVIT was also in error.

2015Co., 878 A.2d 434, 441 (Del. 2005) (“Existing contract terms control, however, such that implied good faith cannot be used to circumvent the parties’ bargain, or to create a free-floating duty . . . unattached to the underlying legal document.”) (internal quotations omitted). 29 frivolous and advanced in bad faith, that could also be remedied under the bad faith exception to the American Rule.73 The Superior Court’s finding that Nationwide breached the implied covenant by making a large withdrawal from the NorthPointe NVIT was also in error.

2025Ch. 2005), aff’d, 906 A.2d 27 (Del. 2006)). “[T]o state a bad-faith claim, a plaintiff must show either ‘an “extreme set of facts”’ to establish that ‘“disinterested directors were intentionally disregarding their duties,”’ or that ‘the decision under attack is so far beyond the bounds of reasonable judgment that it seems essentially inexplicable on any ground other than bad faith.’” In re Chelsea Therapeutics Int’l Ltd.

2015Because the Court concludes that, in this case, the result would be the same under either standard, and given Defendants’ concession that the two standards are “similar,” Defs.’ Reply Br. 9, the Court analyzes Plaintiff’s derivative claims under the bad faith standard. 48 Walt Disney, 906 A.2d at 66 . 49 Wayne Cnty.

2025Feb. 14, 2025) (explaining that, in the corporate fiduciary duty context, pleading bad faith is “no easy task”). 77 Buck, 2021 WL 673459 , at *6; Allied Capital, 910 A.2d at 1039 (noting that the bad faith standard is “stringent”). 78 See, e.g., Surf’s Up, 2021 WL 117036 , at *9 (citing examples of cases that “involved insolvent breaching parties in which a controlling entity was alleged to have forced their insolvency by siphoning the breaching parties’ assets and arrogating those assets to itself”); Bandera, 2019 WL 4927053 , at *27 (holding bad faith adequately pled because complaint allege

2019If one is privileged by reason of a recognized relationship to discuss the financial welfare of an affiliated party, one may in good faith suggest that a termination of a contract, and the assumption of any resulting liability, would be beneficial to that party.171 The bad faith standard is “stringent” and will not be found where a parent was merely advising or causing the subsidiary to engage in an efficient breach of the contract.172 Plaintiffs’ allegations that Riverstone intentionally caused its subsidiaries to render Talen Montana insolvent and to file the Montana Actions are sufficient t

2023Oct. 12, 2011). 25 See, e.g., White v. Panic, 783 A.2d 543 , 554 n.36 (Del. 2001) (“To prevail on a waste claim or a bad faith claim, the plaintiff must overcome the general presumption of good faith by showing that the board’s decision was so egregious or irrational that it could not have been based on a valid assessment of the corporation’s best interests.”); CanCan Dev., LLC v. Manno, 2015 WL 3400789 , at *20 (Del.

2022Contemporary Delaware decisions have brought waste within the fiduciary framework of the business judgment rule by re-conceiving waste as a means of pleading that a fiduciary acted in bad faith.28 A court may find that a fiduciary acted in bad faith “where the fiduciary intentionally acts with a purpose other than that of advancing the best interests of the [entity].”29 “The waste test is one way of establishing irrational, bad faith conduct.” 28 See, e.g., White v. Panic, 783 A.2d 543 , 554 n.36 (Del. 2001) (“To prevail on a waste claim or a bad faith claim, the plaintiff must overcome the ge

2026The party seeking a fee award bears the stringent evidentiary burden of producing “clear evidence” of bad-faith conduct.12 “[T]he bad faith exception applies only in extraordinary cases, and the party seeking to invoke that exception must demonstrate by clear evidence that the party from whom fees are sought ... acted in subjective bad faith.”13 “Although there is no single definition of bad faith conduct, courts have found bad faith where parties 10 Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 545 (Del. 1998). 11 Chambers v. NASCO, Inc., 501 U.S. 32 (1991); Christiansburg

2019“The United States Supreme Court has used the bad faith exception to the American Rule to uphold the award of attorneys fees.” Id. (citing Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991)).

2026“To award fees under the bad faith exception, the party against whom the fee award is sought must be found to have acted in subjective bad faith.” In re SS & C Techs., 948 A.2d at 1150 .

2018ANALYSIS Delaware follows the American Rule, which generally requires that, “regardless of the outcome of litigation, each party is responsible for paying his or her own attorneys’ fees.”8 “The bad faith exception to the American Rule applies in cases where the court finds litigation to have been brought in bad faith or finds that a party conducted the litigation process itself in bad faith, thereby unjustifiably 6 Id. 7 Id. 8 In re SS & C Techs., Inc. S’holders Litig., 948 A.2d 1140, 1149 (Del.

2020To do so would ignore the possibility that bad 54 Pierce, 671 A.2d at 1362 . 55 Id. at 1363 . 56 Id. at 1365 . 57 Id. 14 faith could follow the resolution of a Huffman suit.

2016Nothing in the pre-suit record supports a bad faith claim. over settlement negotiations and defense of litigation, which results in a conflict of interest between the insurer and the insured.” (citation omitted)); see also Pierce, 671 A.2d at 1367 (“[W]hen the bad faith actions of an insurer are taken with a reckless indifference or malice toward the plight of the [insured], punitive damages are justified.”); Tackett, 653 A.2d at 265 (“[A]n insured may be entitled to the recovery of punitive damages in a bad faith action if the insurer’s breach is particularly egregious.”).

2016Nothing in the pre-suit record supports a bad faith claim. over settlement negotiations and defense of litigation, which results in a conflict of interest between the insurer and the insured.” (citation omitted)); see also Pierce, 671 A.2d at 1367 (“[W]hen the bad faith actions of an insurer are taken with a reckless indifference or malice toward the plight of the [insured], punitive damages are justified.”); Tackett, 653 A.2d at 265 (“[A]n insured may be entitled to the recovery of punitive damages in a bad faith action if the insurer’s breach is particularly egregious.”).

1997A. The Attorney-Client Privilege in Insurer “Bad Faith” Litigation With regard to the attorney-client privilege, the Delaware Supreme Court noted that “[a] party cannot force an insurer to waive the protections of the attorney-client privilege merely by bringing a bad faith claim.” Tackett, 653 A.2d at 259 .

2026C. § 18-1101(e) (“A limited liability company agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties) of a member, manager or other person to a limited liability company or to another member or manager or to another person that is a party to or is otherwise bound by a limited liability company agreement; provided, that a limited liability company agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of go