Contractual Claims Precluding Fiduciary Duty Claims

CHANCERY COURT GRANTS DEFENDANT’S MOTION ON THE PLEADINGS WHERE NAMED DEFENDANTS DID NOT OWE ANY OF THE CONTRACTUAL OR FIDUCIARY OBLIGATIONS PLAINTIFF TRIED TO ENFORCE

Mar 29 2019

By: Scott Waxman and Samantha Beatty

In Ross v. Institutional Longevity Assets LLC, C.A. No. 2017-0186-TMR (Del. Ch. Feb. 26, 2019), the Chancery Court, in a motion for judgement on the pleadings, found that the plain language of a limited liability company’s operating agreement was sufficient to affirm the notion that the plaintiff had failed to establish a set of facts to support his breach of contract and breach of fiduciary duty claims. The Court found that (i) where the language of a contract is clear, the parties’ disagreement will not render a contract ambiguous; (ii) where a plaintiff has not identified gaps in the language of a contract, there can be no evidence that an implied covenant of good faith has been breached, and (iii) where a fiduciary duty claim arises out of the same conduct as a contract claim, the fiduciary claim is superfluous.

Chancery Court Denies Motion to Dismiss a Breach of Contract Claim Based on Language in Limited Partnership Agreement

Aug 27 2018

By: Scott E. Waxman and Stephanie S. Liu

In Ms. Mary Giddings Wenske, et al. v. Blue Bell Creameries, Inc., et al., the Delaware Chancery Court denied Defendants’ motion to dismiss a breach of contract claim, finding that Plaintiffs had pled a set of facts that allow a reasonable inference that Defendants breached the standards set forth in its partnership agreement.

Court of Chancery Dismisses Breach of Fiduciary Duty Claim as Duplicative of Breach of Contract Claim

By: Scott Waxman and Zack Sager

In MHS Capital LLC v. Goggin, the Delaware Court of Chancery granted a motion to dismiss a breach of fiduciary duty claim against the manager of a Delaware limited liability company because all of the manager’s conduct that could have formed the basis of such claim was covered by the duties of the manager delineated in the limited liability company agreement. The Court also analyzed and dismissed claims for, among other things, fraud, breach of the implied contractual covenant of good faith and fair dealing, unjust enrichment, and misappropriation of trade secrets.

Director’s Breach of Contract Lawsuit Found to Violate the Underlying Contract’s Confidentiality Clause

Jan 02 2018

By: David Forney and Benjamin Kendall

In Cappella Holdings, LLC v. Anderson, C.A. No. 9809-VCS (Del. Ch. Nov. 29, 2017), the Chancery Court dismissed a director’s breach of contract claims against his former employer relating to alleged violations of an anti-dilution provision in his employment agreement. The Court instead found that the director’s initial complaint, which included highly sensitive information about the company, violated the confidentiality provision of the underlying contract on which his claims were based.

Chancery Court Enforces Good Faith Standard of Care in Limited Partnership Agreement

By Eric Feldman and Priya Chadha

In Brinckerhoff v. Enbridge Energy Co., Inc., et al., C.A. No. 11314-VCS (April 29, 2016), the Delaware Court of Chancery reiterated its adherence to the principle stated in the Delaware Revised Uniform Limited Partnership Act (“DRULPA”) of giving “maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements” as well as to the ability under DRULPA of parties to a limited partnership agreement to define their respective standards of care and scope of duties and liabilities, including to eliminate default fiduciary duties, and dismissed the plaintiff’s claims.

Blaustein, et al. v. Lord Baltimore Capital Corp., et al., No. 272 (Del. January 21, 2014)

Jan 29 2014

By Greg Hidalgo and Claire White

In this en banc decision, the Supreme Court affirmed the grant of summary judgment by the Chancery Court in favor of the defendants, and dismissed claims by the minority shareholder of a closely-held corporation for breach of fiduciary duty and the implied covenant of good faith and fair dealing in connection with the shareholder’s repeated requests for the corporation to repurchase her stock pursuant to a Shareholder’s Agreement. The Supreme Court confirmed that the protections afforded to minority shareholders in a closely-held corporation under Delaware common law are the same as those owed to shareholders in a publicly-held corporation, and held that directors of a closely-held corporation do not owe any special fiduciary duty to a minority shareholder to repurchase stock on favorable terms, or at all. In particular, the Supreme Court rejected the minority shareholder’s argument that she was entitled to a vote of the disinterested (or “non-conflicted”) members of the Board of Directors on her repurchase proposals. Citing Nixon v. Blackwell, the Court emphasized that a minority shareholder should rely on contractual protections to provide liquidity for the investor’s shares, and noted that the relevant provision of the Shareholders’ Agreement granted the corporation discretion as to whether to engage in a repurchase transaction, and as to price. The Supreme Court also held that the Chancery Court correctly concluded that there was no implied covenant to negotiate, in good-faith, a stock purchase price, relying on the express terms of the Shareholders’ Agreement as evidence that the parties had bargained for a permissive stock repurchase provision.

Blaustein v. Lord Baltimore Capital Corp

Catagory:Contractual Claims Precluding Fiduciary Duty Claims