Posts in Implied Covenant

Chancery Trims Contract Claims in Post-Merger Dispute

In Re P3 Health Group Holdings, LLC, Consol. C.A. 2021-0518-JTL (Del. Ch. Oct. 31, 2022)
Plaintiff Hudson Vegas Investment SPV, LLC asserted various claims after its minority interest in Defendant P3 Health Group Holdings, LLC was wiped out in a business combination between P3 and a SPAC. The Court of Chancery has issued several decisions in the case; this one dealt with Hudson’s various claims for breach of P3’s LLC agreement. More ›

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Implied Covenant of Good Faith Covers Contractual Conditions “Too Obvious” to State Expressly in Indemnification Dispute

Baldwin v. New Wood Resources, LLC, App. No. 303, 2021 (Del. Aug. 16, 2022)
This appeal involved an underlying claim that Baldwin had improperly refused to repay litigation expenses advanced to him under New Wood Resource’s limited liability company agreement. The agreement provided Baldwin with indemnification so long as he acted in good faith, and it also specified a process for determining whether Baldwin had done so. One narrow issue on appeal was whether the implied covenant of good faith and fair dealing required the good faith determination itself to be conducted in good faith. Reversing the Superior Court, an en banc panel of the Supreme Court ruled that the implied covenant did apply. The Court relied upon its earlier decision in Dieckman v. Regency GP LP to restate the principle that one function of the implied covenant is to cover those contractual conditions that are "too obvious" to include expressly. That "too obvious" category included the condition that the good faith determination be made in good faith. Because New World Resources conceded this point at argument and did not make a persuasive alternative argument, the Court remanded the case.

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Implied Covenant of Good Faith and Fair Dealing Saves Employee’s Claim for Improper Termination Under Company’s LLC Agreement

Smith v. Scott, C.A. No. 2020-0263-JRS (Del. Ch. Apr. 23, 2021)
The Delaware LLC Act provides that fiduciary duties may be expanded or limited by the provisions of an LLC agreement. If the agreement is silent, then traditional corporate fiduciary duties apply. However, if the agreement unambiguously disclaims fiduciary duties, then the only duties that exist are those specified contractually in the LLC agreement and the implied covenant of good faith and fair dealing.  More ›

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Superior Court CCLD Addresses Pleading Standards for Trade Secret, Fraud and Implied Covenant Claims

Brightstar Corp. v. PCS Wireless, LLC, C.A. No. N18C-10-250 PRW CCLD (Del. Super. Ct. Aug. 7, 2019).

Brightstar and PCS, two competitors that distribute new and pre-owned mobile devices, entered into a buy/sell agreement as part of negotiations for a proposed merger and strategic alliance.  Under the buy/sell agreement, PCS purchased mobile devices from Brightstar for re-sale to third parties and was subject to a non-circumvention provision that restricted PCS from purchasing these devices from certain other suppliers.  After their merger discussions faltered, PCS terminated the agreement, and Brightstar brought suit for unpaid amounts and alleged misappropriation of pricing information.  PCS counterclaimed for, inter alia, fraud and breach of the implied covenant of good faith and fair dealing. More ›

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