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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 4 posts in LLCs/LLPs.
Chancery Finds Payment Condition, Non-Compete, and Non-Solicit Provisions Unenforceable
Ainslie et al. v. Cantor Fitzgerald, L.P., C.A. No. 9436-VCZ (Del. Ch. Jan. 4, 2023)
Under Delaware law, restrictive covenants generally are enforceable unless overly broad in the circumstances, and Delaware courts closely scrutinize them. Similarly, contractual conditions precedent generally are enforceable unless they result in a penalty, and Delaware courts construe ambiguous conditions narrowly to avoid forfeitures. In this decision from the Court of Chancery, a provision in a limited liability partnership agreement intended to discourage competitive activities by former partners was held unenforceable both because it was overly broad and resulted in a forfeiture.
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Chancery Finds General Partner Breached Partnership Agreement in Exercising Call Right, and Awards Limited Partners Nearly $700 Million in Damages
Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, C.A. No. 2018-0372-JTL (Del. Ch. Nov. 12, 2021)
If a partnership agreement requires an opinion of counsel as a condition precedent, such opinion must be rendered in subjective good faith under Delaware law, As Boardwalk Pipeline Partners illustrates, a court applying Delaware law may reject such an opinion as rendered in bad faith if the counsel and the requesting party involved coordinate to develop counterfactual assumptions designed to generate a desired result for the requesting party. More ›
Chancery Declines to Award Damages Equivalent to Contractual Dissociation Remedy Under Partnership Agreement
In re Cellular Telephone Partnership Litigation, Coordinated C.A. No. 6885-VCL (Del. Ch. Sept. 28, 2021)
Plaintiffs held a minority interest in a partnership owned and controlled by AT&T. In 2010, AT&T implemented a transaction causing the partnership to transfer its assets to an affiliate, freezing out the plaintiffs. In connection with the freeze out, plaintiffs received $4.1 million—their pro rata share of the $219 million that AT&T paid to the partnership. Plaintiffs later brought an action in the Court of Chancery alleging that by implementing the transaction, AT&T breached the partnership agreement on a number of different bases. More ›
Chancery Addresses Whether LLC Agreement Modified or Eliminated Fiduciary Duties
In Re Cadira Group Holdings, LLC Litigation, Consolidated C.A. No. 2018-0616-JRS (Del. Ch. July 12, 2021)
The Delaware Limited Liability Company Act provides that “the fiduciary duties of a member, manager, or other person that is a party to or bound by a limited liability company agreement may be expanded or restricted or eliminated by provisions in the limited liability company agreement.” Yet to eliminate fiduciary duties, Delaware law requires that the intent to do so must be “plain and unambiguous.” More ›
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