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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Court Of Chancery Applies The Covent Of Good Faith And Fair Dealing To Fill A Gap
This may be the definitive decision on when and how to apply the covenant in every LLC agreement to act in good faith and deal fairly. Here the “gap” the parties did not address in their LLC agreement concerns the rights of newly admitted LLC members to block a forced sale of the entity. While that right was addressed in the initial LLC agreement, the terms on which new members were admitted years later were not addressed at that time. The decision is also noteworthy in how it decides to fill the gap the parties left, by deciding what they would have done had they thought about it.