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Showing 17 posts in contract.

Court Of Chancery Decides If Arbitration Required When Arbitration Clause Not In One Of Two Contracts

Posted In Arbitration

Align Strategic Partners LLC v. Moesser, C.A. No. 11240-VCN (February 26, 2016)

When only one of two related contracts has an arbitration clause, the Court can still require arbitration of a dispute under the contract lacking that clause. The question is whether the two contracts deal with the same subject matter and that is not as easy to decide as it may appear. For example, if the two contracts need to be read together to accomplish the parties’ intent, such as where one contract defines certain necessary terms while the other does not, then an arbitration clause in one contract may require arbitration of disputes that nominally arise under the other contract as well. While employing Illinois law, this decision helps guide how to determine if the relationship between the contracts warrants compelling arbitration.

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Intersection Between Fiduciary Duties and Contract Rights May Be Headed For a Showdown

Posted In Fiduciary Duty

by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider l 08.17.2011

In recent years, the tension between fiduciary duty principles and contract rights, particularly with respect to fiduciary duties in unincorporated entities, has received a great deal of attention from the members of the Delaware judiciary in their written opinions and in extrajudicial commentary.

On the one hand, many decisions of the Court of Chancery have held that fiduciary duties apply in unincorporated entities unless specific language eliminates those duties. On the other, Chief Justice Myron T. Steele wrote an article in the 2009 American Business Law Journal that stated, "Delaware courts should not apply default fiduciary duties even if the parties have not specifically provided for the elimination of fiduciary duties."

Although the Delaware Supreme Court has not yet directly addressed whether fiduciary duties apply to unincorporated entities by default, it has held — in the 2010 case Nemec v. Shrader — that the exercise of contractual rights is not subject to fiduciary duties.

The tension between fiduciary duties and contract principles in unincorporated entities was visited again in the Court of Chancery's recent opinion in Paige Capital Management LLC v. Lerner Master Fund LLC. Although the court's opinion addressed many factual and legal issues, the facts of Paige as they relate to fiduciary duty issues are straightforward.

Michele and Christopher Paige, wife and husband, sought to enter the world of hedge fund management. They recruited Lerner Master Fund LLC, the investment arm of the Lerner family, founders of MBNA and current owners of the NFL's Cleveland Browns and English Premier League's Aston Villa Football Club, to provide the hedge fund with $40 million in "seed money" so that the Paiges could use the Lerners' investment to attract other qualified investors. The Lerner group became a limited partner of the hedge fund, but also signed a separate agreement with additional terms and conditions that were applicable to the Lerners' investment. Pursuant to this side agreement, the Lerners were not permitted to remove their investment from the hedge fund for three years, unless, among other things, the Paige entities breached the contract or a fiduciary duty. In exchange, the Lerners received reduced management fees, incentive payments and other benefits.

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