In re USA Cafes, L.P. Litigation case brief summary
600 A.2d 43
CASE SYNOPSIS: Defendants, general partner, general partner's owners and directors, and successor corporation, sought dismissal of claims of breach of fiduciary duty, securities law violations, and duty of candor that were brought against it by plaintiff minority owners.
FACTS:
-A general partner of a limited partnership sold substantially all of the corporation's assets to successor corporation.
-Minority owners (owners) of the limited partnership, brought a class action suit against corporation, its owners and directors, and successor corporation.
-The court refused to dismiss the fiduciary duty claim against owners and directors. Corporate directors were fiduciaries for corporate stockholders.
-Also, the complaint alleged that owners and directors directly participated in the breach by the general partner.
-Owners and directors also sought to dismiss because they were not subject to the court's jurisdiction.
ANALYSIS:
-The court held there was personal jurisdiction.
-The corporation was created only to run the partnership.
-It did not offend notions of fair play and substantial justice to extend jurisdiction to directors, which was allowed under Del. Code Ann. tit. 10, § 3114.
-The court refused to dismiss successor corporation's breach of fiduciary duty action, because it was accused of activities that went beyond arm's-length negotiations, but dismissed a duty of candor claim since no owner was a shareholder when any representations were made.
RULES:
-Directors of a corporate general partnership owe a fiduciary duty to a limited partnership.
-One who controls the property of another may not, without implied or express agreement, intentionally use that property in a way that benefits the holder of the control to the detriment of the property or its beneficial owner.
OUTCOME:
-The court refused to dismiss claims of breach of fiduciary duty.
-The court held that corporate directors were fiduciaries.
-The court refused to dismiss for lack of personal jurisdiction, finding no offense to fair play and substantial justice.
-The court refused to dismiss a breach of fiduciary action against successor corporation, but did dismiss a claim of lack of candor
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600 A.2d 43
CASE SYNOPSIS: Defendants, general partner, general partner's owners and directors, and successor corporation, sought dismissal of claims of breach of fiduciary duty, securities law violations, and duty of candor that were brought against it by plaintiff minority owners.
FACTS:
-A general partner of a limited partnership sold substantially all of the corporation's assets to successor corporation.
-Minority owners (owners) of the limited partnership, brought a class action suit against corporation, its owners and directors, and successor corporation.
-The court refused to dismiss the fiduciary duty claim against owners and directors. Corporate directors were fiduciaries for corporate stockholders.
-Also, the complaint alleged that owners and directors directly participated in the breach by the general partner.
-Owners and directors also sought to dismiss because they were not subject to the court's jurisdiction.
ANALYSIS:
-The court held there was personal jurisdiction.
-The corporation was created only to run the partnership.
-It did not offend notions of fair play and substantial justice to extend jurisdiction to directors, which was allowed under Del. Code Ann. tit. 10, § 3114.
-The court refused to dismiss successor corporation's breach of fiduciary duty action, because it was accused of activities that went beyond arm's-length negotiations, but dismissed a duty of candor claim since no owner was a shareholder when any representations were made.
RULES:
-Directors of a corporate general partnership owe a fiduciary duty to a limited partnership.
-One who controls the property of another may not, without implied or express agreement, intentionally use that property in a way that benefits the holder of the control to the detriment of the property or its beneficial owner.
OUTCOME:
-The court refused to dismiss claims of breach of fiduciary duty.
-The court held that corporate directors were fiduciaries.
-The court refused to dismiss for lack of personal jurisdiction, finding no offense to fair play and substantial justice.
-The court refused to dismiss a breach of fiduciary action against successor corporation, but did dismiss a claim of lack of candor
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
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