MONTH-IN-BRIEF (May 2023)
Court of Chancery Denies Motion to Dismiss Based on Covenant Not to Sue for Breach of Fiduciary Duty, but Holds Contractual Limitations on Fiduciary Duties Are Not Facially Invalid under Delaware Law
New Enterprise Associates 14, L.P. v. Rich, C.A. No. 2022-0406-JTL (Del. Ch. May 2, 2023) (Laster, V.C.)
By Pamela Millard, Potter Anderson & Corroon LLP
In an epic opinion analyzing matters of trust and principal-agency law, relevant provisions of the Delaware General Corporation Law (the “DGCL”), and Delaware case law, Vice Chancellor J. Travis Laster concluded that the fiduciary duties of Delaware directors are not “immutable,” and may be “tailored, even without statutory authorization.”
Plaintiffs in the case were investment funds managed by sophisticated venture capital firms that invested in Fugue, Inc., (the “Company”), a startup that failed to achieve either a liquidity event or an exit event for plaintiffs through a third-party sale.