Holland & Knight LLP
MONTH-IN-BRIEF (Nov 2023)
Delaware Court of Chancery Addresses Claims of Breach of Contractual and Fiduciary Duties Following Alleged Diverting of New Deals Depriving Rollover Equity Holders of Their Economic Rights
By Nastassia Merlino, NYU School of Law
The Delaware Court of Chancery recently refused to dismiss a rollover equity seller’s claim for breach of contract on the basis that the defendant’s act of operating a competing business may have constituted a breach of the implied covenant of good faith and fair dealing even though there was technically no breach of the underlying agreement. In MALT Family Trust v. 777 Partners LLC (Del. Ch. Nov. 13, 2023), the Court addressed several claims regarding a buyer’s alleged breach of contractual and fiduciary duties following its failure to provide rollover equity holders with the agreed-upon equity that was to be granted upon the achievement of specific milestones. According to the rollover equity holders, the buyer’s improper operation of a competing business impeded seller’s performance, which prevented seller from earning additional rollover equity.