Law Commons^™

Delineating The Implied Covenant And Providing For “Good Faith”, Daniel S. Kleinberger

Faculty Scholarship

This column considers whether an operating or partnership agreement can delineate the implied contractual obligation, comparing ULLCA and the Delaware Act, and then warns of the dangers of carelessly imposing by contract an express requirement of "good faith."

Delaware’S Implied Contractual Covenant Of Good Faith And “Sibling Rivalry” Among Equity Holders, Daniel S. Kleinberger

Faculty Scholarship

An obligation of good faith and fair dealing is implied in every common law contract and is codified in the Uniform Commercial Code (“U.C.C”). The terminology differs: Some jurisdictions refer to an “implied covenant;” others to an “implied contractual obligation;” still others to an “implied duty.” But whatever the label, the concept is understood by the vast majority of U.S. lawyers as a matter of commercial rather than entity law. And, to the vast majority of corporate lawyers, “good faith” does not mean contract law but rather conjures up an important aspect of a corporate director’s duty of loyalty.

Nonetheless, …

Is The Delaware Court Of Chancery Going “Objective” On Us? Or Policemen’S Annuity And Benefit Fund Of Chicago V. Dv Realty Advisors Llc: More Delaware Permutations On Good Faith, Daniel S. Kleinberger

Faculty Scholarship

The Chancery Court’s opinion in Policemen’s Annuity and Benefit Fund of Chicago v. DV Realty Advisors LLC, C.A. No. 7204-VCN, 2012 WL 3548206 (Del. Ch. Aug. 16, 2012) is thought provoking for at least two reasons. The first is somewhat technical and concerns the relationship between a partnership agreement’s reference to “good faith” and the implied covenant of good faith. The second concerns what appears to be yet another Delaware permutation on the meaning of “good faith.”

Due to the opinion’s treatment of the covenant, it seems possible (though hardly desirable) for two different standards of good faith to apply …

Finessing Well-Plead Derivative Lawsuits: The Implications Of The Minnesota Supreme Court's Selection Of Auerbach Over Zapata, James F. Hogg

Faculty Scholarship

This article begins with the factual background and subsequent procedural history of the UnitedHealth Group Inc. shareholder derivitve litigation, as an instance where Minnesota courts effectively disposed of the factual allegations in a well-pleaded derivative action, directed at the behavior and actions of members of a board of directors, without reviewing finding of facts or reasoning behind the SLC's report or conclusions. The purpose of this article is to understand how a board-appointed committee can convince a court to dismiss and settle a derivative suit without showing detailed justification, and this is achieved by reviewing the statutes, case law, and …

Why Not Good Faith?-The Foibles Of Fairness In Closely Held Corporations, Daniel S. Kleinberger

Faculty Scholarship

This essay describes the contours of the shareholder’s duty to be fair and explores some of the problems caused by the law’s imprecision in defining the duty of fairness. Because this duty is best understood as a rejection of old norms, part one of this essay describes the traditional doctrines of intra-corporate responsibility. Part two describes the special characteristics of a close corporation and outlines how those characteristics pushed close corporation law to new concepts of fairness and shareholder duties. Part three attempts to delineate those duties of fairness and also to highlight some of the dangers that arise when …