Opinion ID: 1889298
Heading Depth: 1
Heading Rank: 6

Heading: Whether the Court of Chancery Erred by Holding HGI, Gumbiner, and Guzzetti Jointly and Severally Liable with the General Partner for Aiding and Abetting

Text: HGI, Gumbiner, and Guzzetti argue that only the General Partner was a party to the Partnership Agreement, and therefore they cannot be held liable for breach of the Agreement. They also assert that there is no cause of action under Delaware law for aiding and abetting a breach of contract. This Court reviews de novo the Court of Chancery's interpretation of Delaware law. [45] HGI, Gumbiner, and Guzzetti are correct that they cannot be held liable for breach of the Partnership Agreement because they were not parties to it. It is a general principle of contract law that only a party to a contract may be sued for breach of that contract. [46] But, the Court of Chancery properly held HGI, Gumbiner, and Guzzetti jointly and severally liable with the General Partner for aiding and abetting the General Partner's breach of fiduciary duties created by the Partnership Agreement. The elements of a claim for aiding and abetting a breach of a fiduciary duty are: (1) the existence of a fiduciary relationship, (2) the fiduciary breached its duty, (3) a defendant, who is not a fiduciary, knowingly participated in a breach, and (4) damages to the plaintiff resulted from the concerted action of the fiduciary and the non-fiduciary. [47] In this case, the General Partner had a fiduciary relationship with the Partnership and its limited partners as defined by the Partnership Agreement. The General Partner breached Sections 7.05 and 7.10(a), which impose the fiduciary duties of entire fairness. HGI, Gumbiner, and Guzzetti knowingly participated in the breach of fiduciary duties, and the limited partners consequently were injured. The Vice Chancellor correctly noted that where a corporate General Partner fails to comply with a contractual standard [of fiduciary duty] that supplants traditional fiduciary duties and the General Partner's failure is caused by its directors and controlling stockholder, the directors and controlling stockholders remain liable. [48] The Court of Chancery thus properly held HGI, Gumbiner, and Guzzetti jointly and severally liable with the General Partner for the General Partner's breach of the Partnership Agreement's fiduciary duties of entire fairness.