Court Opinion

ID: 4239688
Source: CourtListenerOpinion
Date Created: 2018-01-26 17:10:20.987339+00
Date Added: 2024-06-11T14:16:29.415969
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
RICHARD B. GAMBERG 2007               )
FAMILY TRUST, on behalf of itself     )
and all others similarly situated,    )
                                      )
                   Plaintiff,         )
                                      )
             v.                       ) C.A. No. 10994-VCMR
                                      )
UNITED RESTAURANT GROUP,              )
L.P., a Delaware limited partnership, )
ATLANTIC COAST DINING, INC., )
a Delaware corporation, ANTHONY       )
GRILLO, ROBERT APPLEBY,               )
DAVIS H. WOOD and LINWOOD R. )
MILLER,                               )
                                      )
                   Defendants.        )

                        MEMORANDUM OPINION
                       Date Submitted: October 3, 2017
                       Date Decided: January 26, 2018

Eric M. Andersen, ANDERSEN SLEATER SIANNI LLC, Wilmington,
Delaware; Attorney for Plaintiff.

Rebecca L. Butcher, Joseph D. Wright, and Travis J. Ferguson, LANDIS RATH
& COBB LLP, Wilmington, Delaware; Attorneys for Defendants Atlantic Coast
Dining, Inc., Anthony Grillo, Robert Appleby, Davis H. Wood, and Linwood R.
Miller.

Frank E. Noyes, OFFIT KURMAN, P.A., Wilmington, Delaware; Joyce A.
Kuhns, OFFIT KURMAN, P.A., Baltimore, Maryland; Attorneys for Defendant
United Restaurant Group, L.P.

MONTGOMERY-REEVES, Vice Chancellor.
      This case involves the right to distributions under a partnership agreement.

At the time of partnership formation, the express terms of the partnership

agreement required that any excess distributions in a given year be treated as

prepayment in later years. Three years later, William H. Vaughn took over as

president of the general partner, and for more than a decade the partnership made

excess distributions without accounting for the overpayments as prepayments.

      Following Vaughn’s death in 2009, ownership of the general partner passed

to new individuals. In response to the partnership’s struggles during the financial

crisis, the general partner sought to refinance certain debt obligations in order to

avoid insolvency and liquidation.     During the lead-up to the refinancing, the

general partner realized that the partnership had previously made excess

distributions during Vaughn’s tenure that had not been treated as prepayments.

Consistent with the plain language of the partnership agreement, the general

partner reclassified the prior excess distributions as prepayments, so that the

limited partners were not due any cash in connection with the refinancing.

Additionally, the refinancing would cause the owners of the general partner to

incur personal tax liability. Thus, the general partner proposed an amendment that

would allow the partnership to use a portion of the proceeds to cover the tax

liability for the owners of the general partner, which a majority of the limited

partners approved.

                                         1
      Plaintiff objected to the reclassification of the overpayments as prepayments

and to the amendment to the partnership agreement. Thereafter, Plaintiff filed this

action. Plaintiff alleges that the prepayment terms of the partnership agreement do

not reflect the actual intent of the original agreement between the general partner

and limited partner. One person executed the agreement as both the sole limited

partner and president of the general partner. As the focus of its claims, Plaintiff

seeks reformation of the partnership agreement on a theory of mutual or unilateral

mistake with oneself by scrivener’s error.      Plaintiff contends that Defendants

violated the reformed terms of the partnership agreement by failing to pay a

portion of the refinancing proceeds to the limited partners (the “Limited Partners”).

Defendants moved to dismiss or, in the alternative, for summary judgment, which

the parties fully briefed. Thereafter, Plaintiff moved to amend its complaint (the

“Complaint”). For the reasons detailed below, I deny Plaintiff’s Motion to Amend

and grant Defendants’ Motion to Dismiss.

I.    BACKGROUND
      All facts derive from the Complaint and the documents incorporated by

reference therein.1

1
      On a motion to dismiss, the Court may consider documents outside the pleadings
      if “(1) the document is integral to a plaintiff’s claim and incorporated in the
      complaint or (2) the document is not being relied upon to prove the truth of its
      contents.” Allen v. Encore Energy P’rs, 72 A.3d 93, 96 n.2 (Del. 2013).

                                          2
      A.     Parties
      United Restaurant Group L.P. (the “Partnership”) owns franchise rights for

twenty-nine T.G.I. Friday’s restaurants.2 Atlantic Coast Dining, Inc. (the “General

Partner”) is organized as a subchapter S Delaware corporation and serves as

general partner. 3 Anthony Grillo, Robert Appleby, Davis H. Wood, and Linwood

R. Miller (the “Individual Defendants,” collectively with the Partnership and the

General Partner, the “Defendants”) are the directors and owners of the General

Partner.4 Grillo serves as president and CEO of the General Partner. 5 Plaintiff

Richard B. Gamberg 2007 Family Trust is a Limited Partner. Vaughn established

Plaintiff in 2007 to hold a portion of his Limited Partner units, and Vaughn’s

ownership interest in the General Partner passed to his estate in 2009 upon his

death.6

      B.     The Partnership Agreement
      A partnership agreement (the “Agreement”) governs the relationship

between the General Partner and the Partnership’s Limited Partners. 7          The

2
      Compl. ¶ 4.
3
      Id. ¶ 11.
4
      Id. ¶¶ 12-15.
5
      Id. ¶ 11.
6
      Id. ¶ 17.
7
      Id. at Ex. A.
                                        3
Agreement governs distributions of net cash flow as well as net sale and

refinancing proceeds. 8 As the Agreement currently reads, the General Partner

calculates distributions of net cash flow to Limited Partners on a cumulative basis. 9

The relevant provision—Section 6.1(c)(1)—states:

             [Each calendar quarter Unit Holders are entitled to a
             distribution of Net Cash Flow] in an amount equal to the
             excess, if any, of (i) the aggregate, cumulative Priority
             Returns from the date the First New Restaurant opens for
             business to the [present], over (ii) the sum of all prior
             distributions to such Unit Holders pursuant to this
             Paragraph (1), Paragraph 3 of this Subsection (c) and
             Sections 6.2 (b) and (d) hereof [governing distributions
             of net sales and refinancing proceeds]. 10

“In other words, if the Limited Partners have received distributions in excess of

[what they are owed] in a given year, these excess distributions are treated as

prepayment of [distributions] in future years.” 11 Plaintiff contends this prepayment

mechanism is a scrivener’s error.12

      Additionally, Section 5.1(a) allocates profits of the Partnership. Section

5.1(a)(5) allocates profits to the Limited Partners on a cumulative basis:

8
      Id. at Ex. A, §§ 6.1, 6.2.
9
      Id. ¶ 21.
10
      Id. at Ex. A, § 6.1(c)(1) (emphasis added).
11
      Id.
12
      Id. ¶ 22.

                                            4
             [Profits shall be allocated] . . . to the Unit Holders, other
             than the General Partner . . . in an amount equal to the
             excess, if any, of (i) the sum of (A) the aggregate,
             cumulative Priority Returns from the date the First New
             Restaurant opens for business to the [present], and (B)
             the cumulative Losses allocated pursuant to Subsection
             (b)(3) of this Section 5.1 for all prior Fiscal Years, over
             (ii) the cumulative Profits allocated pursuant to this
             Paragraph (5) for all prior Fiscal Years.13

After the Partnership allocates the profits due to the Limited Partners, Section

5.1(a)(6) allocates profits to the General Partner:

             [Profits shall be allocated] . . . to the General Partner, in
             an amount equal to the excess, if any, of (i) the sum of
             (A) the cumulative (but not compounded) Subordinated
             Allowance from the date the First New Restaurant opens
             for business to the [present], and (B) the cumulative
             Losses allocated pursuant to Subsection (b)(2) of this
             Section 5.1 for all prior Fiscal Years, over (ii) the
             cumulative Profits allocated pursuant to this Paragraph
             (6) for all prior Fiscal Years. 14

      C.     Relevant Facts
      At the inception of the Partnership in 1993, Robert H. Snyder was the

president of the General Partner, the sole Limited Partner, and the sole signatory to

the Agreement in both capacities. 15 Additional investors joined at later dates after

execution of the Agreement.        Vaughn, Snyder’s father-in-law, served as the

13
      Id. at Ex. A, § 5.1(a)(5) (emphasis added).
14
      Id. at Ex. A, § 5.1(a)(6) (emphasis added).
15
      Id. at Ex. A, at 81.

                                            5
president of the General Partner from 1996 to 2009.16 During that time, Vaughn

and the General Partner’s board of directors allegedly oversaw distributions

without accounting for distributions in prior years, despite the requirements of the

Agreement. 17 Then, the Partnership encountered financial difficulties in 2009 and

2010. 18 In 2013, the General Partner began to consider a variety of strategic

options,19 including refinancing the Partnership’s debt. 20 During this strategic

review, the General Partner realized that Vaughn had made certain payments in

violation of the terms of the Agreement.21 Because of the failure to properly

account for excess distributions as overpayments, the General Partner determined

16
      Id. ¶ 17.
17
      Id. ¶ 23; Pl.’s Opp’n Br. to Mot. to Dismiss 4.
18
      See, e.g., Compl. Ex. G, at 1 (“[I]n the fourth quarter of 2009, [the Partnership]
      was in violation of [certain] loan covenants, and by the end of 2010, we were in
      default which could have resulted in foreclosure of all of our assets and the
      liquidation of the company if it had not been resolved. Due to the successful
      refinancing of [certain] debt with GE and Medley, we were able to continue
      operating and have stabilized [the Partnership’s] financial performance. The
      Medley debt was critical to . . . survival, but came at a price.”).
19
      Plaintiff notes that the General Partner employed Grillo starting in 1995. Pl.’s
      Opp’n Br. to Mot. to Dismiss 14. But Plaintiff does not explain when Appleby,
      Wood, and Miller joined the General Partner.
20
      Compl. ¶ 17.
21
      Id. at Ex. G, at 2.
                                            6
that Limited Partners would receive less from any distributions until the earlier

overpayments were recouped through what would otherwise be underpayments.22

      The General Partner chose to refinance with GE Capital (the “GE

Transaction”), which generated a taxable gain of $4.3 million 23 and a $1.4 million

tax liability. 24 Before refinancing, the General Partner explained that the gain—

and thus the tax liability—would fall on the General Partner under the Agreement

because the Limited Partners had effectively been prepayed. 25 In order to make the

refinancing agreeable to the General Partner from a tax liability standpoint, the

Partnership considered a fifth amendment to the Agreement (the “Fifth

Amendment”) that would allow a tax distribution to the General Partner to cover

such a tax payment shortfall.26          Plaintiff declined to approve the Fifth

Amendment. 27 After obtaining the approval of a majority of the Limited Partners,

22
      Id. ¶ 3.
23
      Id. ¶ 17.
24
      Id. at Ex. H, at 2.
25
      Id.
26
      Defs.’ Opening Br. to Mot. to Dismiss Ex. 1.
27
      Pl.’s Opp’n Br. to Mot. to Dismiss 14.

                                           7
the General Partner deemed the Fifth Amendment approved on October 31, 2013,28

and completed the refinancing transaction.29

II.   MOTION TO AMEND ANALYSIS
      Plaintiff seeks to amend its Complaint under Court of Chancery Rule

15(aaa). Plaintiff submitted its first amended Complaint on September 14, 2015.

On October 15, 2015, Defendants filed a Motion to Dismiss. On November 20,

2015, Plaintiff filed a brief in opposition to the Motion to Dismiss. On December

4, 2015, Defendants filed a reply brief. On February 2, 2016, the parties proposed

settlement terms in a memorandum of understanding, but discussions broke down

before actual settlement resulted. On May 12, 2016, Plaintiff submitted a Motion

to Amend the Complaint for a second time based on pre-existing information

learned during settlement talks. Plaintiff asks to add the Partnership’s auditor as a

defendant and bring a new claim for tortious interference with a contract—the

Agreement—against the auditor. 30

      Rule 15(aaa) states that:

             [A] party that wishes to respond to a motion to dismiss
             under Rules 12(b)(6) or 23.1 by amending its pleadings
             must file an amended complaint, or a motion to amend in
             conformity with this Rule, no later than the time such

28
      Defs.’ Opening Br. to Mot. to Dismiss Ex. 1.
29
      Compl. ¶ 38.
30
      Mot. for Leave to File Second Am. Compl.

                                          8
              party’s answering brief in response to either of the
              foregoing motions is due to be filed.31

       “Rule 15(aaa) does not contemplate the possibility of filing a motion to

amend after the responsive brief is filed and before a decision by the court

dismissing the complaint.” 32 Thus, the general rule is that a plaintiff may not

amend the complaint after filing the answering brief to a motion to dismiss.

Plaintiff points to Lenois v. Lawal 33 and Fortis Advisors, LLC v. Shire US

Holdings, Inc. 34 as departures from that general rule; but, in each of those instances

truly unique, new information came to light that each plaintiff could not have

otherwise known earlier, and principles of equity favored allowing amendment.

This is not the case here, and justice does not dictate another result. Thus, I deny

Plaintiff’s Motion to Amend and evaluate Defendants’ Motion to Dismiss against

the existing Complaint.

III.   MOTION TO DISMISS ANALYSIS
       Defendants move to dismiss under Court of Chancery Rule 12(b)(6). In

considering a motion to dismiss under Rule 12(b)(6), “(i) all well-pleaded factual

31
       Ct. Ch. R. 15(aaa).
32
       Stern v. LF Capital P’rs, LLC, 820 A.2d 1143, 1146 (Del. Ch. 2003).
33
       Order Granting Pl.’s Mot. for Leave to Supplement the Compl., Lenois v. Lawal,
       C.A. No. 11963-VCMR (Del. Ch. May 23, 2017).
34
       C.A. No. 12147-VCS (Del. Ch. Oct. 24, 2016) (TRANSCRIPT).

                                           9
allegations are accepted as true; (ii) even vague allegations are ‘well-pleaded’ if

they give the opposing party notice of the claim; [and] (iii) the Court must draw all

reasonable inferences in favor of the non-moving party.” 35 While I must draw all

reasonable inferences in Plaintiff’s favor, I need not “accept as true conclusory

allegations ‘without specific supporting factual allegations.’” 36 “[D]ismissal is

inappropriate unless the ‘plaintiff would not be entitled to recover under any

reasonably conceivable set of circumstances susceptible of proof.’” 37

      The Complaint asserts five counts: (1) a claim for reformation of the

Agreement; (2) a breach of contract claim against the General Partner for enacting

the Fifth Amendment without unanimous approval from the Limited Partners; (3) a

breach of contract claim against the General Partner seeking a cash distribution

from the Partnership; (4) a breach of contract claim against the General Partner

alleging the Partnership improperly advanced fees; and (5) a breach of fiduciary

duty claim against the Individual Defendants for a disclosure allegedly made in

bad faith before the vote on the Fifth Amendment. I address each in turn. At the

35
      In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006)
      (quoting Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).
36
      Id. (quoting In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 65-66 (Del.
      1995)).
37
      Id. (quoting Savor, 812 A.2d at 896-97).

                                          10
outset, I note that Plaintiff chose very specific arguments on which to stand.38 I

address only these arguments, and all other “[i]ssues not briefed are deemed

waived.”39

      A.     The Court Grants the Motion to Dismiss with Respect to the
             Contractual Claims
      This action requires me to examine the Agreement between and among the

General Partner and Limited Partners.40 “Delaware law adheres to the objective

theory of contracts, i.e., a contract’s construction should be that which would be

understood by an objective, reasonable third party.” 41        “When interpreting a

contract, this Court ‘will give priority to the parties’ intentions as reflected in the

four corners of the agreement,’ construing the agreement as a whole and giving

effect to all its provisions.”42   The terms of the contract control “when they

establish the parties’ common meaning so that a reasonable person in the position

38
      Other arguments may have been available to Plaintiff, e.g. contract modification
      by conduct, but Plaintiff does not assert any other arguments than those addressed
      by this Memorandum Opinion.
39
      Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (citing Loudon v.
      Archer-Daniels-Midland Co., 700 A.2d 135, 140 n.3 (Del. 1997); Murphy v. State,
      632 A.2d 1150, 1152 (Del. 1993)).
40
      Arvida/JMB P’rs, L.P. v. Vanderbilt Income and Growth Assocs., 1997 WL
      294440, at *2 (Del. Ch. May 23, 1997) (“[T]he controlling agreements must be
      interpreted in accordance with the rules for construing contracts.”).
41
      Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).
42
      Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting GMG Capital
      Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012)).

                                          11
of either party would have no expectations inconsistent with the contract

language.”43 Standard rules of contract interpretation state that “a court must

determine the intent of the parties from the language of the contract.”44

             1.    Plaintiff fails to state a claim for reformation
      Plaintiff asks the Court to reform the Agreement based on mutual or

unilateral mistake with oneself by scrivener’s error.45 To obtain reformation of a

contract, a plaintiff must show:

             [A]n agreement has been made, or a transaction has been
             entered into or determined upon, as intended by all
             parties interested, but in reducing such agreement or
             transaction to writing, either through the mistake
             common to both parties, or through the mistake of the
             plaintiff accompanied by the fraudulent knowledge and
             procurement of the defendant, the written instrument fails
             to express the real agreement or transaction. 46

43
      Id. at 368 (quoting Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d
      1228, 1232 (Del. 1997)).
44
      Id. (quoting Twin City Fire Ins. Co. v. Del. Racing Ass’n, 840 A.2d 624, 628 (Del.
      2003)).
45
      Compl. ¶¶ 22, 57.
46
      Lions Gate Ent. Corp. v. Image Ent. Inc., 2006 WL 1668051, at *8 (Del. Ch. June
      5, 2006) (citing Waggoner v. Laster, 581 A.2d 1127, 1135 (Del. 1990)). “A party
      seeking reformation must establish the need for the remedy by clear and
      convincing evidence.” Id. (citing Interactive Corp. v. Vivendi Universal, S.A.,
      2004 WL 1572932, at *15 (Del. Ch. July 6, 2004)).

                                          12
      One way that a written instrument may fail to reflect the “real agreement”47

of the parties is the presence of a scrivener’s error. A scrivener’s error occurs

where the written instrument “fails to reflect the intention of the parties”48 through

“the mistake of the scrivener who drew the contract for the parties.”49

      The relevant language of the Agreement appears in Section 6.1(c)(1)—

governing distribution of net cash flow—and states:

             [Each calendar quarter Unit Holders are entitled to a
             distribution of Net Cash Flow] in an amount equal to the
             excess, if any, of (i) the aggregate, cumulative Priority
             Returns from the date the First New Restaurant opens for
             business to the [present], over (ii) the sum of all prior
             distributions to such Unit Holders pursuant to this
             Paragraph (1), Paragraph 3 of this Subsection (c) and
             Sections 6.2 (b) and (d) hereof [governing distributions
             of net sales and refinancing proceeds]. 50

Thus, the Agreement treats any overpayments under the applicable sections as

prepayments that reduce future distributions.

47
      Id.
48
      Deutsche Bank Nat’l Tr. Co. v. Roslewicz, 2014 WL 4559101, at *3 (Del. Ch.
      Sept. 2, 2014) (citing 66 Am. Jur. 2d. Reformation of Instruments § 19 (2014)).
49
      66 Am. Jur. 2d. Reformation of Instruments § 19. “An example of a scrivener’s
      error is a ‘minor typographical mistake, such as an incorrect address.’” Deutsche
      Bank, 2014 WL 4559101, at *3 (quoting Envo, Inc., v. Walters, 2009 WL
      5173807, at *5 (Del. Ch. Dec. 30, 2009)). But a scrivener’s error may also be
      more substantive. See, e.g., ASB Allegiance Real Estate Fund v. Scion
      Breckenridge Managing Member, LLC, 2012 WL 1869416, at *1 (Del. Ch. May
      16, 2012) (reforming a waterfall provision).
50
      Compl. Ex. A, § 6.1(c)(1) (emphasis added).

                                         13
      Plaintiff alleges that the scrivener of the Agreement made a mistake by

including the prepayment mechanism. Plaintiff begins by explaining that “Snyder

was the sole signatory to the . . . Agreement signing in his capacity as the General

Partner and the initial Limited Partner,” so Snyder was the individual on both sides

of the alleged mistake. 51 “Snyder [states that he] did not know or realize the

offending provision [providing for prepayment] was included in the . . .

Agreement.” 52 And, thus, the mistake—whether mutual or unilateral—occurred

because of “a scrivener’s error.” 53

      Plaintiff offers two facts as support that the prepayment mechanism is a

scrivener’s error.54 First, Plaintiff argues that Vaughn made certain distributions to

the Limited Partners without accounting for prior overpayments. 55 But Plaintiff

51
      Id. ¶ 57.
52
      Id. ¶ 58.
53
      Pl.’s Opp’n Br. to Mot. to Dismiss 8.
54
      Plaintiff also attempts to create ambiguity in the Agreement by noting that the
      Agreement excludes net sales and refinancing proceeds from the definition of net
      cash flow. Id. at 8-9. This argument, however, does not create an ambiguity. Net
      cash flow does indeed exclude net sales and refinancing proceeds. Compl. Ex. A,
      § 1.1(aa). But Section 6.1(c) of the Agreement does not distribute net sales and
      refinancing proceeds; instead, Section 6.2 of the Agreement does. Id. at Ex. A, §§
      6.1(c), 6.2. Section 6.1(c) then explicitly reduces the amounts distributed under
      this provision by the amounts already distributed under Section 6.2. Id. at Ex. A, §
      6.1(c). There is no ambiguity or scrivener’s error with this; the Agreement
      functions precisely as Defendants explain.
55
      Pl.’s Opp’n Br. to Mot. to Dismiss 8.

                                           14
does not explain how or why Vaughn’s failure to treat the overpayments as

prepayments evidences a mistake in the Agreement. And Plaintiff does not contest

that the literal terms of the Agreement dictate that Vaughn’s overpayments operate

as prepayment, exactly how Defendants treated them.

      Second, Plaintiff notes that Snyder signed a verification, submitted with the

Complaint, that he believes that the Complaint is “true and correct.” 56 Presumably,

this statement extends to Plaintiff’s argument that the prepayment mechanism is a

mistake by scrivener’s error. But Plaintiff does not attempt to offer Snyder’s

understanding of what error the scrivener made in drafting the language of the

agreement or what the correct language should be. And while Snyder was the sole

Limited Partner and president of the General Partner at the time of Partnership

formation, to the extent Snyder’s verification may be viewed as approval of

Plaintiff’s allegations, Plaintiff only alleges what Snyder believed the underlying

agreement was not, as opposed to what positive agreement Snyder intended to

govern distributions.

      Moreover, the prepayment mechanism contained in Section 6.1(c)(1), which

is carefully crafted and clear on its face, occurs in three other distribution

provisions in the Agreement. 57           Plaintiff does not address these identical

56
      Verification of Robert H. Snyder.
57
      Compl. Ex. A, §§ 6.1(c)(2), 6.2(b), 6.2(c).

                                            15
distribution provisions. Even if I were to reform the prepayment mechanism

contained in Section 6.1(c)(1), I would be left to guess whether I should alter one

or more of the other provisions providing for prepayment of various distributions,

and indeed which provisions to alter or leave alone.

      In sum, Plaintiff does not identify what error was made when “reducing [the]

agreement . . . to writing.”58 Plaintiff does not explain “exactly what terms [the

Court should] insert into the contract.” 59 Nor does Plaintiff offer any facts or

arguments to explain what “specific prior contractual understanding”60 should

govern the interactions between the General Partner and Limited Partners. All that

Plaintiff states is what the terms of the Agreement are not, but Plaintiff does not

offer any explanation for what the terms of the Agreement should be. The Court is

left to guess what contractual terms should fill the void. Plaintiff fails to meet its

pleading burden to state a reasonably conceivable claim for reformation of the

Agreement.     Thus, I dismiss Plaintiff’s claim for reformation of an alleged

scrivener’s error in the contract.

58
      Lions Gate, 2006 WL 1668051, at *8 (Del. Ch. June 5, 2006) (citing Waggoner,
      581 A.2d at 1135).
59
      ASB Allegiance, 2012 WL 1869416, at *13 (quoting Collins v. Burke, 418 A.2d
      999, 1002 (Del. 1980)).
60
      Id.

                                         16
            2.     Plaintiff fails to state a claim for breach of the implied
                   covenant of good faith and fair dealing
      In the alternative, Plaintiff argues that Defendants breached the implied

covenant of good faith and fair dealing.61 But that “doctrine . . . operates only in

that narrow band of cases where the contract as a whole speaks sufficiently to

suggest an obligation and point to a result, but does not speak directly enough to

provide an explicit answer.” 62 “The implied covenant is well-suited to imply

contractual terms that are so obvious—like a requirement that the general partner

not engage in misleading or deceptive conduct to obtain safe harbor approvals—

that the drafter would not have needed to include the conditions as express terms in

the agreement.” 63 Here, the Agreement speaks directly, and it dictates the opposite

result from that which Plaintiff seeks. The Agreement treats overpayment of

distributions in any given year as prepayment for future years. 64         Further,

“Delaware law ‘will only imply contract terms when the party asserting the

implied covenant proves that the other party has acted arbitrarily or unreasonably,

thereby frustrating the fruits of the bargain that the asserting party reasonably

61
      Compl. ¶ 59; Pl.’s Opp’n Br. to Mot. to Dismiss 18-20.
62
      Lonergan v. EPE Holdings, LLC, 5 A.3d 1008, 1018 (Del. Ch. 2010) (quoting
      Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146 (Del. Ch. 2009)).
63
      Dieckman v. Regency GP LP, 155 A.3d 358, 361 (Del. 2017).
64
      Compl. Ex. A, § 6.1.

                                         17
expected.’” 65     Plaintiff does not explain how Defendants acted unreasonably;

rather, Defendants follow the express terms of the Agreement to grant Plaintiff the

fruits of his bargain, namely that overpayments in one year constitute prepayments

for later years.

       Thus, Plaintiff fails to state a claim for breach of the implied covenant of

good faith and fair dealing.

              3.      Plaintiff fails to state a claim that the Fifth Amendment
                      violated the Agreement
       Plaintiff asserts that the General Partner breached the Agreement by failing

to receive unanimous approval for the Fifth Amendment. 66 Section 12.3(c) of the

Agreement states that “no amendment to this Agreement shall . . . change the

liability of or reduce the interests of the General Partner or the Limited Partners in

Partnership capital, Profits or Losses . . . unless all Partners consent in writing prior

to such amendment.” 67 The Fifth Amendment contains a provision stating that

“[t]o the extent consistent with the [Internal Revenue] Code, all gain from the sale

of assets in connection with the GE Transaction shall be allocated to the General

65
       Lonergan, 5 A.3d at 1018 (quoting Nemec v. Shrader, 991 A.2d 1120, 1126 (Del.
       2010)).
66
       Compl. ¶¶ 62-64.
67
       Id. at Ex. A, § 12.3(c).

                                           18
Partner under Section 5.1(a)(6) of the . . . Agreement.” 68 Plaintiff contends that

this paragraph necessitates unanimous approval because it directly alters the

allocation of gain under the Agreement 69 and “overrides the order and priority of

the allocation of gains [by] jumping over” the Limited Partners. 70 Plaintiff seeks

rescission of the Fifth Amendment. 71

      On its face, the Fifth Amendment does not change the allocation of gains

under the Agreement. Instead, the Fifth Amendment states that gains “shall be

allocated . . . under Section 5.1(a)(6) of the . . . Agreement.”72 Noting that an

action will be taken in compliance with the existing contract does not modify that

contract. Plaintiff’s theory that the Fifth Amendment alters the allocation of gains

by leapfrogging the Limited Partners only succeeds if the Court reforms the

Agreement consistent with Plaintiff’s request as discussed above. Otherwise, the

Agreement does not entitle the Limited Partners to proceeds from the GE

Transaction because the Limited Partners have been prepaid for those proceeds,73

68
      Defs.’ Opening Br. to Mot. to Dismiss Ex. 1, § 2.
69
      Compl. ¶ 64.
70
      Pl.’s Opp’n Br. to Mot. to Dismiss 21-22.
71
      Compl. ¶ 67.
72
      Defs.’ Opening Br. to Mot. to Dismiss Ex. 1, § 2.
73
      Plaintiff does not contest that the Vaughn overpayments, if treated as prepayments
      under the Agreement, reduce the amount due to the Limited Partners from the GE
                                          19
and all proceeds from the GE Transaction flow to the General Partner under

Section 5.1(a)(6) of the Agreement.         As discussed supra, Plaintiff has not

adequately stated a claim for reformation. Thus, the General Partner did not need

unanimous approval for the Fifth Amendment, and the count fails.

      Plaintiff also seeks a cash distribution because the “invalid and

unenforceable . . . Fifth Amendment” barred a legitimate distribution to the

Limited Partners. 74 But Plaintiff fails to sufficiently plead that the General Partner

did not validly enact the Fifth Amendment. Thus, this count also fails.

             4.      Plaintiff fails to state a claim that the Agreement precludes
                     the advancement of fees
      Plaintiff avers that the General Partner violated the Agreement by

improperly advancing legal fees to Defendants in this action.75 Section 8.4 of the

Agreement provides that “attorneys’ fees may be paid as incurred.”76               This

      Transaction to zero, so that all proceeds from the GE Transaction flow to the
      General Partner. Defendants filed an exhibit with the Motion to Dismiss which
      shows that treating the Vaughn overpayments as prepayments implies that the
      Limited Partners were not entitled to any proceeds from the GE Transaction. Id. at
      Ex. 3. But I need not rely on this document from Defendants and am able to
      resolve the Motion to Dismiss because “[i]ssues not briefed are deemed waived.”
      Emerald P’rs, 726 A.2d at 1224 (citing Loudon, 700 A.2d at 140 n.3; Murphy, 632
      A.2d at 1152).
74
      Compl. ¶ 71.
75
      Id. ¶ 80.
76
      Id. at Ex. A, § 8.4(a).

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language provides for permissive advancement of attorneys’ fees.77 Thus, the

count fails to state a claim upon which relief can be granted.

      B.     The Court Grants the Motion to Dismiss with Respect to the
             Fiduciary Duty Claim
      Plaintiff contends that the Individual Defendants acted in bad faith, in

violation of their duty of loyalty, by falsely disclosing “that the General Partner has

taxable income even though it is a subchapter S corporation.” 78 A general partner

generally owes fiduciary duties to the limited partners,79 but liability for fiduciary

duties in the limited partnership context “may be expanded or restricted or

eliminated by provisions in the partnership agreement.” 80 In the instant case, the

Agreement provides that the Individual Defendants are liable for actions

constituting “fraud, bad faith, willful misconduct or gross negligence.” 81 Plaintiff

chose to proceed on a theory of bad faith. 82 Bad faith requires a defendant to

77
      Martinez v. Regions Fin. Corp., 2009 WL 2413858, at *13-14 (Del. Ch. Aug. 6,
      2009) (finding advancement rights where the agreement in question stated that
      “the Company agrees to pay as incurred . . . all legal fees and expenses”).
78
      Compl. ¶ 75.
79
      Boxer v. Husky Oil Co., 429 A.2d 995, 997 (Del. Ch. 1981) (citations omitted).
80
      Lonergan, 5 A.3d at 1017 (quoting 6 Del. C. § 17-1101(d)).
81
      Compl. Ex. A, § 8.4(g).
82
      Id. ¶ 75; Pl.’s Opp’n Br. to Mot. to Dismiss 21; Oral Arg. Tr. 36.

                                           21
“intentionally fail[] to act in the face of a known duty to act, demonstrating a

conscious disregard for his [or her] duties.” 83

      In a September 27, 2013 memorandum to the Limited Partners, the General

Partner stated that “in the absence of the [Fifth Amendment], the proposed

[refinancing] would likely not be viable because it would impose a tax liability on

the General Partner that the General Partner has no ability to pay.” 84 On October

10, 2013, also before the vote on and enactment of the Fifth Amendment, the

General Partner clarified that “[t]he shareholders of the General Partner would

have a phantom tax liability (liability in excess of cash),” and that the

“[s]hareholders of the General Partner would get cash to pay taxes triggered by the

. . . refinancing (but no more).” 85 The “shareholders” of the General Partner are

the Individual Defendants.86      Regardless, Plaintiff still avers that the October

memorandum “failed to disclose that the [tax liability] estimate was based on the

effective tax rates of the Individual Defendants on their own personal tax

returns.”87

83
      In re Answers S’holder Litig., 2012 WL 1253072, at *7 (Del. Ch. Apr. 11, 2012)
      (quoting Lyondell Chem. v. Ryan, 970 A.2d 235, 243 (Del. 2009)).
84
      Compl. Ex. G, at 6.
85
      Id. at Ex. H, at 2-3.
86
      Id. ¶¶ 12-15.
87
      Pl.’s Opp’n Br. to Mot. to Dismiss 26.

                                           22
      Plaintiff pleads no facts to support its allegation that the Individual

Defendants acted in bad faith by disclosing that “in the absence of the [Fifth

Amendment], the proposed [refinancing] would likely not be viable because it

would impose a tax liability on the General Partner that the General Partner has no

ability to pay.” 88 Regardless, Defendants made an additional disclosure before the

vote on the Fifth Amendment, which made clear exactly on whom the tax liability

would fall—the Individual Defendants.89 Plaintiff tries to save its claim by asking

for further information regarding individual effective tax rates. To the extent this

issue was even raised in the Complaint, and to the extent that issue is material here,

Plaintiff still does not allege any facts or make any arguments to support its claim

that Defendants “intentionally fail[ed] to act in the face of a known duty to act” or

“conscious[ly] disregard[ed] . . . [their] duties” by failing to disclose this

information.90 Thus, I dismiss Plaintiff’s fiduciary duty claim.

IV.   CONCLUSION
      For the foregoing reasons, I deny Plaintiff’s request to amend the Complaint

and grant Defendants’ Motion to Dismiss.

      IT IS SO ORDERED.

88
      Compl. Ex. G, at 6.
89
      Id. at Ex. H, at 2-3.
90
      In re Answers, 2012 WL 1253072, at *7 (quoting Lyondell, 970 A.2d at 243).

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