2025 NY Slip Op 32089(U)
N.Y. Sup. Ct., New York Cty.2025Background
- Plaintiffs, Benchmark Plus Institutional Partners, L.L.C. and Benchmark Plus Partners, L.L.C., invested in a Delaware limited partnership Fund (Delaware Fund), which invested heavily in COPL securities.
- Defendants Davies and Dzaghgouni were the sole directors of the Fund GP, a Cayman Islands entity that managed the Delaware Fund, and served as two of three members on its Valuation Committee.
- Plaintiffs allege that the Fund GP, through its Directors, allowed the Fund to breach stated risk policies and investment objectives by over-concentrating in COPL, failed to correct this, and concealed the extent and overvaluation of these investments.
- Plaintiffs bring claims for breach of contract, fraud/intentional misrepresentation, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty against various defendants, including Davies and Dzaghgouni in their capacities as directors and committee members.
- The Directors moved to dismiss for lack of personal jurisdiction and failure to state a claim; the court analyzed jurisdiction under New York law and substantive failure to state a claim under Delaware law due to a Delaware choice-of-law provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal Jurisdiction | Forum selection clause in LPA and direct involvement of Directors in disputed acts make jurisdiction in NY appropriate | Directors did not personally sign LPA and are not closely-related; thus, not subject to NY jurisdiction | Court has jurisdiction; Directors are closely-related to Fund GP and actively involved |
| Breach of Fiduciary Duty | Directors had control and responsibility as sole directors and majority of committee, failed duty to plaintiffs | Directors owed only minimal duty, no control over assets, and no self-dealing alleged | Sufficient allegations for breach, including possible benefit to Directors, motion denied |
| Aiding and Abetting Breach of Fiduciary Duty | Directors knowingly participated in and substantially assisted breaches by others | No underlying breach; even if breach, no knowing participation by Directors | Complaint states a claim for knowing participation; motion denied |
| Fraud | Directors knowingly made or concealed false statements about COPL positions/valuations, intending to induce plaintiffs' reliance | No showing Directors made false statements or omitted facts when under a duty to correct | Sufficiently pled; complaint alleges actionable misrepresentations or omissions, motion denied |
Key Cases Cited
- In re Boston Celtics Ltd. P’ship Shareholders Litig., 1999 WL 641902 (Del. Ch. 1999) (Directors of a general partner have fiduciary duties to limited partners if they control partnership property)
- Freeford Ltd. v. Pendleton, 53 A.D.3d 32 (1st Dept. 2008) (Forum selection clauses may bind closely related non-signatory entities or individuals)
- Highland Crusader Offshore Partners, L.P. v. Targeted Delivery Techs. Holdings, Ltd., 184 A.D.3d 116 (1st Dept. 2020) (Non-signatories may be bound by contracts in certain circumstances)