Donnelly v. Linden Capital Partners III LP
2:20-cv-03719
D.S.C.Jun 28, 2022Background
- Donnelly (an operating partner) signed an Operating Partner Agreement (OPA) with Linden (LCP III and affiliated funds) in December 2015: $180,000 annual consulting fee (prorated) and a 10% share of certain transaction fees; OPA required 30 days prior written notice to terminate and mandated operating partners spend at least 50% of working time on advisory services.
- Donnelly became CEO of Advarra by an Employment Agreement effective November 7, 2017; Linden ceased paying OPA consulting fees after November 7, 2017.
- Donnelly claims he continued to perform operating-partner services (Nov. 2017–Aug. 2019) and seeks unpaid consulting fees and transaction fees for several deals (Drug Safety Solutions; Xendo/Sofus/Solutions in Health; Schulman IRB/Advarra merger (Project Flight); sale of Advarra to Genstar (Project Bearcat)).
- Defendants contend the OPA ended (or was not applicable) once Donnelly accepted the Advarra CEO role, that several disputed transactions were not LCP III equity investments (or were add‑ons), and that Linden had sole discretion whether to award transaction fees.
- Procedural posture: cross-motions for summary judgment. The court denied Donnelly’s partial motion, granted defendants’ motion in part and denied it in part: D granted on transaction‑fee claims for Drug Safety Solutions, the Chesapeake/Schulman (Project Flight) merger, and Bearcat sale; D denied as to consulting‑fee claim and transaction fees for Solutions in Health and Xendo/Sofus; unjust enrichment against LCP III dismissed, unjust enrichment against LCP IV survives factual dispute.
Issues
| Issue | Donnelly’s Argument | Linden’s Argument | Held |
|---|---|---|---|
| Whether the OPA terminated when Donnelly signed the Advarra Employment Agreement (Nov. 7, 2017) | The OPA required 30 days written notice and Linden never provided written termination; signing the Employment Agreement did not itself terminate the OPA. | The Employment Agreement and parties’ communications/conduct show Donnelly understood the OPA would end when he became Advarra CEO. | Genuine dispute of material fact; cross‑motions denied on this issue. |
| Whether Donnelly remained an operating partner Nov. 7, 2017–Aug. 2019 and is owed consulting fees under the OPA | Donnelly continued to perform Linden advisory services (often beyond full‑time) and thus is owed pro rata consulting fees. | Donnelly could not meet the OPA’s 50% advisory‑time requirement while serving as full‑time CEO; Linden reduced his role to light duties. | Genuine dispute of material fact; Donnelly’s partial summary judgment denied as to consulting fees. |
| Whether disputed transactions involved an LCP III equity investment (entitling Donnelly to transaction fees) | An equity investment can be funded via loans, balance‑sheet cash, rollover, or other economic forms; Donnelly’s experts characterize some deals as involving Linden equity exposure. | Linden limits “equity investment” to capital invested by the fund (e.g., new fund capital / capital calls); some deals were funded by debt or pre‑existing equity, not new LCP III investments. | Mixed results: summary judgment granted for Linden on Drug Safety Solutions, Project Flight (Advarra merger), and Bearcat sale (Donnelly admitted no LCP III equity in those); disputed fact questions remain for Solutions in Health and Xendo/Sofus. |
| Whether Linden’s practice of not paying fees for “add‑on” deals or its sole discretion to withhold transaction fees defeats Donnelly’s claims | The OPA does not expressly exclude "add‑ons"; Donnelly says no meeting of minds to restrict fees to platforms only and disputes whether Linden exercised discretion in good faith. | Linden says it never paid transaction fees for add‑on deals and had sole discretion under the OPA to determine whether Donnelly “significantly contributed” and to pay fees. | Genuine disputes of fact: whether parties intended a platform/add‑on distinction and whether Linden properly exercised its contractual discretion (including implied covenant issues) preclude summary judgment. |
| Whether unjust enrichment claims may proceed (LCP III and LCP IV) | As an alternative to breach claims, unjust enrichment is available if the OPA did not govern post‑Nov. 2017 relations; Donnelly alleges LCP IV benefited from his work on Bearcat. | Where an express contract governs the dispute (the OPA), unjust enrichment against that contracting party (LCP III) is precluded; no contract with LCP IV governs the asserted benefit. | Unjust enrichment against LCP III dismissed (contract governs). Unjust enrichment against LCP IV survives summary judgment (genuine dispute whether Donnelly conferred a benefit on LCP IV in connection with Bearcat). |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary‑judgment standard; genuine‑issue inquiry).
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (movant’s initial burden on summary judgment).
- Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282 (4th Cir. 1987) (summary judgment granted only when facts and inferences are undisputed).
- HealthSouth Rehab. Hosp. v. Am. Nat’l Red Cross, 101 F.3d 1005 (4th Cir. 1996) (all inferences construed for non‑movant on summary judgment).
- Paradise v. Augustana Hosp. & Health Care Ctr., 584 N.E.2d 326 (Ill. App. 1991) (what constitutes sufficient written notice to terminate a contract).
- Wendl v. Moline Police Pension Bd., 421 N.E.2d 584 (Ill. App. 1981) (notice need not use the word “termination” if intent is clear).
- First Commodity Traders, Inc. v. Heinold Commodities, Inc., 766 F.2d 1007 (7th Cir. 1985) (unjust enrichment unavailable when express contract governs the dispute).