William Penn Partnership v. Saliba
13 A.3d 749
| Del. | 2011Background
- Del Bay Associates LLC owned the Beacon Motel, the sole Del Bay asset, with Lingos as managers and fiduciaries to other Del Bay members.
- Lingos orchestrated a sale to JGT for $6.625 million, aiming to leverage a two-thirds voting mechanism and their control of Del Bay and JGT.
- Saliba and Ksebe, Del Bay members, did not know of the sale process, were not informed of key terms, and feared a rushed June 30 closing for tax reasons.
- The sale proceeded without Saliba/Ksebe attending the closing; a Del Bay resolution falsely stated unanimity for the sale.
- Appraisals and valuations prior to sale suggested a market value around $5.06–5.68 million, below the sale price, and expert appraisals later supported approximately $5.48 million.
- Chancellor found the sale process tainted by misrepresentations, omissions, and the Lingos’ self-interest, failing to show entire fairness.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Lingos fail the entire fairness test? | Saliba argues Lingos dominated process and concealed terms, violating loyalty. | Lingos contend price within range and process fair enough given terms. | No; entire fairness not established due to manipulating process and omissions. |
| Was there breach of fiduciary duties by Lingos? | Saliba asserts self-dealing and undisclosed interests breached loyalty and care. | Lingos claim duties were not modified and transaction complied with governing documents. | Yes; fiduciary duties breached through gatekeeping and concealment. |
| Should Saliba and Ksebe receive attorneys' fees and costs? | Plaintiffs contend fees justified to deter disloyal conduct. | Lingos argue against fee shifting; American Rule applies absent equity. | Yes; fees and costs awarded to discourage disloyalty. |
Key Cases Cited
- Alaska Electric Pension Fund v. Brown, 988 A.2d 412 (Del. 2010) (deferential review of factual findings in fiduciary-breaches cases)
- Int'l Telecharge, Inc. v. Bomarko, Inc., 766 A.2d 437 (Del. 2000) (two-part fairness analysis and abuse of discretion standards)
- Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995) (framework for entire fairness: fair dealing and fair price)
- Dover Historical Soc'y v. City of Dover Planning Comm'n, 902 A.2d 1084 (Del. 2006) (principles guiding abuse of discretion review in fee-shifting)
- Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160 (Del. 2002) (equitable remedies constrained by loyalty duties and fiduciary duties)