Chancery Court Dismisses Challenge to Removal of Tag-Along Rights in Healthcare Merger
A recent Delaware Chancery Court decision provides important guidance for private equity sponsors, minority investors, and deal professionals regarding the enforceability of contractual waivers and the limits of the implied covenant of good faith and fair dealing in LLC agreements. The court’s ruling underscores the primacy of contract terms in LLC governance, and the limited […]
Frank J. Favia Jr. and Jonathan A. Dhanawade are Partners at Mayer Brown LLP. This post is based on their Mayer Brown memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
A recent Delaware Chancery Court decision provides important guidance for private equity sponsors, minority investors, and deal professionals regarding the enforceability of contractual waivers and the limits of the implied covenant of good faith and fair dealing in LLC agreements. The court’s ruling underscores the primacy of contract terms in LLC governance, and the limited role of equitable doctrines where fiduciary duties have been expressly disclaimed.
Khan, et al. v. Warburg Pincus, LLC, et al. [1] involved the merger of an urgent care provider and a primary care provider. The urgent care provider, a limited liability company, was majority owned by a private equity sponsor. As explained in more detail below, after the closing, the urgent care provider’s minority unitholders challenged the elimination of their tag-along rights and the allocation of merger consideration. (more…)
