Chancery Court Holds That a Limited Partner’s Claims are Dual-Natured and Can Be Pursued After a Related-Party Merger; $171 Million Award to Be Recovered Pro Rata By Unaffiliated Limited Partners
By Scott Waxman and Joshua Haft
The Chancery Court held that a plaintiff’s claim that a general partner was liable for breach of a limited partnership agreement, for which the general partner was previously found liable by the Chancery Court, was best viewed as a dual-natured claim. Dual-natured claims should be viewed as derivative for purposes of Chancery Court Rule 23.1 and the demand doctrine, but should be viewed as direct for purposes of claim termination after a merger that extinguished a limited partnership. Thus, the Chancery Court granted pro-rata recovery of a liability award for breach of a limited partnership agreement to limited partners who were not affiliated with the general partner at the time of the related-party merger that resulted in termination of the limited partnership.