Monthly Archives: May 2025

In the latest instance of a private equity seller vindicating contractual rights in the Delaware Court of Chancery, on April 30, Vice Chancellor Lori W. Will rejected attempts by minority LLC members in urgent care provider CityMD to avoid the clear terms of their LLC agreement by urging the court to impose fiduciary duty-type obligations on the majority owner and seller, Warburg Pincus, LLC and funds it controls (“WP Investors”). In Khan v. Warburg Pincus, LLC, the court dismissed claims for breach of the implied covenant of good faith and fair dealing, tortious interference, and unjust enrichment brought by these minority unitholders based on allegations of unfair treatment by WP Investors in connection with the process leading to the merger of CityMD with a primary care provider, VillageMD. In particular, the plaintiffs asserted that they were treated unfairly because the merger was conditioned — and, thus, plaintiffs’ ability to obtain the merger consideration was dependent — on the minority approving amendments to the LLC agreement that waived certain minority protections (described below). Effectively conceding that the LLC agreement permitted WP Investors to seek such amendments even if the result was to benefit WP Investors at the expense of the minority, plaintiffs principally claimed that WP Investors’ actions breached the implied covenant of good faith and fair dealing (the LLC agreement provided in multiple provisions that WP Investors did not owe fiduciary duties to minority unit holders). In dismissing the plaintiffs’ claims, the court reaffirmed the longstanding principle that the implied covenant of good faith and fair dealing “cannot be used to circumvent the parties’ bargain” and refused to “inject common law fiduciary duties into a contractual relationship that eliminated them.” The Khan decision also underscores the important difference in the protections afforded to minority owners in corporations versus alternative entities.