Law School Case Brief
In re USACafes, L.P. Litig. - 600 A.2d 43 (Del. Ch. 1991)
In addressing motions to dismiss for failure to state a claim, it is appropriate to assume the truthfulness of all well-pleaded allegations of the complaint and to give the pleader the benefit of all reasonable inferences that can be drawn from its pleading. Only if the court can say with reasonable certainty that plaintiff could prevail on no state of facts inferable from the pleadings may the court dismiss a complaint at this preliminary stage.
Defendant USACafes, L.P. ("Partnership"), a Delaware limited partnership, was formed in the 1986 reorganization of a Nevada-based corporation. Also formed as part of that reorganization was USACafes General Partner, Inc. ("General Partner"), a Delaware corporation that acted as the general partner of the Partnership. Defendants Sam Wyly and Charles Wyly owned all the stock of the General Partner, sat on its board and personally owned 47 percent of the limited partnership units of the Partnership. In 1989, the General Partner sold substantially of the Partnership’s assets to defendant Metsa Acquisition Corporation ("Metsa"). Plaintiffs, holders of limited partnership units of Partnership, filed several class actions in Delaware chancery court against defendants and others, alleging: (1) breach of the duty of loyalty in that the sale price was low because the General Partner's directors received substantial side payments; (2) the General Partner was not sufficiently informed to make a valid business judgment on the sale; (3) shareholders of the Nevada-based corporation were misled by the lack of candor in the prospectus issued in the formation of the Partnership, and; (4) Metsa knowingly participated in the other defendants' alleged breaches of duty in connection with the sale. The various defendants filed motions to dismiss.
Were defendants entitled to dismissal of plaintiffs' complaint?
Yes, in part; No, in part.
The court denied the motion by the Wylys, the General Partner and the Partnership to dismiss the claims arising out of the sale of the Partnership's assets. The court ruled, inter alia, that plaintiffs' complaint alleged facts, which if true, established that the Wylys breached fiduciary obligations imposed upon them as directors of a Delaware corporation or participated in a breach of such duties by the General Partner. The court granted the motion by the Wylys, the General Partner and the Partnership to dismiss the breach of duty of candor claims arising out of the allegedly misleading statements in the Prospectus. The motions to dismiss the Securities Act of 1933 claims based on the Prospectus was granted except with respect to the Partnership and the General Partner. The court denied Metsa's motion to dismiss.
Access the full text case
Not a Lexis Advance subscriber? Try it out for free.
Be Sure You're Prepared for Class