Thank You For Submiting Feedback!
In the context of fiduciary duty, the concept of entire fairness consists of two blended elements: fair dealing and fair price. Fair dealing involves analyzing how the transaction was structured, the timing, disclosures, and approvals. Fair price relates to the economic and financial considerations of the transaction. The court examines the transaction as a whole and both aspects of the test must be satisfied; a party does not meet the entire fairness standard simply by showing that the price fell within a reasonable range that would be considered fair.
William Lingo and Bryce Lingo, together, owned a one-third interest in the Del Bay Associates, LLC; the trustee owned a one-sixth interest, and the partnership owned the remaining one-half interest. The partners, who were also the LLC's sole managers and thus owed fiduciary duties to plaintiffs, facilitated the sale of the LLC's sole asset, a motel, to the corporation. The partners owned 40 percent of the corporation and formed a majority of its board of directors. William Lingo and Bryce Lingo, through their ownership in the William Penn Partnership, breached their fiduciary duties to the members of Del Bay Associates, LLC when they facilitated the sale of the Beacon Motel, Del Bay's sole asset, under a deceptive and manipulative sales process. The Chancellor awarded Anis Saliba and Rosa Ksebe, members of Del Bay Associates to whom William Penn Partnership owed fiduciary duties, attorneys' fees because of the faithless prelitigation conduct of the William Penn fiduciaries. The Lingos, acting for the William Penn Partnership, appealed.
Did the Chancellor err in holding that the partners failed to meet their burden of establishing the entire fairness of the sale of LLC property?
The Chancellor correctly found that the Lingos, acting for the William Penn Partnership, failed to meet their burden of establishing the entire fairness of the transaction because their prelitigation conduct rose to egregiousness and therefore, he did not abuse his discretion by awarding attorneys' fees.