The First Department dismissed a complaint alleging, inter alia, breach of a limited partnership agreement and breach of fiduciary duty in connection of the sale of a fund (Archstone) nearly entirely owned by bankrupt Lehman Brothers. Plaintiff, who had purchased a 1% interest in the fund for $20 million, alleged the sale will generate enough to pay only the preferred interests and will “wipe out” the minority interests (including plaintiff). Plaintiff further alleged the sale was motivated by Lehman's desire to pay creditors relating to its 2008 bankruptcy. In dismissing the breach of fiduciary duty cause of action, the court explained the analytical criteria, including an “entire fairness” analysis:
Even under the heightened entire fairness standard advocated by plaintiff, the claim is insufficient. An “entire fairness” analysis focuses on two entwined considerations: fair dealing and fair price … . Plaintiff fails to allege facts demonstrating the absence of fairness, or that it did not “receive the substantial equivalent in value of what [it] had before” … . Conclusory assertions that amounts paid were “unfair” are insufficient … . Plaintiff concedes that the $16 billion transaction price attained Archstone's current value at the time of the transaction. Plaintiff also admits that the transaction “represented a premium of approximately 15% over the implied purchase price of Lehman's combined acquisitions of the interests of the other [s]ponsor [b]anks' interests earlier in 2012.” Plaintiff identifies no alternative transactions, let alone one that would have achieved more value for the Fund. Fiduciaries are “not required to abandon [a] transaction simply because a better deal might have become available in the future” … . Cambridge Capital Real Estate Invs., LLC v Archstone Enter. LP, 2016 NY Slip Op 02017, 1st Dept 3-22-16
PARTNERSHIP LAW (BREACH OF FIDUCIARY DUTY CAUSE OF ACTION BY MINORITY INTEREST HOLDER DISMISSED)/FIDUCIARY DUTY, BREACH OF (PARTNERSHIP LAW, BREACH OF FIDUCIARY DUTY CAUSE OF ACTION BY MINORITY INTEREST HOLDER DISMISSED)