Contributions

Challenging USACafes Liability of a Fiduciary Entity’s Controllers

By Natal­ie Noble1

In In re USACafes, L.P. Lit­i­ga­tion, the Delaware Chancery Court held gen­er­al­ly that when a busi­ness enti­ty (a “fidu­cia­ry enti­ty”) exer­cis­es con­trol over anoth­er busi­ness enti­ty (the “ben­e­fi­cia­ry enti­ty”), those per­sons exer­cis­ing con­trol over the fidu­cia­ry enti­ty owe a fidu­cia­ry duty to the ben­e­fi­cia­ry enti­ty and its own­ers.2 Although the hold­ing of USACafes specif­i­cal­ly addressed fidu­cia­ry duties owed to a lim­it­ed part­ner­ship (LP), its doc­trine has been applied more broad­ly. Since its incep­tion in 1991, courts have applied USACafes doc­trine to a vari­ety of mul­ti-lay­ered, par­ent-sub­sidiary busi­ness struc­tures involv­ing cor­po­ra­tions, gen­er­al part­ner­ships, LLCs, and LPs.4 The doc­trine is found­ed on gen­er­al equi­table prin­ci­ples deriv­ing from trust law: those who have con­trol over the prop­er­ty of a ben­e­fi­cia­ry owe a fidu­cia­ry duty to act in the best inter­est of the property’s true own­ers.5 Viewed exclu­sive­ly from this per­spec­tive, USACafes doc­trine makes sense. How­ev­er, viewed more expan­sive­ly, it cre­ates fric­tion with the cor­po­rate law prin­ci­ples of legal sep­a­rate­ness and lim­it­ed lia­bil­i­ty, under which own­ers of a busi­ness are not per­son­al­ly liable for the oblig­a­tions of the busi­ness enti­ty.6 It also cre­ates ten­sion with ordi­nary con­tract law by extend­ing lia­bil­i­ty out­side the agree­ment between the busi­ness enti­ty and its investors. Final­ly, USACafes cre­ates a fidu­cia­ry rela­tion­ship between a gen­er­al part­ner and lim­it­ed part­ner investors, which may inter­fere with the gen­er­al partner’s tra­di­tion­al fidu­cia­ry duty to its share­hold­ers.

As a result, USACafes doc­trine has been the sub­ject of crit­i­cism from prac­ti­tion­ers, aca­d­e­mics, and judges.7 More­over, despite being over a quar­ter-cen­tu­ry old, it has not been explic­it­ly approved by the Delaware Supreme Court. The time is there­fore ripe for this doc­trine to be recon­sid­ered. This Con­tri­bu­tion will argue that the USACafes doc­trine should be aban­doned because it dis­cour­ages free­dom of con­tract, dis­suades investors from financ­ing new enter­pris­es, and con­tra­venes bedrock doc­trines of cor­po­rate law.

* * * * *

The exis­tence of USACafes stems from a rift between the law gov­ern­ing cor­po­ra­tions and the law gov­ern­ing alter­na­tive enti­ties such as LPs and Lim­it­ed Lia­bil­i­ty Com­pa­nies (LLCs). Under cor­po­rate law, the con­trollers of a cor­po­ra­tion must be “nat­ur­al per­sons.”8 By con­trast, under alter­na­tive enti­ty law, the gen­er­al part­ner of an LP or the man­ag­ing mem­ber of an LLC may be a nat­ur­al per­son or a legal per­son (that is, anoth­er legal enti­ty).9 Whether the enti­ty is a cor­po­ra­tion, LLC, or LP, the legal or nat­ur­al man­ag­er of the busi­ness owes a fidu­cia­ry duty to act in the best inter­est of the busi­ness and its own­ers.10 How­ev­er, when the per­son owing the duty is a legal enti­ty rather than a nat­ur­al per­son, the ques­tion aris­es whether the indi­vid­u­als con­trol­ling the enti­ty also owe a duty direct­ly to the ben­e­fi­cia­ry enti­ty and its own­ers.11 This is the ques­tion addressed by USACafes.

In USACafes, the Delaware Chancery Court held that, where a legal enti­ty is the gen­er­al part­ner of an LP, the direc­tors of the gen­er­al part­ner owe a fidu­cia­ry duty direct­ly to the LP and to the lim­it­ed part­ners of the LP. The case involved a cor­po­rate gen­er­al part­ner, itself owned by two share­hold­ers, that owned 47% of the LP’s . The unaf­fil­i­at­ed LP unithold­ers sued the direc­tors of the gen­er­al part­ner for breach of fidu­cia­ry duty, alleg­ing they accept­ed indi­vid­ual side pay­ments in exchange for sell­ing the LP’s assets to a third-par­ty pur­chas­er.12 The direc­tors moved to dis­miss the lim­it­ed part­ners’ claim. They argued that, although the gen­er­al part­ner owed fidu­cia­ry duties to the LP and its lim­it­ed part­ners, the direc­tors did not per­son­al­ly owe such duties to the LP and its lim­it­ed part­ners.13 The basis for this argu­ment is the fun­da­men­tal cor­po­rate law doc­trine of legal sep­a­rate­ness, which con­ceives of a busi­ness enti­ty as a sep­a­rate legal enti­ty from its con­trollers.14 Sur­pris­ing many, the Delaware Chancery Court depart­ed from this fun­da­men­tal prin­ci­ple and denied the defen­dants’ motion to dis­miss.16 Chan­cel­lor Allen jus­ti­fied this depar­ture by ref­er­enc­ing trust law, under which “one who con­trols prop­er­ty of anoth­er may not, with­out implied or express agree­ment, inten­tion­al­ly use that prop­er­ty in a way that ben­e­fits the hold­er of the con­trol to the detri­ment of the prop­er­ty or its ben­e­fi­cial own­er.”17

Focus­ing on con­trol as the essen­tial com­po­nent, courts have expand­ed this far-reach­ing equi­table prin­ci­ple to include a vari­ety of busi­ness struc­tures and enti­ties. For exam­ple, in Wal­lace v. Wood, the Delaware Chancery Court ruled that fidu­cia­ry duties may attach to the par­ent of a cor­po­rate gen­er­al part­ner, thus extend­ing USACafes to cov­er con­trol­ling share­hold­ers.18 USACafes doc­trine has also been applied where the gen­er­al part­ner of an LP is an enti­ty oth­er than a cor­po­ra­tion. In Bigelow/Diversified Sec­ondary Part­ner­ship Fund, the Delaware Chancery Court found that, when the gen­er­al part­ner of an LP is itself a gen­er­al part­ner­ship, the part­ners of that gen­er­al part­ner­ship (as well as enti­ties and indi­vid­u­als affil­i­at­ed with that part­ner­ship) may owe a fidu­cia­ry duty to the LP and its lim­it­ed part­ners.19 Sim­i­lar­ly, in Paige Cap­i­tal Man­age­ment, the Delaware Chancery Court inter­pret­ed USACafes to impose fidu­cia­ry duties on the man­ag­er of an LLC that was the gen­er­al part­ner for the LP.20 More recent­ly, the Delaware Chancery Court held that, when one LLC is man­aged by anoth­er LLC, the sole mem­ber of the man­ag­ing LLC owes fidu­cia­ry duties to the sub­sidiary LLC.21

Despite this expan­sion, sev­er­al judi­cial opin­ions have crit­i­cized the doc­trine. For exam­ple, Chief Jus­tice Strine has called the doc­trine a “less ven­er­a­ble but large­ly unques­tioned prece­dent,”22 “a bit of an odd­ment [of] our alter­na­tive enti­ty law,”23 and a “step … tak­en … with­out much analy­sis.”24 More­over, although Chief Jus­tice Strine expand­ed the doc­trine in Bay Cen­ter Apart­ments, he did so because, “[i]importantly, the defen­dants [did] not chal­lenge the gen­er­al applic­a­bil­i­ty of the doc­trine in the LLC con­text.”25 Sim­i­lar­ly, Vice Chan­cel­lor Laster not­ed that there are “good rea­sons to ques­tion the enti­ty-pierc­ing impli­ca­tions of USACafes” and thus its “con­tin­u­ing per­sua­sive­ness .…”26 From this, the Vice Chan­cel­lor thought the Delaware Supreme Court may even­tu­al­ly reject the doc­trine.27

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The USACafes doc­trine cre­ates an “unortho­dox”28 default rule. Under it, unless the LLC or LP agree­ment explic­it­ly includes con­trollers in a fidu­cia­ry waiv­er pro­vi­sion, they are auto­mat­i­cal­ly sub­ject to lia­bil­i­ty.29 The alter­na­tive default rule would exclude the con­trollers from lia­bil­i­ty unless the par­ties choose to extend fidu­cia­ry duties beyond the fidu­cia­ry enti­ty to its con­trollers.30 This is in line with the con­cept of legal sep­a­rate­ness, which con­sid­ers con­trollers as inde­pen­dent from the affil­i­at­ed legal enti­ty. At issue in the debate sur­round­ing USACafes is which of these default rules should gov­ern. Accept­ing the USACafes default rule would be prob­lem­at­ic for three rea­sons.

First, USACafes doc­trine dis­cour­ages free­dom of con­tract and makes the law gov­ern­ing LPs and LLCs dif­fi­cult to pre­dict. Delaware’s LLC statute and LP statute empha­size that the rela­tion­ship among par­ties to LLCs and LPs is pri­mar­i­ly con­trac­tu­al in nature.31 Under ordi­nary con­tract law prin­ci­ples, only the con­trac­tu­al par­ties owe legal duties to one anoth­er aris­ing from the con­tract.32 There­fore, indi­vid­u­als that are not par­ty to the con­tract should not owe legal duties to the con­tract par­ties. In the con­text of LPs, this prin­ci­ple means that where the gen­er­al part­ner of an LP is an enti­ty, only that enti­ty would owe legal duties to the LP and its lim­it­ed part­ners, because only that enti­ty is a par­ty to an agree­ment cre­at­ing that rela­tion­ship. The con­trollers of the gen­er­al part­ner enti­ty would owe no such duties, since they are not for­mal­ly par­ties to the agree­ment.33 Sim­i­lar­ly, applied to LLCs, indi­vid­u­als exer­cis­ing con­trol over an LLC man­ag­er enti­ty would not owe fidu­cia­ry duties if they are not par­ties to the agree­ment.

How­ev­er, USACafes doc­trine runs con­trary to this prin­ci­ple by rec­og­niz­ing the fidu­cia­ry lia­bil­i­ty of indi­vid­u­als not par­ty to the con­tract. Recent­ly, Vice Chan­cel­lor Laster cri­tiqued USACafes doc­trine by sug­gest­ing that the Delaware Supreme Court might hold that, when par­ties freely bar­gain for an enti­ty to serve as the fidu­cia­ry, “that enti­ty is the fidu­cia­ry, and the par­ties can­not lat­er cir­cum­vent their agree­ment by invok­ing con­cepts of con­trol.”34 When indi­vid­u­als out­side of the con­trac­tu­al agree­ment can be sub­ject to lia­bil­i­ty, it dis­cour­ages par­ties from defin­ing the con­tours of lia­bil­i­ty ex ante. Instead, it makes lia­bil­i­ty con­tin­gent on courts’ case-by-case fac­tu­al assess­ments of the extent to which direc­tors con­trolled the man­ag­ing enti­ty. This sys­tem stands in con­trast to the pur­pose of Delaware law gov­ern­ing LPs and LLCs: “… to give the max­i­mum effect to the prin­ci­ple of free­dom of con­tract.”35 More­over, it cre­ates unpre­dictabil­i­ty in how the doc­trine applies to LPs and LLCs.

Sec­ond, USACafes doc­trine con­tra­venes tra­di­tion­al prin­ci­ples of cor­po­rate law and dis­cour­ages invest­ment of cap­i­tal in new enter­pris­es. Accord­ing to the prin­ci­ple of lim­it­ed lia­bil­i­ty as applied to cor­po­ra­tions, LLCs, and LPs, the man­agers of a busi­ness are not per­son­al­ly liable for the debts and oblig­a­tions of the enti­ty.36 Since the enti­ty is a legal per­son sep­a­rate from its direc­tors, those oblig­a­tions belong to the enti­ty alone.37 As Chief Jus­tice Strine recent­ly not­ed, this prin­ci­ple encour­age wealth-cre­ation for soci­ety by allow­ing investors to cab­in their risk when they invest cap­i­tal in new enter­pris­es.38 This is par­tic­u­lar­ly impor­tant in unpre­dictable sec­tors such as real estate and health­care. How­ev­er, USACafes doc­trine dis­re­gards the for­mal­i­ty of lim­it­ed lia­bil­i­ty for rea­sons of equi­ty.39 It is admit­ted­ly true that USACafes is not the only instance in which equi­ty takes prece­dence over tra­di­tion­al prin­ci­ples of cor­po­rate law. For exam­ple, courts some­times pierce the cor­po­rate veil to hold a corporation’s share­hold­ers or direc­tors per­son­al­ly liable for the corporation’s actions or debts.40 How­ev­er, the nor­mal cor­po­rate veil-pierc­ing rem­e­dy requires plain­tiffs to show some seri­ous injus­tice involv­ing “fraud or some­thing like fraud.”41 Mere “dom­i­na­tion and con­trol” over an enti­ty is not suf­fi­cient to jus­ti­fy pierc­ing.42

This stands in stark con­trast to USACafes doc­trine, which only requires con­trol – and not seri­ous injus­tice – to estab­lish lia­bil­i­ty.43 More­over, because courts are “not par­tic­u­lar­ly exact­ing in find­ing con­trol for such pur­pos­es,”44 USACafes doc­trine enables a com­par­a­tive­ly “odd pat­tern of rou­tine veil pierc­ing.”45 In a pri­or deci­sion, then-Chan­cel­lor Strine ques­tioned this pat­tern in the con­text of an LP with a cor­po­rate gen­er­al part­ner: “why [are] investors in the lim­it­ed part­ner­ship not required, in the absence of a rea­son for veil pierc­ing, to look sole­ly to the enti­ty they knew was their fidu­cia­ry for relief[?]”46 Aside from allu­sions to equi­ty, courts have not clar­i­fied why veil-pierc­ing rules should be adjust­ed in the con­text of USACafes.48 This is made more puz­zling by the fact that USACafes doc­trine ben­e­fits “vol­un­tary, essen­tial­ly con­trac­tu­al, cred­i­tors of the fidu­cia­ry enti­ty.”49 Such cred­i­tors had the oppor­tu­ni­ty to pro­tect them­selves ex ante by extend­ing lia­bil­i­ty beyond the fidu­cia­ry enti­ty.50 There­fore, com­mon sense and aca­d­e­m­ic con­sen­sus51 sug­gest that these sophis­ti­cat­ed cred­i­tors are the least deserv­ing ben­e­fi­cia­ries of the judi­cial deci­sion to pierce the cor­po­rate veil.52 Giv­en the impor­tance of the lim­it­ed lia­bil­i­ty prin­ci­ple as a cat­a­lyst for invest­ment and the lack of judi­cial jus­ti­fi­ca­tion for USACafes doc­trine, the doc­trine should be aban­doned.

Third, USACafes doc­trine cre­ates inter­nal con­flicts for the prin­ci­ple of fidu­cia­ry duty.53 Usu­al­ly, the con­trollers of a cor­po­ra­tion only owe fidu­cia­ry duties to the cor­po­ra­tion and its share­hold­ers.54 How­ev­er, under USACafes, if the cor­po­ra­tion is also the gen­er­al part­ner of an LP, the con­trollers also owe fidu­cia­ry duties to the lim­it­ed part­ners of the LP. When the inter­ests of these two groups inevitably con­flict, the cor­po­ra­tion is put in an “awk­ward posi­tion”55 of respond­ing to two sets of con­trary duties. The idea that cor­po­rate direc­tors should “serve mul­ti­ple mas­ters” in this sense has been dis­par­aged as encour­ag­ing lit­i­ga­tion and imped­ing account­abil­i­ty to any one set of inter­ests.56 How­ev­er, under USACafes doc­trine, this is exact­ly what cor­po­rate direc­tors must do.

For these three rea­sons, the default rule should align with tra­di­tion­al prin­ci­ples of cor­po­rate law and con­tract law rather than USACafes doc­trine. Estab­lish­ing a default rule that respects the lim­it­ed lia­bil­i­ty prin­ci­ple does not negate the equi­ty con­cerns moti­vat­ing the deci­sion in USACafes. With­out USACafes, par­ties would still be enti­tled to pierce the cor­po­rate veil in cas­es involv­ing seri­ous injus­tice. They would also be free to bar­gain for extend­ed legal duties to the con­trollers of a fidu­cia­ry enti­ty dur­ing con­tract nego­ti­a­tions. Grant­ed, a change in the default rule might have adverse con­se­quences for those who relied on USACafes by leav­ing their LLC or LP agree­ment silent regard­ing con­trollers’ duties.57 How­ev­er, giv­en that the doc­trine has been fre­quent­ly cri­tiqued by judges and has not yet been accept­ed by the Delaware Supreme Court, it is unlike­ly that par­ties have inten­tion­al­ly relied on USACafes doc­trine.

* * * * *

USACafes doc­trine sets forth a con­tro­ver­sial default rule that cre­ates ten­sion with bedrock prin­ci­ples in con­tract and cor­po­rate law. Because it fos­ters uncer­tain­ty and dis­cour­ages invest­ment in new busi­ness­es, it should be aban­doned in favor of a rule that rec­og­nizes the sep­a­rate­ness of legal enti­ties and their con­trollers. This alter­na­tive default rule would allow for con­troller lia­bil­i­ty in extreme cas­es and pre­serve par­ties’ free­dom to impose fidu­cia­ry duties on con­trollers through ex ante bar­gain­ing.

Notes:

1. Natal­ie Noble is a 3L at New York Uni­ver­si­ty School of Law. This piece is a com­men­tary on the 2017 Prob­lem at the Ruby R. Vale Inter­school Cor­po­rate Moot Court Com­pe­ti­tion held in Wilm­ing­ton, Delaware. The issue in the prob­lem dealt with whether fidu­cia­ry duties should be extend­ed to the board of direc­tors of the par­ent com­pa­ny of a gen­er­al part­ner of a lim­it­ed part­ner­ship. The views expressed in this arti­cle do not nec­es­sar­i­ly rep­re­sent the views of the author on this point of law. Rather, this arti­cle is a dis­til­la­tion of one side of an argu­ment assigned to the team the author rep­re­sent­ed at the Vale Inter­school Cor­po­rate Moot Court Com­pe­ti­tion.  For anoth­er com­men­tary from this com­pe­ti­tion, see The Future of Dead-Hand Proxy Puts in Delaware: Alive and Well or Dead on Arrival? by Caitlin Mil­lat.
2. In re USACafes L.P. Lit­ig., 600 A.2d 43, 48 (Del. Ch. 1991) (Allen, C.). See also Moshen Manesh, The Case Against Fidu­cia­ry Enti­ty Veil Pierc­ing, 72 Bus. Law. 61 (2017).
3. USACafes, 600 A.2d at 48.
4. Manesh, supra note 2, at 63 (“[C]ourts have applied USACafes in a vari­ety of con­texts and through var­i­ous mul­ti-tiered, par­ent-sub­sidiary busi­ness struc­tures involv­ing cor­po­ra­tions, gen­er­al part­ner­ships, LLCs as well as LPs.”).
5. USACafes, 600 A.2d at 48 (“While I find no cor­po­ra­tion law prece­dents direct­ly address­ing the ques­tion whether direc­tors of a cor­po­rate gen­er­al part­ner owe fidu­cia­ry duties to the part­ner­ship and its lim­it­ed part­ners, the answer to it seems to be clear­ly indi­cat­ed by gen­er­al prin­ci­ples and by anal­o­gy to trust law. I under­stand the prin­ci­ple of fidu­cia­ry duty, stat­ed most gen­er­al­ly, to be that one who con­trols prop­er­ty of anoth­er may not, with­out implied or express agree­ment, inten­tion­al­ly use that prop­er­ty in a way that ben­e­fits the hold­er of the con­trol to the detri­ment of the prop­er­ty or its ben­e­fi­cial own­er.”).
6. See, e.g., Rev. Unif. Ltd. Liab. Co. Act. § 303(a)(2) (Unif. Law. Com’n 2006) (“The debts, oblig­a­tions, and lia­bil­i­ties of a lim­it­ed lia­bil­i­ty com­pa­ny, whether aris­ing in con­tract, tort, or oth­er­wise … do not become the debts, oblig­a­tions, or oth­er lia­bil­i­ties of a mem­ber or man­ag­er sole­ly by rea­son of the mem­ber act­ing as a mem­ber or man­ag­er act­ing as a man­ag­er.”); Manesh, supra note 2, at 73 (“For cor­po­ra­tions, LLCs, and LPs … own­ers and man­agers of the busi­ness are not per­son­al­ly liable for the debts and oblig­a­tions of the enti­ty.”).
7. See, e.g., Mar­tin I. Lubaroff & Paul M. Alt­man, Lubaroff & Alt­man on Delaware Lim­it­ed Part­ner­ships §§ 11.2.5 (1995 & 2011 Supp.); Leo E. Strine, Jr. & J. Travis Laster, The Siren Song of Unlim­it­ed Con­trac­tu­al Free­dom, in Research Hand­book on Part­ner­ships, LLCs and Alter­na­tive Forms of Busi­ness Orga­ni­za­tions 11, 21 (Robert W. Hill­man & Mark J. Loewen­stein eds., 2015).
8. See, e.g., Del. Code Ann. tit. 8, § 141(b) (2015).
9. Fee­ley v. NHAOCG, LLC, 62 A.3d 649, 669 (Del. Ch. 2012) (“Oth­er Delaware alter­na­tive enti­ty statutes, includ­ing the LLC Act and the Delaware Statu­to­ry Trusts Act … per­mit enti­ties to serve in man­age­r­i­al roles, and adopt the same pol­i­cy of max­i­miz­ing free­dom of con­tract.”) (foot­note omit­ted).
10. Manesh, supra note 2, at 65 (“In all cas­es, whether the enti­ty is a cor­po­ra­tion, LLC, or LP, the legal or nat­ur­al per­sons man­ag­ing a busi­ness owe fidu­cia­ry duties to the busi­ness and its own­ers.”) (foot­note omit­ted).
11. Id. at 66 (“But the ques­tion nat­u­ral­ly raised when the per­son who stands in a fidu­cia­ry posi­tion is not a nat­ur­al per­son, but instead a legal enti­ty, is whether, in addi­tion to this fidu­cia­ry enti­ty, the indi­vid­u­als con­trol­ling the fidu­cia­ry enti­ty also owe a fidu­cia­ry duty direct­ly to the ben­e­fi­cia­ry enti­ty and its own­ers?”).
12. In re USACafes L.P. Lit­ig., 600 A.2d 43, 46 (Del. Ch. 1991) (Allen, C.).
13. Id. at 47.
14. See, e.g., 18 Am. Jur. 2d Cor­po­ra­tions § 2 (2016) (“A cor­po­ra­tion is a legal enti­ty with an iden­ti­ty or per­son­al­i­ty sep­a­rate and dis­tinct from that of its own­ers and its share­hold­ers and must be thought of with­out ref­er­ence to the mem­bers who com­prise it.”); Manesh, supra note 2, at 72 (“A fun­da­men­tal prin­ci­ple of enti­ty law is that of legal separateness—that a busi­ness enti­ty is a legal per­son, sep­a­rate and dis­tinct from the entity’s own­ers and man­agers) (foot­note omit­ted).
15. See, e.g., Rus­sell C. Sil­ber­glied & Blake Rohrbach­er, TOUSA, USACafes, and the Fidu­cia­ry Duties of a Parent’s Direc­tors Upon a Subsidiary’s Insol­ven­cy, 2011 Norton’s Ann. Surv. of Bankr. L. 33, 51 (2011) (“USACafes came as a bit of a sur­prise to many prac­ti­tion­ers .…”); Manesh, supra note 2, at 67.
16. USACafes, 600 A.2d at 56.
17. Id. at 48.
18. Wal­lace ex rel. Cen­com Cable Income Part­ners II, Inc. v. Wood, 752 A.2d 1175, 1182 (Del. Ch. 1999).
19. Bigelow/Diversified Sec­ondary P’ship Fund 1990 v. Damson/Birtcher Part­ners, Civ.A. No. 16630-NC, 2001 WL 1641239, at *8 (Del. Ch. Dec. 4, 2001).
20. Paige Cap­i­tal Mgmt., LLC v. Lern­er Mas­ter Fund, LLC, C.A. No. 5502-CS, 2011 WL 3505355, at *29–30 (Del. Ch. Aug. 8, 2011).
21. Bay Ctr. Apart­ments Own­er, LLC v. Emery Bay PKI, LLC, C.A. No. 3658-VCS, 2009 WL 1124451, at *9 & n.44 (Del. Ch. Apr. 20, 2009). See also Fee­ley v. NHAOCG, LLC, 62 A.3d 649, 671 (Del. Ch. 2012) (apply­ing Bay Cen­ter Apart­ments and con­firm­ing the rel­e­vance of USACafes doc­trine to LLCs under prin­ci­ples of stare deci­sis).
22. Gotham Part­ners, L.P. v. Hall­wood Real­ty Part­ners, L.P., C.A. No. 15754, 2000 WL 1476663, at *19–20 (Del. Ch. Sept. 27, 2000).
23. Paige Cap­i­tal Mgmt., 2011 WL 3505355, at *30.
24. Id.
25. Bay Ctr. Apart­ments Own­er, 2009 WL 1124451, at *9.
26. Fee­ley v. NHAOCG, LLC, C.A. No. 7304-VCL, 2012 WL 966944, at *8 (Del. Ch. Mar. 20, 2012).
27. Fee­ley v. NHAOCG, LLC, 62 A.3d 649, 671 (Del. Ch. 2012).
28. Gotham Part­ners, L.P. v. Hall­wood Real­ty Part­ners, L.P., C.A. No. 15754, 2000 WL 1476663, at *19–20 (Del. Ch. Sept. 27, 2000).
29. Manesh, supra note 2, at 90 (“The fidu­cia­ry duty owed by a con­troller under USACafes will apply unless waived or mod­i­fied by the terms of the agree­ment gov­ern­ing the ben­e­fi­cia­ry enti­ty.”) (foot­note omit­ted).
30. Id. at 91 (“Judi­cial aban­don­ment of the doc­trine would not rad­i­cal­ly alter the exist­ing legal land­scape. It would sim­ply flip the default rule for alter­na­tive enti­ties from one that is “unortho­dox” to one that is more in accord with oth­er fun­da­men­tal prin­ci­ples of law and equi­ty.”) (foot­note omit­ted).
31. See Del. Code Ann. tit. 6, § 17–1101© (2015) (gov­ern­ing LPs); id. § 18–1101(b) (gov­ern­ing LLCs) (stat­ing that it is the statutes’ “pol­i­cy … to give the max­i­mum effect to the prin­ci­ple of free­dom of con­tract.”).
32. Manesh, supra note 2, at 78 (“Of course, under ordi­nary con­tract law prin­ci­ples, only the par­ties to a con­tract owe legal duties to one anoth­er aris­ing from the con­tract.”).
33. Id.
34. Fee­ley v. NHAOCG, LLC, 62 A.3d 649, 671 (Del. Ch. 2012).
35. See Del. Code. Ann. tit. 6, § 17–1101© (2015) (gov­ern­ing LPs); id. § 18–1101(b) (gov­ern­ing LLCs); Manesh, supra note 2, at 78.
36. See, e.g., Manesh, supra note 2, at 73.
37. Id.
38. See BASF Corp. v. POSM II Props. P’ship, L.P., C.A. No. 3608-VCS, 2009 WL 522721, at *8 n.50 (Del. Ch. Mar. 3, 2009).
39. Manesh, supra note 2, at 73.
40. See, e.g., 18 Am. Jur. 2d Cor­po­ra­tions § 48 (2016); Manesh, supra note 2 at 74.
41. Mobil Oil Corp. v. Lin­ear Films, Inc., 718 F. Supp. 260, 268 (D. Del. 1989).
42. See, e.g., Otokumpu Eng’g Enters., Inc. v. Kvaern­er Envi­roPow­er, Inc., 685 A. 2d 724, 729 n.2 (Del. 1996).
43. In re USACafes L.P. Lit­ig., 600 A.2d 43, 48 (Del. Ch. 1991) (Allen, C.).
44. Manesh, supra note 2, at 75. See also Bigelow/Diversified Sec­ondary P’ship Fund 1990 v. Damson/Birtcher Part­ners, Civ.A. No. 16630-NC, 2001 WL 1641239, at *8 (Del. Ch. Dec. 4, 2001).
45. See Strine & Laster, supra note 5, at 21.
46. Paige Cap­i­tal Mgmt., LLC v. Lern­er Mas­ter Fund, LLC, C.A. No. 5502-CS, 2011 WL 3505355, at *30 (Del. Ch. Aug. 8, 2011).
47. See Fee­ley v. NHAOCG, LLC, 62 A.3d 649, 668 (Del. Ch. 2012) (assert­ing equi­ty as the basis for attach­ing lia­bil­i­ty to con­trollers)
48. Manesh, supra note 2, at 76.
49. Id.
50. Id.
51. See, e.g., Mark J. Loewen­stein, Veil Pierc­ing to Non-Own­ers: A Prac­ti­cal and The­o­ret­i­cal Inquiry, 41 Seton Hall L. Rev. 839, 846 (2011); Stephen M. Bain­bridge, Abol­ish­ing Veil Pierc­ing, 26 J. Corp. L. 479, 507–09 (2001).
52. Manesh, supra note 2, at 76–77.
53. Id. at 80.
54. See, e.g., Revlon, Inc. v. MacAn­drews & Forbes Hold­ings, Inc., 506 A.2d 173, 182 (Del. 1986).
55. Gelf­man v. Wee­den Investors, L.P., 792 A.2d 977, 992 n.24 (Del. Ch. 2001).
56. Manesh, supra note 2, at 81.
57. Id. at 91 n.195.