Business & Corporate Caselaw Review (2023)

Caselaw Review
Wendy Gerwick Couture
Idaho State Bar
Business & Corporate Law Section Annual Meeting
April 20, 2023

Mere agreements to
agree aren’t
enforceable
The 2008 non-
compete
statute
matters
Words matter
in LLC & LP
Agreements

616 Inc. v. Mae Properties, LLC, 524 P.3d 889 (Idaho Feb. 8, 2023).
Pullover
Prints
Corporation
616 Inc.
APA
Seller Buyer

Pullover
Prints
Corporation
616 Inc.
APA
Seller Buyer
Did the APA (& incorporated asset list) convey an
enforceable leasehold interest in real property?

Pullover
Prints
Corporation
616 Inc.
APA
Seller Buyer
At issue: Purported five-year lease of Suite 100, $3K per month
• Other tenants in same building.
• At least one other building on lot.
• 616 has been occupying & paying on 1st of month for past 18
months.

Elements to form a lease contract with all
material terms:
 Definite agreement re: extent & bounds of
property lease;
 Definite & agreed term (length of time);
 Definite & agreed price of rental; &
 Time & manner of payment.

material terms:
property lease;
Elements to satisfy the Statute of Frauds
(applicable to a lease >1 year):
 Essential elements of the agreement in
writing &
 Subscribed by the party sought to be
charged.

material terms:
property lease;
writing &
charged.
“616 relies solely on written language [in the APA &
incorporated Asset List] to evidence both contract formation &
compliance with the Statute of Frauds.

material terms:
property lease;
writing &
charged.
Thus, the two-step inquiry merges into one in this dispute,
with the central question being whether the written language
contains the material terms necessary to form a lease
contract.”

material terms:
property lease;
writing &
charged.
Thus, the two-step inquiry merges into one in this dispute,
with the central question being whether the written language
contains the material terms necessary to form a lease
contract.”
X
X

property lease;
THIS AGREEMENT TO PURCHASE BUSINESS ASSETS (“Agreement”) is made
Effective as of the last date set forth on the signature page below (“Effective
Date”) by and between PULLOVER PRINTS CORPORATION, an Idaho General
Business Corporation (“Seller”) and 616 INC. (RAYMOND SMITH, PRESIDENT) or
his assigns, (“Buyer”). Seller agrees to sell, and Buyer agrees to buy, all of the
business assets of Pullover Prints Corporation (“Business”) located at 9990 W.
State Street[,] Boise, Idaho 83714 (“Business Premises”), subject to the terms and
conditions of this Agreement. Buyer and Seller may be referred to in this
Agreement individually as a “Party” or collectively as the “Parties”.
6. LEASE OF BUSINESS PREMISES: Seller represents and warrants that Seller
and/or Seller's sole member, Jim Ellis, owns and/or has the authority to lease the
Business Premises to Buyer. Seller and/or Jim Ellis or MAE Properties hereby
agrees to lease the Business Premises to Buyer for a term of five (5) years,
commencing on the Closing Date, with a monthly rental payment of Three-
thousand [sic] Dollars ($3,000.00) per month, terminable at Buyer's will with a 60
day written notice (“Lease Agreement”). First month rent shall be at no charge.

property lease;
THIS AGREEMENT TO PURCHASE BUSINESS ASSETS (“Agreement”) is made
Effective as of the last date set forth on the signature page below (“Effective
Date”) by and between PULLOVER PRINTS CORPORATION, an Idaho General
Business Corporation (“Seller”) and 616 INC. (RAYMOND SMITH, PRESIDENT) or
his assigns, (“Buyer”). Seller agrees to sell, and Buyer agrees to buy, all of the
business assets of Pullover Prints Corporation (“Business”) located at 9990 W.
State Street[,] Boise, Idaho 83714 (“Business Premises”), subject to the terms and
conditions of this Agreement. Buyer and Seller may be referred to in this
Agreement individually as a “Party” or collectively as the “Parties”.
6. LEASE OF BUSINESS PREMISES: Seller represents and warrants that Seller
and/or Seller's sole member, Jim Ellis, owns and/or has the authority to lease the
Business Premises to Buyer. Seller and/or Jim Ellis or MAE Properties hereby
agrees to lease the Business Premises to Buyer for a term of five (5) years,
commencing on the Closing Date, with a monthly rental payment of Three-
thousand [sic] Dollars ($3,000.00) per month, terminable at Buyer's will with a 60
day written notice (“Lease Agreement”). First month rent shall be at no charge.
“Although the property description
required for a lease of real property is less
demanding than that required for a sale, a
physical address alone ‘gives no indication
of the quantity, identity, or boundaries of
the real property’ to be leased.”

property lease;
The Asset List described the personal property PPC conveyed to
616, and relevant to 616's argument here, the Asset List used
the following headings to indicate where those items were
apparently located at the underlying property (i.e., what rooms
or areas PPC allegedly occupied at the physical address): “Front
Showroom”; “Vinyl Area”; “Embroidery Area”; “Artwork Room
– Jaymee's Office”; “General Office Area”; “Office Area
Storage/Break Room”; “Screen Print Area”; and “Screen
Development Room.”

property lease;
The Asset List described the personal property PPC conveyed to
616, and relevant to 616's argument here, the Asset List used
the following headings to indicate where those items were
apparently located at the underlying property (i.e., what rooms
or areas PPC allegedly occupied at the physical address): “Front
Showroom”; “Vinyl Area”; “Embroidery Area”; “Artwork Room
– Jaymee's Office”; “General Office Area”; “Office Area
Storage/Break Room”; “Screen Print Area”; and “Screen
Development Room.”
“[E]ven when the physical address is considered
alongside the rooms’ headings mentioned in the
Asset List, nothing in the writings identifies the
mentioned rooms as being within any particular
location, building(s), or otherwise at the physical
address. . . .
More importantly, nothing in the writings reflects
that those rooms form the general extent and
bounds of the property to be leased.”

6. LEASE OF BUSINESS PREMISES: Seller represents and warrants
that Seller and/or Seller's sole member, Jim Ellis, owns and/or
has the authority to lease the Business Premises to Buyer. Seller
and/or Jim Ellis or MAE Properties hereby agrees to lease the
Business Premises to Buyer for a term of five (5) years,
commencing on the Closing Date, with a monthly rental payment
of Three-thousand [sic] Dollars ($3,000.00) per month,
terminable at Buyer's will with a 60 day written notice (“Lease
Agreement”). First month rent shall be at no charge.

6. LEASE OF BUSINESS PREMISES: Seller represents and warrants
that Seller and/or Seller's sole member, Jim Ellis, owns and/or
has the authority to lease the Business Premises to Buyer. Seller
and/or Jim Ellis or MAE Properties hereby agrees to lease the
Business Premises to Buyer for a term of five (5) years,
commencing on the Closing Date, with a monthly rental payment
of Three-thousand [sic] Dollars ($3,000.00) per month,
terminable at Buyer's will with a 60 day written notice (“Lease
Agreement”). First month rent shall be at no charge.
“In the APA, the word ‘monthly’—standing alone—does not
reflect a definite and certain agreement on the ‘time and
manner of payment’ for the agreed rent. . . . [T]he APA does
not state what day rent is due each month (time), how rent is
to be paid or applied (manner), or to whom rent is due
(manner). Without these details, the APA, on its face, does not
include a definite and certain agreement on the ‘time and
manner of payment’ for the agreed rental price.”

material terms:
property lease;
writing &
charged.
X
X
BUT,
 if Statute of Frauds not satisfied,
 but there is sufficient evidence of a
lease contract for a term > 1 year that
is definite & certain in all of its material
terms (e.g., an oral contract containing
all material terms),
court may exercise its equitable power to
specifically enforce the contract based on
the doctrine of part performance.

material terms:
property lease;
writing &
charged.
X
X
BUT,
is definite & certain in all of its
material terms (e.g., an oral contract
containing all material terms),

material terms:
property lease;
writing &
charged.
X
X
BUT,
is definite & certain in all of its
material terms (e.g., an oral contract
containing all material terms),
“[T]he doctrine of part performance simply
does not apply because before it can, there
must be a complete lease contract between the
parties that could be specifically enforced in
equity.”

Pullover
Prints
Corporation
616 Inc.
APA
Seller Buyer
NO

Treasure Valley Home Solutions, LLC v. Chason, 524 P.3d 1272 (Idaho Feb. 14, 2023).
Treasure
Valley Home
Solutions
Chason
Real Estate Purchase &
Sale Agreement
Buyer Seller

Treasure
Valley Home
Solutions
Chason
Sale Agreement
Buyer Seller
Was the Agreement enforceable?

Material terms of a land sale contract include:
 Parties involved
 Subject matter thereof
 Price or consideration
 Description of property

Agreement
Purchase price of $330,000, payable as follows:
a) By initial Deposit submitted herewith receipt of which is hereby
acknowledged ... $500 …
d) By Seller Terms Sheet ... $55,000
e) Balance to be paid by certified check or bank check at Closing ...
$274,500.
Purchase price contingent upon Buyer and Seller mutually agreeing to seller
financing terms in seller terms sheet on or before October 7, 2020.

Attached Term Sheet
***Terms of this agreement to be set by Seller & Buyer on or before
October 7, 2020****
o Blanks for “purchase price,” “down payment,” “interest rate,” “term,”
“payment,” and “balloon.”
o Never completed.
Agreement
$274,500.

Attached Term Sheet
***Terms of this agreement to be set by Seller & Buyer on or before
October 7, 2020****
o Blanks for “purchase price,” “down payment,” “interest rate,” “term,”
“payment,” and “balloon.”
o Never completed.
Agreement
$274,500.
“The plain and unambiguous language of the
Agreement, including its attachments,
demonstrates that the purchase price identified
on the first page of the Agreement was not
final, but instead was contingent on the parties
reaching consensus on the terms of a seller-
financed loan for $55,000 of the purchase
price. . . . Without a purchase price, the
Agreement is unenforceable.”

Treasure
Valley Home
Solutions
Chason
Sale Agreement
Buyer Seller
Was the Agreement enforceable?
NO

Blaskiewicz v. Spine Institute of Idaho, P.A., 519 P.3d 1141 (Idaho Oct. 31, 2022).
Dr.
Blaskiewicz
Spine
Institute of
Idaho
Professional Services
Agreement
Containing Non-Compete
Clause
Employee Employer

Dr.
Blaskiewicz
Spine
Institute of
Idaho
Agreement
Clause
Employee Employer
Is the non-compete clause
enforceable?

11. RESTRICTIVE COVENANT. Physician acknowledges and agrees that Physician is a key
employee of Group, and that the restrictive covenants set forth in this Section are necessary
to protect Group's legitimate business interests within the meaning of Idaho Code § 44-2701
et seq. For purposes of this Section, the “Restricted Time” shall be during the term of this
Agreement and for a period of eighteen (18) months after the termination of this Agreement,
and the “Restricted Area” shall be the area within fifty (50) miles of Group's primary office
location, but the Restricted Area” shall exclude Caldwell, Idaho (“Caldwell”) and the
geographic service area served by WVMC (the “WVMC Service Area”) .... In no event shall
this Section preclude Physician from performing Services within Caldwell or the WVMC
Service Area.
11.1 Non-Competition. Physician shall not, within the Restricted Time and Restricted Area
and without Group's express written consent, engage in the practice of medicine except as an
employee of Group pursuant to this Agreement, or engage in, perform, or provide on behalf
of any entity other than Group any of Physician's Services described in this Agreement, nor
shall Physician establish, contract with, have an ownership or investment interest in, or
provide professional services to any entity or facility that competes with Group or otherwise
provides the Services described in this Agreement.
...
11.3 Scope of Restriction. Physician agrees that this Section 11 is reasonable and necessary
to protect the legitimate interests of Group, its patients, and its personnel, and that Group
would be irreparably injured by Physician's breach of these obligations. If the scope or
duration of any restriction is too broad to permit enforcement of such restriction to its full
extent, then such restriction shall be enforced to the maximum extent permitted by law.

2008
Pre-2008 caselaw re: enforceability of non-competes I.C. § 44-2701 et seq.

2008
§ 44-2701. Agreements and covenants protecting legitimate
business interests
A key employee or key independent contractor may enter into
a written agreement or covenant that protects the employer's
legitimate business interests and prohibits the key employee
or key independent contractor from engaging in employment
or a line of business that is in direct competition with the
employer's business after termination of employment, and
the same shall be enforceable, if the agreement or covenant
is reasonable as to its duration, geographical area, type of
employment or line of business, and does not impose a
greater restraint than is reasonably necessary to protect the
employer's legitimate business interests.

2008
business interests
“While [pre-2008 Idaho cases] remain instructive,
the district court’s failure to address the relevant
statutes constitutes clear error.”

2008
§ 44-2703. Construction and enforcement
To the extent any such agreement or covenant is found to be
unreasonable in any respect, a court shall limit or modify the
agreement or covenant as it shall determine necessary to
reflect the intent of the parties and render it reasonable in
light of the circumstances in which it was made and
specifically enforce the agreement or covenant as limited or
modified.

2008
“However, even if the provision is too broad,
the district court had within its power the
ability to limit or modify the non-compete
provision through blue-penciling. . . . For
example, it is possible that, under the proper
factual findings, the district court could have
modified the agreement to preclude
Blaskiewicz from practicing only the type of
medicine he did for the Spine Institute, i.e.,
complex spinal deformity surgery, yet allow
him to perform other surgeries he is otherwise
qualified to perform.”
§ 44-2703. Construction and enforcement
To the extent any such agreement or covenant is found to be
unreasonable in any respect, a court shall limit or modify the
agreement or covenant as it shall determine necessary to
reflect the intent of the parties and render it reasonable in
light of the circumstances in which it was made and
specifically enforce the agreement or covenant as limited or
modified.

Dr.
Blaskiewicz
Spine
Institute of
Idaho
Agreement
Clause
Employee Employer
MAYBE. District court erred in
granting summary judgment for
Dr. Blaskiewicz that void.
Is the non-compete clause
enforceable?

Kibble & Prentice Holding Company v. Tilleman, 2022 WL 17417525 (D. Idaho Dec. 2, 2022)
USI
Insurance
Services
Northwest
Tilleman
Employment Agreement
Clauses
Employer
Producer

USI
Insurance
Services
Northwest
Tilleman
Clauses
Employer
Producer
Are the non-compete clauses
enforceable?

• Six months
• Two years
8.5(a). Non-Solicitation of Clients
8.5(b). Non-Solicitation of Active
Prospective Clients

• Six months
• Two years
• Six months
• Two years
Prospective Clients
8.6(a). Non-Acceptance/Non-
Service of Clients
Service of Active Prospective
Clients

2008
“Idaho law historically has disfavored covenants not to
compete in the employment context . . .

2008
Now, with the 2008 statute, the Idaho Legislature has altered
Idaho policy regarding noncompete agreements by: (i)
expressly providing for the creation and enforcement of
noncompete agreements; (ii) providing rebuttable
presumptions of reasonableness for durational, geographical,
and scope of activity restrictions in noncompetes, which place
the burden of proof on the employee and not the employer;
and (iii) directing courts to limit or modify unreasonable
noncompete agreements and specifically enforce the
agreements as limited or modified.

2008
Now, with the 2008 statute, the Idaho Legislature has altered
Idaho policy regarding noncompete agreements by: (i)
expressly providing for the creation and enforcement of
noncompete agreements; (ii) providing rebuttable
presumptions of reasonableness for durational, geographical,
and scope of activity restrictions in noncompetes, which place
the burden of proof on the employee and not the employer;
and (iii) directing courts to limit or modify unreasonable
noncompete agreements and specifically enforce the
agreements as limited or modified.
The cumulative effect of these changes is to create a broader
policy favoring non-compete agreements.”

2008
business interests

2008
§ 44-2704(5).
It shall be a rebuttable presumption that an employee or
independent contractor who is among the highest paid five
percent (5%) of the employer's employees or independent
contractors is a “key employee” or a “key independent
contractor.” To rebut such presumption, an employee or
independent contractor must show that it has no ability to
adversely affect the employer's legitimate business interests.

“But the earnings argument only means that Tilleman is not
presumed to be a ‘key employee’ under the statute; it does
not mean he does not fit within the broad statutory definition
of key employee.”
2008
§ 44-2704(5).
It shall be a rebuttable presumption that an employee or
independent contractor who is among the highest paid five
percent (5%) of the employer's employees or independent
contractors is a “key employee” or a “key independent
contractor.” To rebut such presumption, an employee or
independent contractor must show that it has no ability to
adversely affect the employer's legitimate business interests.

2008
§ 44-2702(1)
“Key employees” and “key independent contractors” shall
include those employees or independent contractors who, by
reason of the employer's investment of time, money, trust,
exposure to the public, or exposure to technologies,
intellectual property, business plans, business processes and
methods of operation, customers, vendors or other business
relationships during the course of employment, have gained a
high level of inside knowledge, influence, credibility,
notoriety, fame, reputation or public persona as a
representative or spokesperson of the employer and, as a
result, have the ability to harm or threaten an employer's
legitimate business interests.

“During his many years of employment with CHS and
then USI, Tilleman gained experience and expertise
in the agricultural insurance business – using
resources, trust, and customer access courtesy of
CHS and USI. This experience and expertise allowed
Tilleman to develop and nurture close relationships
with clients, giving him substantial influence over
client accounts. These close relationships with CHS
and then USI's clients empowered Tilleman to harm
or threaten USI's business.”
2008
§ 44-2702(1)

[B]y virtue of past employment with [CHS] ... and future
employment with [USI], [Tilleman] ... has benefitted [and]
will continue to benefit ... from [USI's] investment of time,
money and trust in [him] and will gain a high level of inside
knowledge, influence, credibility, reputation or public
persona as a representative or spokesperson of [USI], and,
as a result, had, has, and will continue to have, the ability to
harm or threaten [USI's] legitimate business interests.
2008
§ 44-2702(1)

[B]y virtue of past employment with [CHS] ... and future
employment with [USI], [Tilleman] ... has benefitted [and]
will continue to benefit ... from [USI's] investment of time,
money and trust in [him] and will gain a high level of inside
knowledge, influence, credibility, reputation or public
persona as a representative or spokesperson of [USI], and,
as a result, had, has, and will continue to have, the ability to
harm or threaten [USI's] legitimate business interests.
2008
§ 44-2702(1)
“Tilleman has not and cannot meaningfully dispute
his prior acknowledgements.”

2008
§ 44-2704(3).
It shall be a rebuttable presumption that an agreement or
covenant is reasonable as to geographic area if it is restricted
to the geographic areas in which the key employee or key
independent contractor provided services or had a significant
presence or influence.

“[S]uch narrow covenants enjoy a rebuttable
presumption of reasonableness in that they are,
in effect, limited to the ‘geographic area’ in
which Tilleman ‘provided services or had a
significant presence or influence.’ . . . The Court
therefore finds the restrictive covenants are
reasonable as to the . . . geographic area.”
2008
§ 44-2704(3).
It shall be a rebuttable presumption that an agreement or
covenant is reasonable as to geographic area if it is restricted
to the geographic areas in which the key employee or key
independent contractor provided services or had a significant
presence or influence.

• Six months
• Two years
• Six months
• Two years
Prospective Clients
Service of Clients
Service of Active Prospective
Clients
“In Idaho, … the goodwill developed
by an employee on behalf of the
employer belongs to the employer,
and the employer ‘is entitled to
protect itself from the risk that a
former employee might appropriate
customers by taking unfair advantage
of the contacts developed while
working for the employer.’ … All the
provisions of the restrictive covenants
protect legitimate business interests
that both the Idaho courts and the
Idaho legislature have found to be
legally cognizable.”

USI
Insurance
Services
Northwest
Tilleman
Clauses
Employer
Producer
Are the non-compete clauses
enforceable?
YES

In re Dissolution of T & S Hardwoods KD, LLC, 2023 WL 334674 (Del. Ch. Jan. 20, 2023).
T&S
Hardwoods,
Inc.
Robinson
Lumber Co.
Lumber
processor &
manufacturer
Lumber
wholesaler
Thompson Robinson

T&S
Hardwoods,
Inc.
Robinson
Lumber Co.
Joint Venture Agreement
& LLC Agreement
Lumber
processor &
manufacturer
Lumber
wholesaler
Thompson Robinson

T&S
Hardwoods,
Inc.
Robinson
Lumber Co.
& LLC Agreement
Lumber
processor &
manufacturer
Lumber
wholesaler
• Each owns 50% of LLC.
• Manager-managed:
Thompson & Robinson.
• Most decisions: require
unanimity.
• LLC became a party to
Robinson Lumber Co.’s
credit agreement &
pledged substantially all
of its assets as collateral.
• Thompson provided
personal guaranty for any
funds the LLC borrowed.
Thompson Robinson

T&S
Hardwoods,
Inc.
Robinson
Lumber Co.
& LLC Agreement
Lumber
processor &
manufacturer
Lumber
wholesaler
Did T&S state a claim for judicial
dissolution under 6 Del. C. § 18-802?
Thompson Robinson
unanimity.
credit agreement &

6 Del. C. § 18-802 Judicial dissolution
On application by or for a member or manager the Court of
Chancery may decree dissolution of a limited liability company
whenever it is not reasonably practicable to carry on the
business in conformity with a limited liability company
agreement.

“Dissolution is appropriate in situations where the LLC's
management has become so dysfunctional ... that it is no
longer practicable to operate the business, such as the case of
deadlock. In the context of judicial dissolution, deadlock refers
to the inability to make decisions and take action.”
agreement.

agreement.
LLC Agreement: Company's purpose is “to engage in any lawful
activities for which limited liability companies may be formed
under the Act.”

agreement.
LLC Agreement: Company's purpose is “to engage in any lawful
activities for which limited liability companies may be formed
under the Act.”
“This technical argument fails in the face of the JV Agreement
and other evidence that the Company's purpose is to buy
lumber from T & S and sell it to RLC and other third parties. The
Petition alleges it is not reasonably practicable to carry on this
business.”

LLC Agreement Buy-Sell Provision
Each Member shall have the right ... to give written notice to
any other Member offering to purchase all of the Membership
Interest owned by the other Member or to sell all of his or her
Membership Interest to the other Member in accordance with
the procedures in this Article VII.

“After receiving the notice, the non-offering member may elect
to either sell all of its membership interest to the offering
member or to buy all of the offering member's membership
interests, at the price and upon the other terms and conditions
specified in the notice.”

“Here, the Company's Buy-Sell Provision is optional at all times,
even in the case of deadlock. The LLC Agreement does not
force a buyout of any member upon deadlock. Instead, it gives
each member an option that it may exercise at any time—or
not. . . . The Buy-Sell Purchase Option does not provide an exit
mechanism that the parties agreed, ex ante, would resolve
their deadlock.”

“[E]ven if the Court were to force T & S and Thompson to
exercise its option in the Buy-Sell Provision, Thompson would
still be personally liable as a guarantor on the Company's credit
agreement. That is, the Buy-Sell Provision is not an adequate
remedy at law because it will not ‘equitably effect the
separation of the parties’ as it could leave Thompson as a
departing member ‘with no upside potential, and no protection
over the considerable downside risk’ of having to cure any
default by the Company.”

T&S
Hardwoods,
Inc.
Robinson
Lumber Co.
& LLC Agreement
Lumber
processor &
manufacturer
Lumber
wholesaler
Did T&S state a claim for judicial
dissolution under 6 Del. C. § 18-802?
Thompson Robinson
unanimity.
credit agreement &
YES

XRI Investment Holdings LLC v. Holifield, 283 A.3d 581 (Del. Ch. Sept. 19, 2022).
XRI
Investment
Holdings
LLC
Holifield
Class B Units

GH Blue
Holdings,
LLC
XRI
Investment
Holdings
LLC
SPV owned by
Holifield
Holifield
Class B Units

GH Blue
Holdings,
LLC
XRI
Investment
Holdings
LLC
SPV owned by
Holifield
Was the transfer void under the LLC
Agreement?
Holifield
Class B Units

No Transfer Provision
Unless expressly contemplated by another provision of
this Agreement, no Member may Transfer any of its
Units or other Company Interests except, subject to this
Article VIII,
. . .
(iii) to a Permitted Transferee,
. . .

Article VIII,
. . .
. . .
Definition of “Permitted Transferee”
[W]ith respect to any Class B Member or Management
Member, any Person meeting all of the following requirements:
(a) such Person is (i) the spouse of such Member, (ii) a
lineal descendant of such Member, (iii) any trust, family
partnership or limited liability company, the sole
beneficiaries, partners or members of which are such
Member or Relatives of such Member or (iv) any heir of
any such Member who is deceased,
(b) the applicable Transfer to such Person is made without
consideration and
(c) such Member or his or her heirs or legatees have at all
times (including after the subject Transfer) the exclusive
right to exercise and perform all rights and duties under
this Agreement associated with the ownership of the
applicable Transferred Units.

“Because XRI proved that the step-transaction doctrine
applies, the Blue Transfer must be viewed as part of the
Assurance Loan. . . . Viewed through the lens of the
Assurance Loan, it is clear that Holifield received
consideration in the transaction. He obtained $3.5
million in capital for Entia, plus a structure that could
and did support additional borrowings on two
occasions.”
Article VIII,
. . .
. . .
Definition of “Permitted Transferee”
[W]ith respect to any Class B Member or Management
Member, any Person meeting all of the following requirements:
(a) such Person is (i) the spouse of such Member, (ii) a
lineal descendant of such Member, (iii) any trust, family
partnership or limited liability company, the sole
beneficiaries, partners or members of which are such
Member or Relatives of such Member or (iv) any heir of
any such Member who is deceased,
(b) the applicable Transfer to such Person is made without
consideration and
(c) such Member or his or her heirs or legatees have at all
times (including after the subject Transfer) the exclusive
right to exercise and perform all rights and duties under
this Agreement associated with the ownership of the
applicable Transferred Units.

Transfers In Violation of Agreement.
Any Transfer or attempted Transfer in violation of this
Article VIII shall be void, and none of the Company or
any of its respective Subsidiaries shall record such
purported Transfer on its books or treat any purported
Transferee as the owner of such Units.

Equitable Defense of Acquiescence
“Acquiescence applies when the party who possesses a
valid challenge to a particular act, having ‘full
knowledge of his rights and the material facts,’ engages
in conduct that leads the other party to believe
reasonably that the act had been approved.”

“Holifield proved that XRI acquiesced in the Blue
Transfer. Taken as a whole, XRI's initial actions,
followed by a subsequent and lengthy period of
inactive silence, clearly establish acquiescence. In
evaluating XRI's actions for purposes of acquiescence,
the focus rests on the individuals who acted on behalf
of XRI, including Gabriel, Burt, and XRI's counsel. Based
on their conduct, Holifield reasonably believed that XRI
had accepted and would not challenge the Blue
Transfer.”

BUT, under Delaware Supreme Court precedent,
“if parties to a contract specify that a noncompliant act is ‘void,’ then the act is void ab initio
with all of the consequences attendant to that status under the common law. Pertinent to
this litigation, that means a party may not deploy equitable defenses such as waiver,
estoppel, acquiescence, or unclean hands to defeat the claim of breach and defend the
contractually noncompliant act. In short, the act is incurably void.”
Transfer.”

BUT, under Delaware Supreme Court precedent,
“if parties to a contract specify that a noncompliant act is ‘void,’ then the act is void ab initio
with all of the consequences attendant to that status under the common law. Pertinent to
this litigation, that means a party may not deploy equitable defenses such as waiver,
estoppel, acquiescence, or unclean hands to defeat the claim of breach and defend the
contractually noncompliant act. In short, the act is incurably void.”
Transfer.”
“Although the law requires this result, it is contrary to the equities of the case. If Holifield
could invoke the doctrine of acquiescence, then the court would find that XRI was barred
from asserting its claim that the Blue Transfer violated the No Transfer Provision. The court
would declare that Blue received an assignee interest in the Disputed Units as a result of the
Blue Transfer.”

GH Blue
Holdings,
LLC
XRI
Investment
Holdings
LLC
SPV owned by
Holifield
Was the transfer void under the LLC
Agreement?
YES
Holifield
Class B Units

Boardwalk Pipeline Partners, LP v. Bandera Master Fund LP, 288 A.3d 1083 (Del. Dec. 19, 2022).
Boardwalk
Pipeline
Partners,
LP
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner

Boardwalk
Pipeline
Partners,
LP
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner
Boardwalk
GP, LLC
General Partner

Boardwalk
Pipeline
Partners,
LP
Sole Member
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner
Boardwalk
GP, LLC
General Partner
Boardwalk
Pipelines
Holding
Corp.

Boardwalk
Pipeline
Partners,
LP
Sole Member
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner
Boardwalk
GP, LLC
General Partner
Boardwalk
Pipelines
Holding
Corp.
General Partner, through Sole
Member, decided to exercise call
right under MLP Agreement

Boardwalk
Pipeline
Partners,
LP
Sole Member
Was the General Partner exculpated
from liability for monetary damages
for exercising call right?
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner
Boardwalk
GP, LLC
General Partner
Boardwalk
Pipelines
Holding
Corp.

Call right permitted if:
The General Partner receive[s] an Opinion of Counsel that
the Partnership's status as an association not taxable as a
corporation and not otherwise subject to an entity-level tax
for federal, state or local income tax purposes has or will
reasonably likely in the future have a material adverse effect
on the maximum applicable rate that can be charged to
customers.

customers.
The Opinion must be acceptable to the General Partner.

customers.
Baker Botts Opinion

customers.
Baker Botts Opinion
General Partner exculpated unless:
It acted in bad faith or engaged in fraud, willful misconduct,
or, in the case of a criminal matter, acted with knowledge
that its conduct was criminal

customers.
Baker Botts Opinion
Conclusive presumption of good faith:
General Partner conclusively presumed to act in good faith
if it took an action in reliance on the advice or opinion of
legal counsel.

customers.
Baker Botts Opinion
legal counsel.
Skadden Opinion

customers.
Baker Botts Opinion
legal counsel.
Skadden Opinion
“The [Chancery] court also described the Skadden Opinion as
an ‘opinion about an opinion,’ and cast doubt on whether
multiple opinions were contemplated by [the LPA]. We find
nothing disqualifying about Skadden giving ‘an opinion about
an opinion.’ Ultimately, under the Partnership Agreement and
the LLC Agreement, the Sole Member Board had to determine
whether the Baker Botts Opinion was acceptable before it
caused the General Partner to exercise the call right. Skadden
provided an opinion of counsel on both the reasonableness of
the Baker Botts Opinion and the reasonableness of accepting
the Opinion.”

customers.
Baker Botts Opinion
legal counsel.
Skadden Opinion
“Even though the Court of Chancery found after trial that Baker
Botts provided a compromised opinion, under the Partnership
Agreement and LLC Agreement, the proper focus was on the
Sole Member and the opinion it received from Skadden.
Skadden found the Baker Botts Opinion reasonable and advised
that the Sole Member Board would be acting reasonably if it
accepted the Baker Botts Opinion. The Sole Member Board
followed Skadden's advice and caused the call right exercise.
Having reasonably relied on Skadden's advice, the General
Partner, through the Sole Member, is conclusively presumed to
have acted in good faith and is exculpated from damages.”

Boardwalk
Pipeline
Partners,
LP
Sole Member
Was the General Partner exculpated
from liability for monetary damages
for exercising call right?
YES
Limited Partners:
public unitholders
Boardwalk
GP, LP
General Partner
Boardwalk
GP, LLC
General Partner
Boardwalk
Pipelines
Holding
Corp.

Thank you!
***Slides available on SlideShare
wgcouture@uidaho.edu

Business & Corporate Caselaw Review (2023)

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