In Wenske et al. v. Blue Bell Creameries, Inc., C.A. No. 2017-0699-JRS, the limited partnership agreement required the general partner to “use its best efforts to conduct…business…in accordance with sound business practices in the [dairy industry]”. When bacterial contamination was found in ice cream products, the partnership suspended production and distribution of its dairy products and was fined for poor food safety policies and practices. The plaintiffs sued the defendants including the general partner of the partnership for breach of the limited partnership agreement. The defendants argued that the limited partnership agreement did not incorporate government guidelines for the industry that the plaintiffs relied on in their pleadings. The Chancery Court ruled that the terms should be given their plain meaning and interpreted according to a reasonable person’s understanding. According to the Court, the wording “sound business practices” referred to government guidelines and accepted practices. In addition, the Court made it clear that given the partnership agreement unambiguously eliminated common-law fiduciary duties, the plaintiffs correctly characterized the claim as a breach of contract.
BOTTOM LINE: Consider including the following language in a partnership or LLC agreement which has been found by the court to unambiguously eliminate common law fiduciary duties: “[a]ny standard of care and duty imposed by this Agreement or under [DRULPA] or any applicable law, rule or regulation shall be modified, waived or limited, to the extent permitted by law, as required to permit [the general partner] to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision under the authority prescribed in this Agreement, so long as the action is reasonably believed by [the general partner] to be in, or not inconsistent with, [the partnership’s] best interests.”