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William Penn Partnership v. Saliba | 13 A.3d 749 (2011)

An individual who owes an obligation to act in the best interests of another has a fiduciary duty. A breach of this duty occurs if a fiduciary behaves in a manner that contradicts their duty. But what happens when a breach doesn’t result in any damages? The Delaware Supreme Court considered this question in William Penn Partnership versus Saliba.

Anis Saliba, Rosa Ksebe, and Robert Hoyt each owned a one-sixth interest in Del Bay Associates, a limited liability company, or L L C. William Penn Partnership held the remainder. Bill and Bryce Lingo owned two-thirds interest in Penn and were managers of both Penn and Del Bay. Del Bay’s operating agreement required a two-thirds vote for all decisions. The agreement didn’t modify or eliminate any fiduciary duties.

Del Bay was formed to construct a motel. After construction, the Beacon Motel was Del Bay’s sole asset.

Over a decade later, the Lingos decided they wanted out of Del Bay and sought to sell the motel. The Lingos offered to sell the motel to J G Townsend Junior and Company, or J G T, for over six million dollars. The Lingos owned forty percent of J G T.

Around the same time, the Lingos told Hoyt about their plan to sell and sent a sales contract to Saliba and Ksebe. Saliba and Ksebe didn’t want to sell the motel and offered to purchase it. The Lingos said they would accept the offer, but the sale had to be settled by the end of June.

On June tenth, the Lingos convinced Hoyt to sign the sale contract. Shortly after, J G T approved the purchase, and the sale proceeded to closing. At closing, the Lingos falsely represented that all members of Del Bay had authorized the sale.

Saliba and Ksebe sued the Lingos for breach of fiduciary duty. The chancery court found that the Lingos failed to demonstrate the entire fairness of the transaction. However, the court determined that because the motel’s fair market value was only about five million dollars, Saliba and Ksebe weren’t damaged by the sale. Despite this, the court awarded Saliba and Ksebe attorney’s fees. The Lingos appealed to the Delaware Supreme Court.

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