LLC Board Did Not Have Duty to Maximize Price on Sale of the Company that Favored the Controller—Miller v. HCP
By: Andrew J. Colosimo, Warren S. de Wied, Steven Epstein, Christopher Ewan, Arthur Fleischer, Jr., Andrea Gede-Lange, David J. Greenwald, Randi Lally, Mark H. Lucas, Scott B. Luftglass, Brian T. Mangino, Brian Miner, Philip Richter, Robert C. Schwenkel, David L. Shaw, Peter L. Simmons, Matthew V. Soran, Steven J. Steinman, Gail Weinstein
In Miller v. HCP (Feb. 1, 2018), the Court of Chancery dismissed claims made against the members of an LLC board—a majority of whom had been appointed by the private equity firm that was the company's controlling stockholder—for approving a sale of the company to an unaffiliated third party that was championed by the controller, without attempting to maximize the price. Under the “waterfall” provisions of the LLC Agreement, the controller received all of the sale proceeds. The decision highlights that, in the context of non-corporate entities, minority investors generally will have only the protections that they specifically negotiate for and that are clearly and unambiguously set forth in the governing agreement.
