Drivetrain, LLC, in its capacity as Trustee for th v. EverStream Solar Infrastructure Fund I LP et al

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: 	)
)
) 	Chapter 11
SUNEDISON, INC., et al., 	) 	Case No. 16-10992 (DSJ)
)
Debtor. 	)
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)
DRIVETRAIN, LLC, 	)
)
Plaintiff, 	) 	Adv. Proc. No. 19-01120 (DSJ)
)
- against - 	)
)
EVERSTREAM SOLAR 	)
INFRASTRUCTURE FUND I LP, and 	)
EVERSTREAM SOLAR 	)
INFRASTRUCTURE FUND I GP, LP, 	)
)
Defendants. 	)
)
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MEMORANDUM OF DECISION AND ORDER
A P E A R A N C E S:
KAGEN CASPERSEN & BOGART PLLC
Counsel for Drivetrain, LLC
757 3rd Avenue
20th Floor
New York, NY 10017
By: 	Joel M. Taylor, Esq.
DAY PITNEY LLP
Counsel for Defendants
195 Church Street
New Haven, CT
By: 	Joshua W. Cohen, Esq.
Daniel J. Carragher, Esq.
Jennifer M. Palmer, Esq.
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DAVID S. JONES
UNITED STATES BANKRUPTCY JUDGE
Plaintiff Drivetrain, LLC (“Drivetrain” or “Plaintiff”), in its capacity as Trustee of the
SunEdison Litigation Trust, and in turn on behalf of debtor EverStream HoldCo Fund I, LLC
(“Everstream Debtor”), has moved for leave to file a second amended complaint (the “Second
Amended Complaint”) to add an entirely new claim for breach of fiduciary duty and to name two
new, individual defendants, P.J. Lee (“Lee”) and Bruce Pflaum (“Pflaum”) [ECF No. 50 (the
“Motion”)]. Last year, the Court granted Plaintiff’s earlier motion for leave to add a breach of
contract claim against the original entity defendants by filing an initial amended complaint (the
“First Amended Complaint”). 	Defendants EverStream Solar Infrastructure Fund I LP (the
“Everstream Partnership”) and EverStream Solar Infrastructure Fund I GP LP (“Everstream
General Partner” and, together with the Everstream Partnership, “Defendants”), oppose
Drivetrain’s request. [See Defendants’ Memorandum of Law in Opposition to Plaintiffs’ Motion
for Leave to Amend Complaint, ECF No. 51 (“Opposition”)]. 	They challenge the Second
Amended Complaint on grounds of futility—contending that the governing partnership agreement
eliminated fiduciary duties and imposed in their place solely contractual obligations, that
Everstream General Partner’s complained-of conduct was authorized by the governing partnership
agreement, that the Plaintiff does not sufficiently allege unfairness, that the newly proposed claim
does not relate back to the original complaint, and that the claim is time-barred and was raised
only after undue delay. [Id. at 10–24].
For the reasons that follow, the Court concludes that the governing agreement explicitly
overrode fiduciary duties to the extent any such duties were not imposed by the terms of the
partnership agreement itself. The Court therefore concludes that the new proposed amendments,
all of which seek to add a breach-of-fiduciary-duty claim against the existing Defendants and two
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new individual defendants, are futile, and therefore should not be allowed. 	In light of this
conclusion, the Court does not reach Defendants’ other arguments, including defenses of undue
delay and statute of limitations.
BACKGROUND
A. The Everstream Partnership and Everstream Debtor’s Default on Its Investment in
the Everstream Partnership
Unless otherwise noted, the following background information is taken from the Court’s
July 2021 decision that authorized Plaintiff to file the First Amended Complaint. Drivetrain, LLC
v. EverStream Solar Infrastructure Fund I LP (In re SunEdison, Inc.), No. 16-10992, Adv. No. 19-
01220, 2021 WL 3176070 (Bankr. S.D.N.Y. July 27, 2021) (“Drivetrain I”). 	The Everstream
Partnership is a Delaware limited liability partnership that was formed to invest in and operate
renewable energy assets. 	Everstream General Partner served as the general partner of the
Everstream Partnership, and Everstream Debtor invested in that partnership as a limited partner.
Pursuant to a subscription agreement dated February 7, 2013 (the “Subscription Agreement”),
Everstream Debtor—itself formed for the purpose of investing in the Everstream Partnership—
committed to provide up to $30 million in capital funding to the Everstream Partnership upon a
capital call or calls, as provided for in the Limited Partnership Agreement of the Everstream
Partnership dated February 7, 2013 (as amended and restated in accordance with its terms, the
“Partnership Agreement”).
The Partnership Agreement provided in relevant part as follows regarding limited partners’
obligations to make payments in response to capital calls, and regarding the consequences of a
failure to meet those obligations. Each limited partner (including Everstream Debtor) agreed to
fund partnership investments by paying up to the amount of the limited partner’s “Capital
Commitment,” defined as “with respect to any Limited Partner, the aggregate contribution such
Limited Partner has agreed to make to the [Everstream] Partnership, whether or not contributed,
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as may be modified by the express terms of this [Partnership] Agreement.” 	[ECF No. 20-1
(“Partnership Agreement”) § 1]. 	These payments were not required immediately upon the
effectiveness of the Partnership Agreement but were required to be made in response to “Capital
Calls,” when such calls were made by the Everstream Partnership. [See Partnership Agreement
§§ 1, 5.1]. If a limited partner failed to make a required payment in response to a capital call and
failed or refused to cure the missed payment following notice, Everstream General Partner had the
authority to designate it as a “Defaulting Partner.” [See id. § 6.1]. If a Defaulting Partner failed
to cure its default by paying its required contribution and any interest accrued because of the delay
within ten days after receipt of a “Default Notice,” then Everstream General Partner had the
authority to deem that Defaulting Partner in “Material Default” under the Partnership Agreement.
[See id.].
Upon such a Material Default, Everstream General Partner was authorized to pursue
various remedies “available to the [Everstream] Partnership under this Agreement or at law or in
equity[.]” [Id. § 6.2]. Section 6.6 of the Partnership Agreement is particularly relevant, providing
in part:
The General Partner may make the changes in the interest of a Defaulting Partner
that is in Material Default provided for in . . . Section 6.6.
(a) 	The General Partner may reduce or eliminate the Defaulting Partner’s
Capital 	Commitment, 	Capital 	Contributions 	and 	Uncontributed 	Capital
Commitment to zero or by such proportion as the General Partner may elect in its
discretion, and no Defaulting Partner shall be entitled to any consideration in
connection with any such reduction or elimination. If the Capital Commitment
of a Defaulting Partner is reduced, then the Sharing Percentages of the Partners
shall be adjusted accordingly with the result that future distributions to the
Defaulting Partner pursuant to Section 8.2 will be reduced or eliminated.
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(Emphasis added.) Further, to the extent a Defaulting Partner’s “Sharing Percentage is reduced to
zero, then the [Everstream] General Partner may cause the Defaulting Partner’s interest in the
Partnership to be extinguished.” [Id. § 6.6(c)].
Between March 2013 and May 2014, EverStream Debtor made capital call payments to the
Everstream Partnership totaling $21,073,368.00, which were directly paid by either SunEdison or
debtor NVT LLC (“NVT”). In November 2015, the Everstream Partnership issued a capital call
notice in the amount of $212,014.00 (the “November 2015 Capital Call”) that Everstream Debtor
failed to pay. 	In a letter dated February 23, 2016 (the “February 2016 Letter”), Defendants
informed Everstream Debtor that, as a result of its failure to satisfy the November 2015 Capital
Call, it was in “Material Default” under the Partnership Agreement and that, accordingly,
Everstream Debtor’s partnership interest had been “extinguished for no consideration pursuant to
Section 6.6 of the Partnership Agreement.” [ECF No. 11 Ex. C]. Plaintiff does not dispute that
Everstream Debtor was a “Defaulting Partner,” nor that its default was “Material,” as those terms
are used in the Partnership Agreement.
In March 2016, Defendants informed Everstream Debtor that its partnership interest could
be reinstated, notwithstanding its default, if Everstream Debtor paid the Everstream Partnership
$3,758,523.26 (the “March 2016 Capital Call”), an amount that was the sum of (1) the November
2015 Capital Call plus accrued default interest and (2) the pro rata amount that Everstream Debtor
would have needed to fund in response to an additional capital call to all of the Everstream
Partnership’s limited partners in the total amount of $8,337,962.00 if Everstream Debtor’s
partnership interest had not been terminated. 	Defendants stated that Everstream Debtor’s
partnership interest would remain “extinguished for no consideration” unless and until the
Everstream Partnership received the full amount of the March 2016 Capital Call.
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Everstream Debtor made no payment in response to the March 2016 Capital Call.
Defendants, in a letter dated April 22, 2016 (the “April 2016 Letter”), notified Everstream Debtor
that it would not be reinstated as a limited partner and that its partnership interest, to the extent not
extinguished as of February 2016, was being extinguished in exchange for “no consideration.”
B. Ensuing Procedural History
On April 21, 2016, SunEdison and certain of its affiliates, including NVT, commenced
voluntary cases under Chapter 11 of the Bankruptcy Code. Everstream Debtor filed its Chapter
11 case on July 20, 2016. [See Bankr. S.D.N.Y. 16-12058, ECF No. 1].
On April 19, 2019 Plaintiff, on behalf of Everstream Debtor, filed an adversary proceeding
complaint against Defendants in this Court. [ECF No. 1 (the “Initial Complaint”)]. Plaintiff’s
Initial Complaint included two causes of action: a claim for fraudulent transfer pursuant to Sections
548 and 550 of the Bankruptcy Code, and a claim for disallowance of claims pursuant to Section
502(d) of the Bankruptcy Code. [Id. ¶¶ 35–43].
As noted, in 2021, Plaintiff moved for leave to amend its Initial Complaint. 	Plaintiff
submitted a proposed amended complaint that added a claim for breach of contract, essentially
asserting that the Everstream Partnership breached the Partnership Agreement by deeming
Everstream Debtor’s prior capital-call payments in excess of $21 million to have been forfeited as
a consequence of its failure to honor subsequent capital calls.
Over Defendants’ objections including on grounds of futility, the Court granted leave to
amend, concluding that Partnership Agreement Section 6.6 and the agreement overall were
ambiguous and susceptible of the reading Drivetrain urged. Drivetrain subsequently filed the First
Amended Complaint. [ECF No. 43]. Defendants answered the First Amended Complaint [ECF
No. 46], and the case proceeded to discovery, [ECF No. 48 (the “Discovery Schedule”)]. 	The
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Discovery Schedule sets forth May 22, 2022 as the deadline for fact discovery and August 17,
2022 as the deadline for expert discovery. [Discovery Schedule ¶¶ 2, 5].
C. 	The Current Motion to Amend
Drivetrain has now moved for leave to amend the complaint a second time. [ECF No. 50].
The proposed Second Amended Complaint asserts a new claim or cause of action for breach of
fiduciary duty, and adds two new defendants, Lee and Pflaum, solely on the fiduciary duty breach
claim. [ECF No. 50-2]. The Second Amended Complaint includes new factual allegations that,
in essence, Everstream General Partner and its principals Lee and Pflaum violated the Partnership
Agreement when they extinguished Everstream Debtor’s partnership interest without first
obtaining the approval of the advisory committee of limited partners (the “LP Advisory
Committee”) notwithstanding that these defendants stood to financially benefit from the
extinguishment of Everstream Debtor’s partnership interest. 	[SAC ¶¶ 29, 34]. 	The only
modification contained in the claims or causes of action portion of the Second Amended Complaint
is the addition of a new claim against Everstream General Partner, Lee, and Pflaum “[u]nder
Delaware law” for “breach of fiduciary duty” based on their elimination of Everstream Debtor’s
interest without prior approval from the LP Advisory Committee. 	[SAC ¶¶ 51-57]. 	Drivetrain
further asserts that it learned only in January 2022 that the decision to extinguish its interest was
made without clearance by the LP Advisory Committee, notwithstanding that the decisionmakers
Lee and Pflaum were not disinterested in that decision. Defendants oppose the motion to amend
on grounds of futility and undue delay. [ECF No. 51].
The Court held a hearing on the Motion on March 15, 2021 (the “Hearing”). Following
oral argument, the Court reserved decision.
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DISCUSSION
A. Legal Standards
Rule 15(a) of the Federal Rules of Civil Procedure, made applicable to this adversary
proceeding pursuant to Rule 7015 of the Federal Rules of Bankruptcy Procedure, governs motions
for leave to amend pleadings. When the timing and procedural status limitations that are set forth
in Rule 15(a)(1) are met, a party may amend its pleading as a matter of course. Fed. R. Civ. P.
15(a)(1). But when a party seeks to amend its pleadings outside of those authorized circumstances,
Rule 15(a)(2) requires that the opposing party must consent or the plaintiff must obtain leave of
court. The decision to grant or deny a motion to amend rests in “the sound judicial discretion of
the trial court.” Adelphia Recovery Tr. v. FPL Grp., Inc. (In re Adelphia Commc’ns Corp.), 452
B.R. 484, 489 (Bankr. S.D.N.Y. 2011) (quoting Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47
(2d Cir. 1983)).
Generally, a court “should freely give leave when justice so requires,” but may deny a
motion to amend in instances of undue delay, bad faith, dilatory motive, undue prejudice to the
opposing party, or futility. Fed. R. Civ. P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962).
The “presence of any one of these factors can be sufficient to deny a motion to amend a complaint.”
In re AMR Corp., 506 B.R. 368, 382 (Bankr. S.D.N.Y. 2014). Here, Defendants assert that the
breach of fiduciary duty claim in the proposed Second Amended Complaint is futile for reasons
including that the Partnership Agreement’s exculpation provision eliminates otherwise-applicable
fiduciary duties to the extent they are not specifically incorporated in applicable agreements. [See
Opposition at 10–15].
An amendment to a pleading is considered futile “if the proposed claim [cannot] withstand
a motion to dismiss” pursuant to Rule 12(b)(6). Lucente v. Int’l Bus. Machs. Corp., 310 F.3d 243,
258 (2d Cir. 2002). To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain
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“sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted);
accord Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility is achieved when
the “plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged,” beyond a “sheer possibility that a defendant acted
unlawfully.” Iqbal, 556 U.S. at 677–78; accord Twombly, 550 U.S. at 556. The Second Circuit
has explained that the court must determine “whether the well-pleaded factual allegations, assumed
to be true, plausibly give rise to an entitlement to relief.” Hayden v. Paterson, 594 F.3d 150, 161
(2d Cir. 2010) (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 679).
In considering such a motion, “courts must consider the complaint in its entirety as well as
other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in
particular, documents incorporated into the complaint by reference, and matters of which a court
may take judicial notice.” Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard
L. Madoff Inv. Sec. LLC), Adv. No. 08-01789, 2020 WL 401822, at *4 (Bankr. S.D.N.Y. Jan. 23,
2020) (“Madoff I”) (quoting Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007)).
Such sources include “documents that the plaintiff relied on in bringing suit and that are either in
the plaintiff’s possession or that the plaintiff knew of when bringing suit.” Madoff I, 2020 WL
401822 at *4 (citations omitted). 	When a complaint cites excerpts of a document, a court may
consider other parts of the same document submitted for purposes of a motion to dismiss. Id.; see
also Picard v. Magnify Inc. (In re Bernard L. Madoff Inv. Sec. LLC), 583 B.R. 829, 840 (Bankr.
S.D.N.Y. 2018) (noting that a complaint is “deemed to include any written instrument attached to
it as an exhibit, documents incorporated in it by reference and other documents ‘integral’ to the
complaint”) (citations omitted).
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A court may also deny leave to amend a complaint “where the motion is made after an
inordinate delay,” the plaintiff does not satisfactorily explain the delay, and where amendment
would prejudice the defendant. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir. 1990);
Fontoine v. Permanent Mission of Chile to United Nations, No. 17 Civ. 10086, 2019 WL 2482374,
at *3 (S.D.N.Y. June 14, 2019); Cerni v. J.P. Morgan Sec. LLC, 208 F. Supp. 3d 533, 543–44
(S.D.N.Y. 2016). The nonmoving party’s required showing of prejudice decreases as the length
of delay increases. Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (“[T]he longer
the period of an unexplained delay, the less will be required of the nonmoving party in terms of a
showing of prejudice.”) (internal quotation marks omitted). But delay, absent a showing of bad
faith or undue prejudice, is not a standalone basis for denying a motion to amend. Ruotolo v. City
of New York, 514 F.3d 184, 191 (2d Cir. 2008).
B. Analysis
The first time that Drivetrain sought leave to amend its complaint, the Court considered
documents that were integral to the complaint albeit beyond that complaint’s four corners: the
Subscription Agreement, the Partnership Agreement, and the February 2016 and April 2016
Letters. Drivetrain I at *4. The Second Amended Complaint continues to rely on and/or quote
from those same four documents. [SAC ¶¶ 20, 24, 27–29, 31]. Defendants invoke the Partnership
Agreement by contending that it eliminates fiduciary duties, thus rendering the proposed Second
Amended Complaint futile. 	[Opposition at 10–15]. 	Further, Drivetrain’s Reply Memorandum
references additional provisions of the Partnership Agreement not cited in the Second Amended
Complaint to support its contention that the Partnership Agreement’s provisions create ambiguity
concerning the asserted need for LP Advisory Committee approval of actions taken pursuant to
the agreement’s Section 6.6(a). 	[ECF No. 52 (“Reply”) at 2, 5–6]. 	Accordingly, such sources
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may be considered in evaluating the merits of the Motion under the Rule 12(b)(6) and Rule 15
standard of review.
The parties’ rights and obligations under the Partnership Agreement are governed by
Delaware law. [Partnership Agreement § 19.5]. Under Delaware law, courts “give priority to the
intention of the parties.” 	In re Live Primary, LLC, 626 B.R. 171, 191 (Bankr. S.D.N.Y. 2021)
(citations omitted). 	In discerning the parties’ intent, courts look first to the contract’s express
language. 	Id. (citations omitted). 	For partnership agreements, it is the “policy of [Delaware
statute] to give maximum effect to the principle of freedom of contract and to the enforceability of
partnership agreements.” 6 Del. C. § 17-1101(c).
A Delaware-law claim for breach of fiduciary duty requires that a plaintiff make out two
elements, (1) the existence of a fiduciary duty and (2) the defendant’s breach of that duty. Palmer
v. Reali, 211 F. Supp. 3d 655, 666 (Bankr. D. Del. 2016) (quoting Beard Rsch., Inc. v. Kates, 8
A.3d 573, 601 (Del. Ch. 2010). One such duty— the duty of loyalty — “mandates that the best
interest of the corporation and its shareholders takes precedence over any interest possessed by a
director, officer, or controlling shareholder and not shared by stockholders generally.” 	Official
Comm. of Unsecured Creditors of Fedders N. Am., Inc. v. Goldman Sachs Credit Partners L.P.
(In re Fedders N. Am., Inc.), 405 B.R. 527, 544 (Bankr. D. Del. 2009) (quotation marks omitted).
To state a Delaware-law breach of this duty, a plaintiff must plead two more loyalty-specific
elements, (1) the occurrence of a self-interested transaction, and (2) one that was unfair to the
plaintiff. In re USDigital, Inc., 443 B.R. 22, 44 (Bankr. D. Del. 2011).
A director is considered “interested” where he or she stands to obtain a “‘personal financial
benefit from a transaction that is not equally shared by the stockholders.’” 	Id. (quoting In re
Bridgeport Holdings, Inc., 388 B.R. 548, 564 (Bankr. D. Del. 2008)). In addition, a plaintiff can
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premise a claim for breach of fiduciary duty on the failure to act in good faith. Id.; Stone v. Ritter,
911 A.2d 362, 370 (Del. 2006). This derives from the premise that the failure to act in good faith,
or “‘abdicating one’s directorial duties,’” is the equivalent of breaching the duty of loyalty. In re
Bridgeport Holdings, Inc., 338 B.R. at 564 (quoting Alberts v. Tuft (In re Greater Se. Cmty. Hosp.
Corp. I), 353 B.R. 324, 344 (Bankr. D.D.C. 2006) (emphasis in original)).
Drivetrain contends that Everstream General Partner owed a fiduciary duty of loyalty to
Everstream Debtor under Delaware law 	[Motion at 10; SAC ¶¶ 51–52]. 	It contends that this
asserted duty was breached because Everstream General Partner (i) stood to and did receive a
benefit from the extinguishment of Everstream Debtor’s partnership interest [Motion at 10; SAC
¶ 53]; (ii) did so without employing a fair process or yielding a fair price for Everstream Debtor
[Motion at 12–14]; and (iii) did not follow Section 9.2(a) of the Partnership Agreement because it
did not first obtain the approval of the LP Advisory Committee before extinguishing Everstream
Debtor’s partnership interest [id. at 12–13; SAC ¶ 55], while also violating Delaware law by not
paying fair value for Everstream Debtor’s partnership interest [Motion at 13–14; SAC ¶ 56].
As to the proposed new individual defendants, Drivetrain alleges that Lee and Pflaum, as
at least the functional equivalent of directors and controlling shareholders of corporate general
partners, are fiduciaries of limited partners. [Motion at 14–16; SAC ¶ 52]. Drivetrain alleges that
Lee and Pflaum controlled Everstream General Partner’s day-to-day activities and they made the
decision to extinguish Everstream Debtor’s interest [Motion at 15; SAC ¶¶ 18, 25], and that Lee
and Pflaum personally benefitted from that decision. [Motion at 15; SAC ¶ 35].
Defendants raise several futility arguments opposing the proposed amendment, relying in
substantial part on Section 15.1 of the Partnership Agreement, whose title refers to “exculpation”
and which exculpates any “Everstream Affiliate” (Everstream General Partner) or principal (such
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as Lee and Pflaum) for any loss suffered by Everstream Debtor except in the event of willful
misconduct, fraud, gross negligence, or material breach of the Partnership Agreement. 	[See
Opposition at 14–15]. 	In reply, Drivetrain argues that Section 15.1 does not preempt fiduciary
duties because, while exculpation clauses may limit or preclude damages for breach of fiduciary
duty, they leave in place the duty itself. [Reply at 5]. Further, Drivetrain contends, Section 15.1
and the Partnership Agreement merely confer discretion on Everstream General Partner, which is
legally insufficient to eliminate potential liability for willful misconduct, and thus preserves the
common law duty of loyalty. [Id. at 5-6]. Drivetrain further argues that it has also sufficiently
alleged bad faith, although it bases this contention on its view that Everstream General Partner
acted “without a pre-existing contractual right to do so.” [Id. at 6].
The Court concludes, in a nutshell, that Drivetrain’s argument overlooks and fails to give
effect to the last sentence of Section 15.1, which explicitly overrides otherwise-applicable
fiduciary duties to the extent inconsistent with the governing agreements: 	“To the maximum
extent permitted by law, each Exculpated Party’s duties to the Partnership, any Partner or any other
Person shall be eliminated and replaced with and limited to those set forth in this Agreement.”
This degree of specificity belies Drivetrain’s arguments that the applicable agreements do not
override ordinarily applicable fiduciary duties, and, further, distinguishes this case from those
where courts have concluded that a mere conferral of discretion or other non-explicit text is
insufficient to extinguish fiduciary duties that are imposed as background legal requirements
unless contractually disclaimed. 	Rather, the contract includes the sort of duty waiver or
modification that Delaware law allows.
The Partnership Agreement states that it is governed by the Delaware Revised Uniform
Limited Partnership Act ( “DRULPA”), 6 Del. C. § 17-002. [Partnership Agreement §§ 1, 2.1].
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DRULPA allows limited partnership agreement drafters to “disclaim” fiduciary duties and replace
them with contractual duties. Brinckerhoff v. Enbridge Energy Co., Inc., 159 A.3d 242, 252 (Del.
2017) (citing 6 Del. C. § 17-1011(d)). The statute also makes it possible for drafters to limit or
eliminate liability for breach of fiduciary duties to a limited partnership, another partner, or another
person bound by the limited partnership agreement, provided that the agreement does not limit or
eliminate liability for “any act or omission that constitutes a bad faith violation of the covenant of
good faith and fair dealing.” Refco Grp. Ltd., LLC v. Cantor Fitzgerald, L.P., No. 13 Civ. 1654,
2014 WL 2610608, at *21 (S.D.N.Y. June 10, 2014) (citing 6 Del. C. § 17-1011(f)); see also
Trahan v. Lazar, 457 F. Supp. 3d 323, 346–47 (S.D.N.Y. 2020) (discussing an LPA’s ability under
DRULPA to “replace” fiduciary duties with contractual duties).
Delaware courts, applying Chancery Court Rule 12(b)(6) which is analogous to but less
exacting than federal civil rule 12(b)(6), see Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 813 n.12
(Del. 2013) (“The Twombly/Iqbal plausibility standard is more rigorous than Delaware’s
counterpart pleading standard.”), have dismissed causes of action for breach of fiduciary duty for
failure to state a claim where the drafters of a limited partnership agreement “took advantage of
DRULPA’s flexibility” and eliminated default fiduciary duties in favor of contractually specified
ones, see Allen v. Encore Energy Partners, L.P., 72 A.3d 93, 100–01 (Del. 2013). Courts reason
that in such contracts, the enumerated contractual duties and the implied covenant of good faith
and fair dealing are the “only duties” owed in the aftermath of disclaiming fiduciary duties.
Lonergan v. EPE Holdings, LLC, 5 A.3d 1008, 1017 (Del. Ch. 2010).
DRULPA requires drafters wishing to take advantage of this legal flexibility to “clearly
and unambiguously” disclaim fiduciary duties. See Miller v. Am. Real Estate Partners, L.P., No.
CIV.A.16788, 2001 WL 1045643, at *8 (Del. Ch. Sept. 6, 2001). At the same time, the statute’s
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very existence puts contract parties on notice that they may be signing an agreement that disclaims
fiduciary duties. See The Haynes Family Tr. v. Kinder Morgan G.P., Inc., 135 A.3d 76 at *2 n.2
(Del. 2016).
The 	last 	sentence 	of 	Section 	15.1 	of 	the 	Partnership 	Agreement 	“clearly 	and
unambiguously” disclaims fiduciary duties, providing (to repeat from above) that, “[t]o the
maximum extent permitted by law, each Exculpated Party’s duties to the Partnership, any Partner
or any other Person shall be eliminated and replaced with and limited to those set forth in this
Agreement.” [Partnership Agreement § 15.1]. This language compares favorably with contractual
language that the Delaware Court of Chancery has held sufficed to disclaim 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 [BB GP] 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.
Wenske v. Blue Bell Creameries, Inc., No. 2017-0699, 2018 WL 3337531, at *12 (Del. Ch. July 6,
2018). The Supreme Court of Delaware also has ruled, on multiple occasions, that even contractual
provisions that did not expressly mention fiduciary duties by specifically using the word
“fiduciary” could nonetheless disclaim them. See Brinckerhoff, 159 A.3d at 253; Norton v. K-Sea
Transp. Partners L.P., 67 A.3d 354, 361 (Del. 2013).
Nor has Drivetrain alleged facts sufficient to show that any duty “set forth in” the
Partnership Agreement or any other governing agreement establishes the type of fiduciary duty
that Drivetrain alleges Defendants violated. 	In fact, Drivetrain’s proposed new cause of action
alleges violation of “Delaware law,” not any particular contractual provision. 	[SAC ¶¶ 51-57].
And, while Section 15.1 of the Partnership Agreement does carve out from exculpation acts
constituting “willful misconduct, fraud or gross negligence,” the proposed Second Amended
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Complaint does not allege facts permitting a plausible inference of any such conduct. Rather, at
most, Drivetrain alleges that the General Partner and its leaders stood to benefit from the
elimination of Everstream Debtor’s partnership interest because Everstream General Partner —
like all limited partners — would eventually receive payment from partnership distributions, which
Plaintiff alleges would increase if amounts otherwise due to Everstream Debtor were eliminated.
[SAC ¶¶ 53-54]. Neither Everstream Debtor nor this Court has identified law characterizing such
an assertedly self-interested or self-benefitting decision as rising to the level of fraud, willful
misconduct, or gross negligence.
Indeed, there is a serious question whether Drivetrain has even plausibly alleged facts
showing a violation of Section 9.2 of the Partnership Agreement, which is the provision that
discusses approvals by the LP Advisory Committee. Section 9.2(a) specifies types of conflict-of-
interest transactions for which the Partnership Agreement envisions that LP Advisory Committee
approval would be required, and those specific examples do not include the type of conduct alleged
here. 	Further, various other provisions of the Partnership Agreement specify restrictions or
procedures governing potentially conflicted transactions or management actions. 	[See., e.g.,
Partnership Agreement § 3.5 (multiple subsections establishing procedural and substantive
requirements for transactions with affiliate companies)]. But the provisions that Defendants rely
on as directly authorizing their discretionary decision to eliminate Everstream Debtor’s partnership
interest — Sections 6.2 and 6.6 — do not reference Section 9.2’s committee approval requirement,
they broadly confer discretion on Everstream General Partner, and they do not include any
procedural safeguards like those set forth in Section 3.5 as to affiliate transactions. Thus, it is a
stretch to assert even that there has been a contractual breach of Section 9.2. Moreover, and most
salient for purposes of the Motion, because the proposed Second Amended Complaint seeks not
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to expand on Drivetrain’s contract-breach claim but rather to add a new Delaware-law claim for
breach of an asserted fiduciary duty (as seemingly would be necessary to add individual-capacity
claims against Lee and Pflaum), whether Section 9.2 was or was not complied with does not
support the legal sufficiency of the proposed claim for breach of fiduciary duty.
Drivetrain’s response to Section 15.1 entirely fails to grapple with the section’s explicit
duty-eliminating last sentence. Rather, Drivetrain objects that exculpation clauses in general serve
not to “preempt background fiduciary duties,” but to “restrict[] the remedy that a party may seek
by limiting or eliminating monetary liability.” [Reply at 5.] Whether that point ordinarily might
or might not permit the successful assertion of a breach-of-duty claim against exculpated
individuals, Drivetrain supplies no answer for the explicit duty-eliminating sentence at the end of
Section 15.1. As discussed above, that sentence clearly and unambiguously disclaims generally-
applicable duties, whether fiduciary or otherwise, and limits parties to the Partnership Agreement
to whatever rights and duties are imposed by that agreement.
Nor does case law cited in Drivetrain’s reply support the result they seek. In addressing
Partnership Agreement Section 15.1, Drivetrain cites three cases, Feeley v. NHAOCG, LLC, 62
A.3d 649 (Del. Ch. 2012); Miller, supra; and Gelfman v. Weeden Investors, L.P., 859 A.2d 89
(Del. Ch. 2004). [Reply at 5–6]. Feeley is inapposite because it interprets not DRULPA and its
recognition of the attendant power to disclaim fiduciary duties in the limited partnership context,
but the Delaware LLC Act. See Feeley, 62 A.3d at 664–65. And Miller and Gelfman if anything
support the principle that a limited partnership agreement may eliminate fiduciary duties. 	See
Gelfman, 859 A.2d at 112 n.23 (observing that DRULPA allows a limited partnership to expand
or restrict fiduciary duties); 2001 WL 1045643, at *8 (”DRULPA puts investors on notice that
fiduciary duties may be altered by partnership agreements.”). Further, while Gelfman did not rule
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out the possibility that claims of bad-faith managerial conduct might not fall within the law
authorizing disclaiming of fiduciary duties, cf. 859 A.2d at 112, the Second Amended Complaint
does not purport to assert such a claim, and instead raises only a claim for breach of fiduciary duty,
cf. Lonergan, 5 A.3d at 1017 (“The implied covenant [of good faith and fair dealing] is not a
substitute for fiduciary duty analysis”). The Partnership Agreement is also distinguishable from
the agreement at issue in Miller because the Partnership Agreement in question here expressly says
that each Exculpated Party’s duties shall be “eliminated and replaced” with those set forth in the
Agreement. Thus, unlike in Miller, Defendants do not ask the Court to supplant fiduciary duties
by implication. 2001 WL 1045643, at *8; see also Lipman v. GPB Cap. Holdings, LLC, No. 2020-
54, 2020 WL 6778781, at *7 (Del. Ch. Nov. 18, 2020) (“They thus arrive at a much more expansive
limitation on liability. 	But that is not what the provision says.”). 	In the face of this express
contractual override of fiduciary duties, Drivetrain fails to state a viable claim for breach of
fiduciary duty.
Defendants raise other arguments, notably including a time-bar theory that would require
assessment of the relation back doctrine, and an undue delay defense based on Drivetrain’s not
having raised fiduciary duty claims until six years after the underlying conduct and nearly three
years after it commenced this adversary proceeding. Drivetrain responds that it learned of the lack
of LP Advisory Committee approval only early this year in the course of discovery. The Court
need not and does not resolve these arguments in light of its futility-based denial of the Motion.
CONCLUSION
For the foregoing reasons, the Court denies the Motion. Plaintiff shall submit a proposed
order in a form acceptable to Drivetrain’s counsel, or, if consent is not forthcoming, shall settle an
order on five business days’ notice by filing a notice of the proposed order on the Case
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Management/Electronic Case Filing docket, with a copy of the proposed order attached as an
exhibit to the notice. The parties are encouraged to attempt to reach agreement on the form of the
proposed order. If the parties believe a case management conference would be useful at this time,
they may contact chambers to schedule one.
IT IS SO ORDERED.
Dated: New York, New York 	s/ David S. Jones
April 26, 2022 	HONORABLE DAVID S. JONES
UNITED STATES BANKRUPTCY JUDGE
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