IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE YOUNG WOMEN’S CHRISTIAN ) ASSOCIATION OF ROCHESTER AND ) MONROE COUNTY, ) ) Plaintiff, ) ) v. ) C.A. No. 2024-1264-JTL ) HATTERAS FUNDS, LP, HATTERAS ) INVESTMENT PARTNERS, LP, DAVID B. ) PERKINS, H. ALEXANDER HOLMES, ) STEVEN E. MOSS, GREGORY S. SELLERS, ) THOMAS MANN, BENEFICIENT, and ) BRADLEY K. HEPPNER, ) ) Defendants, ) ) and. ) ) HATTERAS MASTER FUND, L.P. and ) HATTERAS CORE ALTERNATIVES TEI ) INSTITUTIONAL FUND, L.P., ) ) Nominal Defendants. )

OPINION ADDRESSING RULE 12(B)(6) MOTION

Date Submitted: December 5, 2025 Date Decided: March 27, 2026 William M. Alleman, Jr., MELUNEY ALLEMAN & SPENCE, LLC, Lewes, Delaware; Aaron T. Morris, Andrew W. Robertson, William H. Spruance, MORRIS KANDINOV LLP, New York, New York; Attorneys for Plaintiff. Elena C. Norman, Richard J. Thomas, YOUNG CONAWAY STARGATT & TAYLOR LLP, Wilmington, Delaware; Melanie B. Dubis, Corri A. Hopkins, PARKER POE ADAMS & BERNSTEIN LLP, Raleigh, North Carolina; Attorneys for Defendants David B. Perkins and Hatteras Investment Partners, LP (f/k/a Hatteras Funds, LP). Stephen B. Brauerman, Brett M. McCartney, BAYARD, P.A., Wilmington, Delaware; Joshua L. Solomon, Phillip Rakhunov, POLLACK SOLOMON DUFFY LLP, Boston, Massachusetts; Attorneys for Defendants H. Alexander Holmes, Steven E. Moss, Gregory S. Sellers, and Thomas Mann. Stephen C. Norman, Ellis H. Huff, Samuel G. Gustafson, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Attorneys for Defendant Beneficient Bradley K. Heppner, Dallas, Texas; Defendant, Pro Se Scott J. Leonhardt, Jared T. Green, Katherine R. Welch, ESBROOK P.C., Wilmington, Delaware; Jennifer K. Van Zant, Greg Gaught, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD LLP, Raleigh, North Carolina; Attorneys for Nominal Defendants Hatteras Master Fund, L.P. and Hatteras Core Alternatives TEI Institutional Fund, L.P. LASTER, V.C.

An investment manager oversees a group of investment funds (the “Investment Manager”). The principal investment fund is organized as a Delaware limited partnership and provides access to alternative investments through a fund-of-funds strategy (the “Master Fund”). One of its fundamental investment policies requires maintaining diversification by prohibiting the Master Fund from investing more than 25% of its assets in a single issuer (the “Diversification Policy”).

The Master Fund does not accept investments directly from third-party investors. It uses a master-feeder structure in which feeder funds (the “Feeder Funds”) raise capital and channel it into the Master Fund.^[1] The Master Fund and the Feeder Funds have substantially identical limited partnership agreements. An affiliate of the Investment Manager serves as the general partner of each fund, but delegates its managerial authority over the business and affairs of the fund to a board of directors (the “Board” or the “Directors”). The limited partnership agreements provide that the Directors owe the same fiduciary duties as directors of a Delaware corporation. Rather than fully exculpating the Directors from liability for breaches of duty, the limited partnership agreements preserve liability for gross negligence.

After an initial period of success during which assets under management (“AUM”) grew dramatically, the Master Fund experienced a similarly lengthy period terminated their engagements. Four independent directors had resigned. The Security and Exchange Commission was investigating the firm’s accounting practices. And goodwill arising from the interested transactions comprised 88% of the assets on its balance sheet.

When the Investment Manager presented the Asset Sale to the Board, the Directors approved it immediately. They did not receive a fairness opinion or consult with any outside advisors. After the Asset Sale closed, the Directors allowed the Investment Manager to send belated and misleading communications to the Feeder Fund investors.

The Board ostensibly approved the Asset Sale as part of a plan of liquidation for the Master Fund and its feeder funds (the “Dissolution Plan”). Yet after the Asset Sale, the Directors and the Investment Manager did not take any steps to pursue the Dissolution Plan. They also did not take any steps to protect the Master Fund against loss from its now-single investment in the Preferred Units.

Eighteen months later, the Buyer completed a de-SPAC transaction that converted the Preferred Units into publicly traded common stock valued at $8 per share. Although the Master Fund now held a liquid security, the Directors and the Investment Manager did not take any steps to diversify the Master Fund’s assets, wind down its operations, or protect the Master Fund against loss from its singular investment.

In the months following the de-SPAC transaction, the Buyer wrote off the bulk of its goodwill. Its stock price plummeted, ultimately trading for pennies. The Master Fund still has not sold any of the Buyer’s shares. The Master Fund’s AUM has fallen by 98%, with Feeder Fund investors bearing those losses.

Meanwhile, during the time that the Investment Manager and the Directors did nothing, the Master Fund continued to pay the Investment Manager an annual fee equal to 1% of its AUM, even though the Master Fund had gone from holding over 100 different funds to owning a single security. That arrangement yielded over $10 million for the Investment Manager.

One of the investors in a Feeder Fund asserted double-derivative claims on behalf of the Master Fund. The plaintiff claims that the Directors and the Investment Manager breached their fiduciary duties by (i) approving the Asset Sale, (ii) failing to pursue the Dissolution Plan, and (iii) allowing the Investment Manager’s advisory agreement to renew each year without any change in the Investment Manager’s annual fee to reflect the Master Fund’s dramatically different situation. The plaintiff also claims that the Buyer and its CEO aided and abetted the Directors and Investment Manager in breaching their fiduciary duties in connection with the Asset Sale.

The outside directors, the Buyer, and its CEO moved to dismiss the claims against them, contending that the allegations failed to state claims on which relief can be granted. At the pleading stage, the complaint states claims on which relief can be granted against the outside directors and the Buyer. It does not state a claim on which relief can be granted against the Buyer’s CEO.

I. FACTUAL BACKGROUND

The facts are drawn from the amended complaint (the “Complaint”), documents the Complaint incorporates by reference, and documents subject to judicial notice.^[2] At this procedural stage, the court must credit the Complaint’s well- pled allegations and draw all reasonable inferences in the plaintiff’s favor.

A. The Fund Complex

The fund complex at the center of the case does business under the “Hatteras” trade name. In 2003, David B. Perkins cofounded the fund complex with the goal of establishing funds that would provide investors with access to alternative investment strategies—think of hedge funds and private equity funds—through a fund-of-funds approach. By pooling their capital through a fund of funds, smaller investors could attain levels of diversification similar to what larger investors could achieve.

The central management entity in the fund complex is the Investment Manager, formally known as Hatteras Funds, LP and now doing business as Hatteras Investment Partners, LP. ^[3] Perkins controls the Investment Manager, owns a majority of its equity, and serves as its President and CEO.

The fund complex’s principal investment vehicle is the Master Fund, formally known as the Hatteras Master Fund, L.P. The Master Fund’s investment goal is “to provide capital appreciation consistent with the return characteristics of the alternative investment portfolios of larger institutions . . . . [and] to provide capital appreciation with less volatility than that of the equity markets.”4 The Master Fund told its investors that to achieve its investment goal, it typically would invest in approximately fifty different alternative investment products. At the time of the Asset Sale, the Master Fund had investments in around 125 different alternative investment products.

The Master Fund implemented its commitment to diversification through the Diversification Policy. That policy prohibits the Master Fund from investing “25% or more of the value of its total assets in the securities . . . of any one issuer.”5

The Master Fund is a Delaware limited partnership, and is internal affairs are governed by its limited partnership agreement (the “LP Agreement”). An affiliate of the Investment Manager serves as the Master Fund’s general partner,6 but under the LP Agreement, the general partner has irrevocably delegated its rights and powers to manage the business and affairs of the Master Fund to the five-member Board. Perkins serves as Chair. The other Directors are H. Alexander Holmes, Steven E. Moss, Gregory S. Sellers, and Thomas Mann (the “Outside Directors”).

None of the Outside Directors have affiliations with the fund complex other than through their directorships. But, as discussed later, they have served in their positions for decades and benefit from their association with Perkins and the Investment Manager.

Another affiliate of the Investment Manager serves as the Master Fund’s investment advisor under a fund advisory agreement (the “Advisor Agreement”). 7 The Advisor Agreement requires that the Investment Manager develop and monitor an investment program for the Master Fund. That task involves determining “what investments shall be purchased, held, sold or exchanged by the Master Fund and what portion, if any . . . shall be held uninvested . . .” 8 The Advisor Agreement empowers the Investment Manager to “make changes in the investments of the Master Fund,”9 subject to Board oversight and fundamental investment policies like the Diversification Policy.

The Advisor Agreement provides for both an annual fee and a performance fee. The Investment Manager receives an annual fee equal to 1.00% of the Master Fund’s net AUM (the “Annual Fee”). The Investment Manager receives a performance fee equal to 10% of the amount by which the Master Fund’s net profits exceed the yield- to-maturity of treasury bills (the “Performance Fee”). The Performance Fee incorporates a high-watermark mechanism, meaning if the Master Fund suffers a net loss in any period, the Investment Manager must recover the loss before receiving any additional Performance Fees. Because of the amount of losses the Master Fund has suffered, the Investment Manager is unlikely to see any Performance Fees for the foreseeable future.

The Investment Manager engaged Portfolio Advisors, LLC, a non-party, as a sub-adviser to assist in identifying and monitoring alternative investment providers. For its services, Portfolio Advisors receives a portion of the Annual Fee and any Performance Fees.

B. The Feeder Funds

The Master Fund does not raise capital directly. The Master Fund and the Investment Manager instead use a common fund-industry structure in which feeder funds channel capital into the Master Fund.

Four Delaware limited partnerships serve as the Feeder Funds for the Master Fund. Each invests all of its assets in the Master Fund.

Each Feeder Fund has the same governance structure as the Master Fund, including the same general partner (the Investment Manager), the same investment advisor (the Investment Manager), and the same board of directors (the Board). Each has the same investment objectives and fundamental policies as the Master Fund, including the Diversification Policy.

The four Feeder Funds come in two pairs. One pair targets investors generally and consists of the Hatteras Core Alternatives Fund, L.P. and the Hatteras Core Alternatives TEI Fund, L.P. (the “Original Feeder Funds”). A second pair targets institutional investors and consists of the Hatteras Core Alternatives Institutional Fund, L.P. and the Hatteras Core Alternatives TEI Institutional Fund, L.P. (the “Institutional Feeder Funds”).

The two “TEI” funds are for tax-exempt investors. They invest in the Master Fund through intervening off-shore blocker entities designed to prevent the tax- exempt funds from accumulating unrelated business income. The offshore blocker entities in turn invest all of their assets in the Master Fund. The blocker entities have no investment discretion and make no independent decisions. For purposes of legal analysis, the parties ignore the blocker entities. So does this decision.

The following diagram from the Prospectus depicts the basic fund structure:

The Master Fund and the Feeder Funds are registered as closed-end, diversified, investment management companies under the Investment Company Act of 1940 (the “1940 Act”). The Feeder Funds’ status as close-end funds means that investors have minimal liquidity opportunities. In an open-end fund, an investor can redeem its units at the end of each trading day at the fund’s net asset value. Not so in a closed-end fund. Many closed-end funds mitigate that limitation by listing their limited partnership interests, known as units, on a public exchange. The Feeder Funds’ units do not trade publicly, nor are their units freely transferrable.

The only meaningful opportunity for liquidity that Feeder Fund investors had was to ask to have their units repurchased. To address repurchase requests, the Investment Manager historically caused the Feeder Funds to make periodic tender offers for units, usually quarterly. The Investment Manager determined when to make a tender offer and how many units to repurchase, although always less than 20% of the units outstanding. Typically, the Investment Manager capped the number of units accepted for repurchase at 5% of the outstanding units. If investors tendered more, then the repurchases were prorated. Because of the limit on repurchases and the reality of proration, it could take multiple quarters for an investor to exit.

C. The Road To The Asset Sale

The Investment Manager launched the Master Fund and the Original Feeder Funds in 2003. The Investment Manager added the Institutional Feeder Funds in 2007. AUM grew rapidly, peaking in 2013 at more than $624 million. The Investment Manager’s fees grew as well, topping $15.2 million.

After 2013, the flow of investment dollars reversed. The Master Fund experienced a steady stream of tender requests as investors sought to exit. Because of the Master Fund’s fund-of-funds structure, the tender requests created liquidity pressure. Investments in alternative fund providers are illiquid, so the Master Fund could not readily sell investments to generate capital for the tender offers.

By 2020, AUM had fallen by more than half. The Investment Manager’s fees had fallen even further to around $3.9 million per year. With tender requests continuing, Perkins decided to shut down the existing funds and start over with new funds. Ideally, however, he would use the Master Fund’s remaining AUM—valued at approximately $305 million—to seed the new funds.

The solution came through a transaction with the Buyer, then known formally as The Beneficient Company Group, L.P. It, too, was a Delaware limited partnership. Bradley K. Heppner is its founder, Chief Executive Officer, and Chairman.

The Buyer provides liquidity solutions for illiquid alternative investments— exactly what Perkins needed. At the time, however, the Buyer was still a startup. It had only been in business for four years and was not yet profitable. The Buyer also did not expect to generate positive cash flow from its operations in the near term. It needed capital to expand.

Much of the Buyer’s value was attributable to goodwill. Its financial statements for 2020 identified $2.82 billion in total assets. Goodwill accounted for $2.36 billion, or 84%.

That goodwill largely resulted from a series of interested transactions between the Buyer and GWG Holdings, Inc., its former parent. GWG specialized in selling bonds backed by life settlements. Between 2017 and 2020, the Buyer and GWG engaged in a series of transactions that resulted in the Buyer and GWG inverting their relationship. After those transactions, the Buyer controlled GWG.

The GWG transactions raised red flags. In July 2019, the Buyer’s CFO resigned and expressed concern that Heppner was using the GWG transactions to misappropriate funds. In October 2019, four outside directors who served on both the Buyer and GWG boards resigned after objecting to the GWG transactions. During that year, two successive audit firms terminated their engagements. In October 2020, the SEC’s Division of Enforcement subpoenaed GWG’s documents as part of an investigation into its accounting practices, including the consolidation of GWG’s financial statements with the Buyer’s and the legitimacy of the goodwill valuation. In response to the SEC investigation, GWG issued a statement expressing substantial doubt about its ability to continue as a going concern. GWG also announced that its prior financial reports should not be relied upon and that it would restate its financials for 2019 and three quarters of 2020.

D. The Asset Sale

Despite the red flags surrounding the Buyer, the Investment Manager negotiated the Asset Sale. In that transaction, the Buyer acquired all of the Master Fund’s assets, comprising approximately $305 million in diversified holdings. In return, the Master Fund received Preferred Series B-2 units in the Buyer. In addition, the Buyer agreed to support the Investment Manager by providing seed capital for new funds.10 Ironically, the strength of the assets the Buyer acquired in the Asset Sale would help underwrite that support. The Asset Sale thus enabled the Investment Manager to round-trip the Master Fund’s AUM and use it to seed new investment funds.

On December 7, 2021, the Investment Manager presented the Asset Sale to the Board for the first time. The Investment Manager pitched the transaction as the first step in the Dissolution Plan that would result in the Master Fund dissolving and returning capital to investors. The Board approved the Asset Sale that same day. The Board did not secure a fairness opinion or consult with outside advisors.

The Asset Sale dramatically changed the composition and risk profile of the Master Fund’s investments. Before the Asset Sale, the Master Fund held a range of alternative investments managed by advisors who employed diverse strategies across different industries and asset classes. After the Asset Sale, the Master Fund held limited partnership units in a single entity—the Buyer—with an unproven track record and a host of red flags. The Preferred Units were not a liquid investment; they would only convert into salable equity upon an “initial listing event,” defined as a public offering or merger with a public company.^[11] The Board and the Investment Manager had no control over when—if ever—the Buyer would engage in an initial listing event.

10Id. ¶¶ 4, 69, 87.

The Asset Sale violated the Diversification Policy, which prevented the Master Fund from investing more than 25% of its AUM in a single security. The Board could only approve a departure from the Diversification Policy with supermajority unitholder approval. The Board did not seek unitholder approval for the Asset Sale or for the departure from the Diversification Policy. The Investment Manager also did not announce that it was exploring alternatives or give investors a chance to tender their units before the Board approved the Asset Sale. After approving the Asset Sale, the Board cancelled all pending tender requests.

E. Investors Learn About The Asset Sale.

On December 30, 2021, the Investment Manager sent a letter describing the Asset Sale to the Feeder Fund investors. The letter asserted that that the Investment Manager needed to generate liquidity after receiving a “large number of [requests from] investors who want to tender their investment in the [Feeder Funds].”12 The Investment Manager claimed to have considered “multiple options to provide liquidity for investors who want out” and to have concluded there were “two viable approaches: convert the existing Fund or start a new Fund.”13

The letter next reported that the Investment Manager was pursuing both approaches by entering into “a plan of liquidation” under which a “large institutional investor” would “buy 100% of [the Master Fund’s] assets.”14 Read in context, that statement implied that a blue-chip institutional investor was buying the Master Fund’s assets for cash and that the Master Fund would dissolve and return cash to its investors. The letter did not accurately describe the Buyer or explain that the Master Fund was accepting consideration in the form of the Preferred Units. The letter did not disclose that the Buyer had agreed to provide financial support for the Investment Manager’s future funds.

For the next eighteen months, the Investment Manager and the Board did nothing to pursue the Dissolution Plan, diversify the Master Fund’s holdings, correct the violation of the Diversification Policy, or otherwise address the risks posed to the Funds from holding a single illiquid security in an unproven issuer surrounded by red flags. The Master Fund simply held the Preferred Units.

F. The Avalon Transaction

On September 21, 2022, the Buyer announced that it had agreed to a de-SPAC transaction with Avalon Acquisition, Inc., a special purpose acquisition vehicle (the “Avalon Transaction”). The Buyer would emerge from the Avalon Transaction as a publicly traded corporation organized under Nevada law. As part of the Avalon Transaction, the Preferred Units that the Master Fund held would convert into shares of the Buyer’s common stock valued at $8 per share.

On December 9, 2022, the Investment Manager sent another letter to the Feeder Fund investors. This letter explained for the first time that the Master Fund had exchanged its investments for the Preferred Units. The letter included a set of “frequently asked questions” which represented that the concentrated position in the Preferred Units was an “intermediate step” toward liquidity.^[15]

The letter also referenced the Avalon Transaction, describing it as a “liquidity event.”16 But the letter did not explain that the Preferred Units would convert into publicly traded shares of the Buyer’s common stock, rather than cash.

The Avalon Transaction closed on June 8, 2023, and the Master Fund’s Preferred Units converted into the Buyer’s common stock. The Master Fund now had a liquid security that it could sell or distribute to wind down the Master Fund and Feeder Funds.

The Investment Manager sent a third letter to the Feeder Fund investors. This letter reported that the Preferred Units had been exchanged for common stock in the Buyer valued at $8 per share.

G. The Buyer’s Stock Plummets In Value.

After the Avalon Transaction closed, the Investment Manager did not diversify its holdings. The Master Fund continued to hold only the Buyer’s common stock.

On August 14, 2023, the Buyer issued its first Form 10-Q after the Avalon Transaction. In its financial statements, the Buyer wrote down the value of its goodwill—by far the largest asset on its balance sheet—from $2.37 billion to $1.27 billion. In the next quarter, the Buyer wrote down its goodwill by another $306.7 million. In the next quarter after that, the Buyer wrote down its good will by another $883.2 million. During its first seven months as a public company, the Buyer wrote off almost all of the $2.37 billion in goodwill, retaining only $81.7 million.

The Buyer’s stock price plummeted from the $8 per share valuation used in the de-SPAC transaction. By October 2023, the stock had fallen to under $0.60 per share. By April 2024, the stock had fallen below $0.05 per share.

Facing delisting because of its failure to meet Nasdaq’s $1.00 minimum trading price requirement, the Buyer conducted a 1-for-80 reverse stock split on April 18, 2024. By December 2, 2024, the Buyer’s stock had traded down to $0.83 per share, representing a 99.88% loss from the $8 valuation used in the de-SPAC transaction. Adjusting for the reverse stock split, the Buyer’s stock was trading for pennies per share.

Even as the Buyer’s stock price plummeted, the Investment Manager and the Directors failed to take any steps to diversify the Master Fund’s position and protect against losses. The Investment Manager and the Directors also did not take any steps to pursue the Dissolution Plan, such as by distributing the Buyer’s common stock up through the Feeder Funds to their investors. Had they done so, investors could have decided for themselves whether to sell.

To date, the Master Fund has yet to liquidate. The Investment Manager has no apparent plans to do so.

H. The Master Fund Keeps Paying The Annual Fee.

After the Asset Sale, the scope of the Investment Manager’s duties narrowed dramatically. Before the Asset Sale, the Investment Manager was overseeing a portfolio of approximately 125 alternative investment managers. The Investment Manager also had to consider the liquidity needs of Feeder Fund investors and manage periodic tender offers.

After the Asset Sale, the Master Fund held all of its AUM in a single, illiquid security. There were no alternative investment managers or tender offers to oversee.

Because the Advisor Agreement renewed annually, the Board could have taken steps to renegotiate the Investment Manager’s fees. The Board opted not to renegotiate and allowed the Advisor Agreement to renew annually on the same terms.

I. This Litigation

The Young Women’s Christian Association of Rochester and Monroe County (the “YWCA”) is a non-profit organization that provides essential services and policy advocacy to support women, children, and families. The YWCA has been a beneficial owner of units in the tax-exempt Institutional Feeder Fund since 2012.

The YWCA filed this lawsuit on December 6, 2024. The YWCA asserts seven claims on behalf of the Master Fund. All are double-derivative claims, meaning the YWCA is initially asserting its right to sue derivatively on behalf of the tax-exempt Institutional Feeder Fund.

On January 10, 2025, the defendants removed the suit to the United States District Court for the District of Delaware. The YWCA filed an amended complaint that eliminated the basis for federal jurisdiction. The district court remanded the case, and the parties agreed to use that pleading as the Complaint.

Count I asserts that the Directors breached their fiduciary duties by approving the Asset Sale, then failing to pursue the Dissolution Plan. Count I also asserts that the Directors breached their fiduciary duties by allowing the Advisor Agreement to renew without renegotiating the Annual Fee.

Count II asserts that the Investment Manager breached its fiduciary duties by engaging in the same conduct.

Count III asserts that the Investment Manager breached the Advisor Agreement by failing to provide and oversee an investment program after the Asset Sale.

Count IV asserts that Perkins and the Investment Manager were unjustly enriched by continuing to receive the same Annual Fee after the Asset Sale.

Count V asserts a claim for fraud against the Buyer and Heppner based on false and misleading information allegedly provided during the negotiation of the Asset Sale.

Count VI asserts that the Buyer and Heppner aided and abetted the Directors and Investment Manager in breaching their duties.

Count VII asserts that the Buyer and Heppner were unjustly enriched through the Asset Sale and the Avalon Transaction.

The defendants moved to dismiss all of the claims on a variety of grounds, including Rule 12(b)(6). The Outside Directors moved to dismiss Count I under Rule 12(b)(6) as failing to state a claim on which relief can be granted. The Buyer and Heppner moved to dismiss Counts V, VI, and VII on the same basis. Perkins and the Investment Manager did not move to dismiss Counts I, II, III, or IV under Rule 12(b)(6).

On December 5, 2025, the court dismissed Count V. This decision addresses the Rule 12(b)(6) motions.

II. LEGAL ANALYSIS

When considering a Rule 12(b)(6) motion, “a trial court should accept all well- pleaded factual allegations in the Complaint as true” and “draw all reasonable inferences in favor of the plaintiff.”17 The court should “deny the motion unless the plaintiff could not recover under any reasonably conceivable set of circumstances susceptible of proof.” 18 The “conceivability” standard “is more akin to ‘possibility,’ while the federal ‘plausibility’ standard falls somewhere beyond mere ‘possibility’ but short of ‘probability.’”19 Under a notice pleading standard, a court should “accept even vague allegations in the Complaint as ‘well-pleaded’ if they provide the defendant notice of the claim.”20 But Delaware courts take a stricter approach when evaluating investor claims that could impose asymmetric costs and thus carry significant settlement value if they survive a pleading-stage motion. In that setting, a plaintiff must plead “specific facts” and cannot rely on “conclusory allegations.”21 In addition, “the trial court is not required to accept every strained interpretation of the allegations proposed by the plaintiff,” but only “reasonable inferences that logically flow from the face of the complaint.”22 A. Count I: Breach Of Fiduciary Duty Against The Directors

Count I asserts that the Directors breached their fiduciary duties by approving the Asset Sale, by failing to pursue the Dissolution Plan after the Asset Sale, and by not renegotiating the Investment Manager’s Annual Fee. ^[23] The Outside Directors moved to dismiss this count, but it states a claim against them.

1. The Elements Of A Claim For Breach Of Fiduciary Duty

A claim for breach of fiduciary duty is an equitable tort.^[24] The basic elements of a common-law tort are familiar: The plaintiff must prove the existence of a duty, a breach of that duty, injury, and a causal connection between the breach and an injury that is sufficient to warrant a remedy, such as compensatory damages.

The equitable tort for breach of fiduciary duty has only two formal elements: (i) the existence of a fiduciary duty and (ii) a breach of that duty.^[25] The first element resembles the corresponding aspect of a common-law tort: The plaintiff must prove that the defendant owed a fiduciary duty to the plaintiff. The second element departs from the common-law model in significant respects. For a common-law tort, the court analyzes breach using the standard of conduct that the defendant was expected to follow.^[26] For a breach of fiduciary duty, the court evaluates breach using a standard of review.^[27] The standard of review is always more forgiving towards the defendant fiduciary and more onerous for the plaintiff beneficiary than the standard of conduct. ^[28] Delaware decisions traditionally did not acknowledge the distinction between the standard of conduct and the standard of review,29 but Delaware jurists now do so openly to explain the divergence between the normative framing of what fiduciary duties require and their practical application to the facts of a case.^[30]

Although a claim for breach of fiduciary duty has only two formal elements, a beneficiary cannot obtain a meaningful remedy without additional showings that parallel the other elements of a traditional common-law tort. One is harm to the beneficiary or a benefit wrongly received by the fiduciary.^[31] Another is a sufficiently convincing causal linkage between the breach and the remedy sought.^[32] A court may award nominal damages when a breach does not warrant a meaningful remedy.^[33]

2. Fiduciary Status

The Complaint pleads that the Outside Directors are fiduciaries in their capacity as members of the Board. If the Master Fund was a corporation, then little more need be said. Directors are fiduciaries who owe duties of loyalty and care to the corporation and its stockholders as a whole.^[34]

Here, the analysis is more complicated. The Master Fund is a Delaware limited partnership, and the Investment Manager is its general partner. Under Delaware law, “[t]he general partner of a limited partnership owes fiduciary duties to the partnership for the ultimate benefit of the partners, unless the limited partnership agreement eliminates or limits them.” 35 Likewise, under Delaware law, the individuals who control or comprise the governing body of the entity that serves as the general partner of a limited partnership owe fiduciary duties to the partnership for the ultimate benefit of the partners—here too unless the limited partnership agreement eliminates or limits them.^[36] Perkins controls the Investment Manager, so he owes fiduciary duties under that route. But the LP Agreement did not follow the familiar path of having an entity with a board of directors act as the general partner.

The LP Agreement instead provides that the General Partner delegates its managerial duties to the Board. The operative language states:

The General Partner delegates to the Directors those rights and powers of the General Partner necessary for the Directors to manage and control the business affairs of the [Master Fund] and to carry out their oversight obligations with respect to the Partnership required under the 1940 Act, state law, and other applicable laws or regulations. Rights and powers delegated to the Directors include, without limitation, the authority as Directors to oversee and to establish policies regarding the management, conduct and operation of the Partnership’s business, and to do all things necessary and proper as Directors to carry out the objective and business of the Partnership, including, without limitation, the power to engage the Investment Manager to provide Advice and Management and to remove the Investment Manager, as well as to exercise any other rights and powers expressly given to the Directors under this Agreement.^[37] That provision imbues the Board with the “rights and powers” the General Partner would otherwise exercise.

The Delaware Limited Partnership Act (the “LP Act”) authorizes a delegation of this type. It states:

Unless otherwise provided in the partnership agreement, a general partner of a limited partnership has the power and authority to delegate to 1 or more other persons any or all of the general partner’s rights, powers and duties to manage and control the business and affairs of the limited partnership, which delegation may be made irrespective of whether the general partner has a conflict of interest with respect to the matter as to which its rights, powers or duties are being delegated, and the person or persons to whom any such rights, powers or duties are being delegated shall not be deemed conflicted solely by reason of the conflict of interest of the general partner. Any such delegation may be to agents, officers, and employees of the general partner or the limited partnership and by a management agreement or another agreement with, or otherwise to, other persons, including a committee of 1 or more persons. Unless otherwise provided in the partnership agreement, such delegation by a general partner of a limited partnership shall be irrevocable if it states that it is irrevocable. Unless otherwise provided in the partnership agreement, such delegation by a general partner of a limited partnership shall not cause the general partner to cease to be a general partner of the limited partnership or cause the person to whom any such rights, powers and duties have been delegated to be a general partner of the limited partnership. No other provision of this chapter or other law shall be construed to restrict a general partner’s power and authority to delegate any or all of its rights, powers, and duties to manage and control the business and affairs of the limited partnership.38

38 6 Del. C. § 17-403(c). I continue to believe that the LP Act would benefit by having a section providing upfront that a partnership agreement can modify the provisions of the LP Act, then identifying any exceptions to the general rule. Delaware’s General Partnership Act provides a model. See 6 Del. C. § 15-103. Adding that type of provision would avoid the need for the repetitive “[u]nless otherwise provided in the partnership agreement” that plagues the LP Act’s prose. And given that the LP Act is addressing limited partnerships, it seems unnecessary to regularly include the prepositional phrase “of a limited partnership.” Section 17-403(c) might then state: A general partner can delegate any or all of its rights, powers, and duties to 1 or more other persons, including agents, officers, and employees of the general partner or the limited partnership. A general partner who faces a conflict of interest can delegate rights, powers, and duties, and the delegation alone does not make the recipient conflicted. A delegation can be irrevocable. A delegation does not cause the general partner to cease being a general partner or make the recipient a general partner. No other law can restrict a general partner’s ability to delegate its rights, powers, and duties.

Notably, this section authorizes the delegation of “rights, powers[,] and duties,” which inferably includes fiduciary duties.^[39]

The initial delegation in the LP Agreement only encompasses “rights and powers,” not duties. But equity imposes concomitant duties when a person exercises rights and powers over property belonging to another. ^[40] Here, duties follow delegation.

That brings down the word count from 283 to 99. The General Partnership Act offers an alternative formulation that falls in between this suggestion and the LP Act’s version. See 6 Del. C. § 15-401(l).

The LP Agreement makes the extension of duties express by stating that the Board owes fiduciary duties to the same degree as a directors of a Delaware corporation:

The Partners intend that, to the fullest extent permitted by law, and except to the extent otherwise expressly provided in this Agreement, (1) each Director is vested with eh same powers and authority on behalf of the Partnership as are customarily vested in each director of a Delaware corporation and (2) each Independent Director is vested with the same power and authority on behalf of the Partnership as are customarily invested in each director who is not an “interested person” (as that term is defined in the 1940 Act), of a closed-end, management investment company registered under the 1940 Act that is organized as a Delaware corporation).41 Not content with that reference to fiduciary status, the LP Agreement further provides that “[e]ach Director will be the agent of the Partnership . . . .”42 An agent is also a fiduciary.^[43]

The LP Act directs the court to apply fiduciary duties as framed in the LP Agreement, 44 but the combination of contract rights, delegated general partner duties, express director duties, and agent duties creates a jurisprudential mashup. Which of those bodies of law should the court consult for content? From that confusion emerges the beauty of the contractarian entity,45 where parties can create an infinite range of frameworks under which contractual and fiduciary duties interact.^[46]

Whether a duty arises in equity or by contract is not pointless scholasticism. It affects whether another party can aid or abet a breach, because a party cannot aid or abet a breach of contract.^[47] It also affects the elements of the claim. If the duty is fiduciary, then common law tort law—legal or equitable48—governs the elements of the claim, the burden of proof, the standard of conduct, the standard of review, and the available remedies. If the duty is contractual, then contract law determines “the elements of a claim, the burden of proof, the standard of conduct, and the available remedies.”49

Here, the Outside Directors owe duties grounded in equity. Those duties spring from the principles of equity that govern a general partner, flow to the Outside Directors through the delegation, and are then tailored through the LP Agreement.^[50] The Outside Directors are therefore fiduciaries. At a minimum, the Outside Directors owe director duties, so this decision focuses there.

3. Breach

The element of breach is nuanced. To reiterate, when determining whether directors have breached their duties when pursuing a transaction, Delaware law distinguishes between the standard of conduct and the standard of review. “Delaware has three tiers of review for evaluating director decision-making: the business judgment rule, enhanced scrutiny, and entire fairness.”51

The business judgment rule is Delaware’s default standard of review. The rule presumes that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.”52 Unless a plaintiff rebuts one of those elements, “the court merely looks to see whether the business decision made was rational in the sense of being one logical approach to advancing the corporation’s objectives.”53 Only when a decision lacks any rationally conceivable basis will a court infer bad faith and a breach of duty.^[54] The business judgment rule thus provides “something as close to non-review as our law contemplates.” 55 This standard of review “reflects and promotes the role of the board of directors as the proper body to manage the business and affairs of the corporation.”56 Enhanced scrutiny is Delaware’s intermediate standard of review.^[57] Enhanced scrutiny applies to specific, recurring, and readily identifiable situations marked by two features. First, there is a distinct decision-making context where the realities of the situation can subtly undermine the decisions of even independent and disinterested fiduciaries.^[58] Second, the decision under review involves the directors intruding into a space where stockholders possess rights of their own.^[59] The directors’ exercise of corporate power therefore raises questions about the allocation of authority within the entity and, from a theoretical perspective, implicates the principal-agent problem.^[60] The resulting scenarios call for an intermediate standard of review that examines “the reasonableness of the end that the directors chose to pursue, the path that they took to get there, and the fit between the means and the end.”61 Delaware’s most onerous standard of review is the entire fairness test. When entire fairness governs, the defendants must establish “to the court’s satisfaction that the transaction was the product of both fair dealing and fair price.”62 “Not even an honest belief that the transaction was entirely fair will be sufficient to establish entire fairness.”63 “Rather, the transaction itself must be objectively fair, independent of the board’s beliefs.”64

If a claim does not identify any of the recurring scenarios that could implicate enhanced scrutiny, then the business judgment rule presumptively applies. At the pleading stage, to change the standard of review from the business judgment rule to entire fairness, the complaint must allege facts supporting a reasonable inference that the directors who approved the challenged action did not include independent and disinterested directors, acting carefully and in good faith, with enough voting power by themselves to deliver the requisite majority for taking action.^[65] Count I of the Complaint differentiates between Perkins and the Outside Directors. The Complaint alleges that Perkins was interested in the decisions the Board made because of his control over and majority ownership of the Investment Manager. Perkins does not argue that Count I fails to state a claim against him.

The Complaint contends that the Outside Directors breached their duty of care. Under current law, a plaintiff can rebut the business judgment rule and disqualify a director for purposes of the business judgment rule by pleading that the director breached the duty of care.^[66]

For purposes of the standard of conduct, the duty of care requires that directors exercise reasonable care.^[67] For purposes of the standard of review, the level of care varies: • When the business judgment rule applies, the level of carelessness is gross negligence.^[68] • When enhanced scrutiny applies, the level of carelessness is action that falls outside a range of reasonableness.69 • When entire fairness applies, the level of carelessness is action resulting in a decisionmaking process that fails to satisfy the fair dealing dimension of the unitary entire fairness test.70 Finally, the Delaware Supreme Court has established a separate standard of liability: “When disinterested directors themselves face liability, the law, for policy reasons, requires that they be deemed to have acted with gross negligence in order to sustain a monetary judgment against them.”71 Thus, even if a court finds that the directors breached their duty of care under the operative standard of review, a plaintiff still must prove gross negligence to recover money damages.^[72]

Here, the business judgment rule presumptively applies, so the standard of review requires gross negligence. In civil cases not involving business entities, the Delaware Supreme Court has defined gross negligence as “a higher level of negligence representing ‘an extreme departure from the ordinary standard of care.’” 73 Under that framework, gross negligence “signifies more than ordinary inadvertence or inattention,” but it is “nevertheless a degree of negligence, while recklessness connotes a different type of conduct akin to the intentional infliction of harm.”74 In Delaware entity law, by contrast, Delaware cases have held consistently that gross negligence encompasses recklessness.^[75] The decision “has to be so grossly off-the- mark as to amount to reckless indifference or a gross abuse of discretion.”76 a. Approving The Asset Sale

In its lead theory, Count I argues that the Outside Directors breached their duty of care when approving the Asset Sale. The Complaint pleads facts sufficient to support an inference of gross negligence, thereby overcoming the business judgment rule and triggering entire fairness. The Complaint easily supports an inference that the Asset Sale was not entirely fair.

When evaluating gross negligence, a court must consider the decision-making context.^[77] As the YWCA points out, directors considering a fundamental transaction must be particularly vigilant.^[78] “[A] board of directors . . . may not avoid its active and direct duty of oversight in a matter as significant as the sale of [an entity.]”79 One of the Delaware Supreme Court’s clearest teachings is that “directors cannot be passive instrumentalities during merger proceedings.”80 In that setting, directors can breach their duty of care by failing to obtain information that they should have obtained, even when the information was withheld by others.^[81] That is because “the buck stops with the Board.”82 As the YWCA argues, the Asset Sale may not have been a merger, but it was a fundamental transaction.^[83] It involved a sale of all the Master Fund’s assets in contemplation of liquidation. Before the General Assembly liberalized Delaware’s merger statutes,84 the preferred transaction structure involved the target corporation selling all of its assets to the acquirer, then dissolving and distributing the consideration to its stockholders. ^[85] Before the 1980s, the great Delaware takeover cases largely involved sales of assets. ^[86] Those decisions “provided the vehicle for much of the development and refinement in Delaware of the law with respect to the business judgment presumption and the fiduciary duty owed by directors and majority stockholders to a minority.” 87 For the fiduciaries considering the transaction, a sale of assets in contemplation of dissolution presents the same issues as a sale or merger.^[88] The Asset Sale was also a significant transaction because after it closed, the Master Fund’s fate would depend on the value of the Preferred Units—and hence on the Buyer’s managerial acumen. No longer would the Investment Manager be the key figure in the Master Fund’s success, nor would the Master Fund’s fortunes depend on the skill the Investment Manager used in deploying its AUM across at least fifty alternative investment managers in compliance with the Diversification Policy. After the Asset Sale, the Master Fund would own only a single security, and the value of that security would rise or fall based on the skill of the Buyer’s CEO. Although the Investment Manager would continue to have an obligation under the Advisor Agreement to craft and implement an investment program that met the

Havender, 11 A.2d 331, 338 (1940). See generally C. Stephen Bigler & Blake Rohrbacher, Form or Substance? The Past, Present, and Future of the Doctrine of Independent Legal Significance, 63 Bus. Law. ^[1] (2007). The doctrine of independent legal significance applies to legal review, not equitable review. “[E]quity regards substance rather than form.” Monroe Park v. Metro. Life Ins. Co., 457 A.2d 734, 737 (Del. 1983); accord Phillips Petroleum Co. v. Arco Alaska, Inc., 1986 WL 7612, at[*13] (Del. Ch. Jul. ^[9], 1986); see In re Carlisle Etcetera LLC, 114 A.3d 592, 607 (Del. Ch. 2015) (“Equity always attempts to ascertain, uphold, and enforce rights and duties which spring from the real relations of parties.” (cleaned up)). Perhaps most famously, the Delaware Supreme Court explained in 1971 that “inequitable action does not become permissible simply because it is legally possible.” Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971). In the takeover wars of the 1980s, it became established doctrine that a challenged defensive measure first must pass statutory muster, then survive equitable scrutiny. See Marino v. Patriot Rail Co., 131 A.3d 325, 336 (Del. Ch. 2016) (collecting authorities). Put differently, independent legal significance is a Berle I doctrine, not a Berle II doctrine. See Foley v. Session Corp., 345 A.3d 537, 552–53 (Del. Ch. 2025) (discussing distinction and its relationship to the distinction between legal and equitable review).

Diversification Policy, the Investment Manager would not be able to fulfill its contractual obligation until the Preferred Units became salable and the Master Fund sold. The Asset Sale would fundamentally change not only the assets the Master Fund held, but also how it operated and what would produce its success.

Delaware cases have drawn inferences of gross negligence when directors approved fundamental transactions without adequate deliberation, without receiving meaningful due diligence, and in reliance on information provided by an interested party.^[89] In McPadden, a sell-side board of directors relied on a fairness opinion and financial documents prepared by the transaction counterparty, despite the party’s self-interest and the red flags surrounding the transaction. 90 The board failed to conduct its own investigation and ignored information that would have revealed miscalculations that were “extremely favorable to the buyer.”91 Chancellor Chandler ruled that “material and reasonably available information was not considered by the board” and “such lack of consideration constituted gross negligence.”92

In this case, the Directors approved the Asset Sale at a single meeting on December 7, 2021. The Board did not receive a fairness opinion or other outside advice. The Board relied solely on the Investment Manager, which was interested in the transactions because of the Buyer’s promise to support its future funds.

At the time, public information about the Buyer and GWG included the following: • The Buyer had yet to turn a profit and had no near-term expectations of doing so. • The Buyer’s financial statements showed that goodwill accounted for $2.36 billion out of $2.82 billion in total assets. • The Buyer’s public filings explained that its goodwill resulted from a series of interested transactions with GWG, its former parent. • In July 2019, the Buyer’s CFO resigned over concerns that its CEO had used the interested transactions to misappropriate funds. • In October 2019, four outside directors resigned from both the Buyer and GWG boards after objecting to the interested transactions. • During 2019, two successive audit firms for the Buyer terminated their engagements. • In October 2020, the SEC began investigating GWG, the basis for consolidating its financial statements with the Buyer’s, and the basis for the goodwill valuation. • GWG announced that there was substantial doubt about its ability to continue as a going concern in light of the SEC investigation. • GWG announced that its prior financial reports should not be relied upon and that it would restate its financials for 2019 and three quarters of 2020. Yet the Board approved a transaction that would violate the Diversification Policy by investing all of the Master Fund’s assets in the Preferred Units, and where the value of the Preferred Units depended initially on the accuracy of the Buyer’s financial statements and over the long term on its CEO’s business acumen.

Those facts support an inference of recklessness. The Outside Directors proverbially bet all of the Master Fund’s AUM on black, despite a fundamental policy that prevented that.

The Outside Directors point out that the details in McPadden differ from this case, but the legal principle remains. The Outside Directors also argue that they are fully protected at the pleading stage because they relied on the Investment Manager. The concept of relying on experts reflects a “fundamental principle[] of corporate law” that “entitle[s] (impartial) fiduciaries to rely upon the advice of impartial experts as a defense.”93 But this defense does not displace the pleading-stage mandate that the court take all well-pled allegations as true, even though the reliance defense may ultimately prevail at trial.^[94] Here, the Complaint adequately alleges the Investment Manager was interested, not impartial.^[95]

The Outside Directors even argue that they are also protected because they relied on Portfolio Advisors, the Investment Manager’s subadvisor. That assertion mischaracterizes the Complaint and makes little sense in light of Portfolio Advisors’ role. As a sub-adviser, Portfolio Advisors assisted with selection and oversight of the alternative investment funds in which the Master Fund invested. There is no reason to draw the defense-friendly inference that Portfolio Advisors advised on the Asset Sale.

The Outside Directors also argue that they made a rational business judgment to turn to the Buyer for a short-term liquidity solution. From that perspective, the Asset Sale looks irrational. It did not provide any short-term liquidity to the Master Fund, instead locking the fund into an even more illiquid investment. The Outside Directors also could not have been sure that the investment was short term, because only a merger or sale of the Buyer would trigger a conversion of the Preferred Units into liquid shares, and the Outside Directors and the Investment Manager had no control over when that would happen. In the meantime, the Master Fund violated the Diversification Policy and rendered itself dependent on a Buyer and its CEO who were festooned with red flags.

The Outside Directors claim that the YWCA’s allegations are conclusory or the product of hindsight, but that is not so. The Complaint points to specific facts about the Asset Sale, the Master Fund’s pre-Asset Sale portfolio, the Preferred Units, the Buyer, and its CEO that were known or knowable at the time.

Although the Complaint does not go so far, the allegations about the Asset Sale could support a breach of the duty of loyalty. An inference of bad faith follows when a complaint alleges that a “fiduciary intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties.” 96 Delaware law

96Disney II, 906 A.2d at 67.

“clearly permits a judicial assessment of director good faith” for the purpose of rebutting the business judgment rule.^[97]

Under the 1940 Act, a registered investment company cannot, without the approval of a majority of its outstanding voting securities, “deviate from its policy in respect of concentration of investments in any particular industry or group of industries as recited in its registration statement.”98 The LP Agreement provides that “[t]he assets of the Partnership shall be invested in accordance with the ‘Asset Allocation Ranges’” found in Exhibit A.^[99] The LP Agreement further provides that

[t]he Directors may, in their sole and absolute discretion, change or modify such Asset Allocation Ranges from time to time, provided that . . . the Directors shall have no authority to . . . provide for a greater than 25% allocation, at the time of investment, to investments in which the Partnership does not have the right to redeem the investment on at least a quarterly basis after a lock-up period not to exceed one year after the date of investment.100 The Directors could only permit the Master Fund to invest more than 25% of its AUM in a single, non-redeemable security with “the approval of Limited Partners that collectively beneficially own sixty percent (60%) of the interests.”101

The Asset Sale concentrated 100% of the Master Fund’s AUM in a single security. The Diversification Policy was a fundamental policy, and the Outside Directors had a known obligation to comply with it under the 1940 Act and the LP Agreement. The Directors necessarily knew that the Asset Sale’s closing would violate the Diversification Policy. The Directors inferably engaged in a conscious violation of a known duty. They inferably acted in bad faith by consciously ignoring that obligation.

This aspect of Count I states a claim for relief. b. Failing To Implement The Dissolution Plan

Count I next contends that the Outside Directors breached their duty of care by failing to ensure that the Investment Manager actually executed the Dissolution Plan. This aspect of Count I also pleads a claim.

In Albert, Vice Chancellor Lamb allowed a claim for the duty of care to survive a Rule 12(b)(6) motion to dismiss where the complaint alleged that fund managers devoted insufficient time and attention to managing the funds and made inaccurate

101 Id.

disclosures about their activities.102 Their inaction occurred during a period when the funds “were facing difficult challenges.”103

The Complaint presents a similar picture. The Outside Directors approved the Asset Sale as part of the Dissolution Plan, yet after the Asset Sale closed, the Outside Directors inferably did nothing. For eighteen months, the Master Fund simply held the Preferred Units. Then for seven months after the Avalon Transaction, the Outside Directors inferably continued to do nothing. During those months, the single security that the Master Fund held lost 98% of its value. The Master Fund still has not done anything to carry out the Dissolution Plan.

During this time, the Outside Directors allowed the Investment Manager to send communications to investors that were inferably misleading. No one told the investors about the Asset Sale until December 30, 2021, more than three weeks after it closed.104 The letter told investors that after exploring “multiple options to provide liquidity for investors who want out,”105 it had entered into “a plan of liquidation” under which a “large institutional investor” would “buy 100% of [the Feeder Funds] assets.”106 Read in context, the letter implied that a blue-chip institutional investor

102 Albert, 2005 WL 2130607, at *5. 103 Id. 104 Compl. ¶ 77. 105 Id. ¶ 78. 106 Id. ¶ 80.

was buying the assets for cash. The letter did not accurately describe the Buyer, did not explain that the Master Fund was accepting the Preferred Units, and did not disclose the Buyer’s promise to provide financial support for the Investment Manager’s future funds.

The Investment Manager next communicated with the Feeder Fund investors one year later, on December 9, 2022. That letter identified the Preferred Units for the first time and described the Preferred Units as an “intermediate step” toward liquidity. 107 The letter referenced the Avalon Transaction and described it as a “liquidity event,” but did not explain that the Master Fund would receive shares of the Buyer’s common stock instead of cash.108

These allegations support an inference of gross negligence in the sense of recklessness. The Outside Directors again argue that the facts of Albert differ from this case, but the legal principle is what counts.

Not only that, but as with the claim regarding the Asset Sale, the allegations about the Dissolution Plan could rise to the level of bad faith. Once the Outside Directors approved the Dissolution Plan, they had an obligation to either take meaningful steps to pursue it or abandon it and let the investors know. 109 Yet after

107 Id. ¶ 107. 108 Id. ¶ 108. 109 See MacLaughlan, 2026 WL 615751, at[*22] (explaining that a board of directors who failed to take steps to pursue a plan of dissolution “conceivably could breach its duty of loyalty by failing to act in good faith”).

approving the Asset Sale as part of the Dissolution Plan, the Outside Directors have inferably done nothing. Today, the Master Fund continues to hold a single security, albeit one that has lost 98% of its value.

The Outside Directors contend that they properly delegated responsibility for the Dissolution Plan to the Investment Manager. A board can of course delegate responsibilities, but at some point, delegation becomes abdication, and a board breaches its fiduciary duties by abdicating its duties to oversee the business and affairs of an entity.110 The Outside Directors inferably crossed that line.

Count I states a claim based on the Outside Directors’ failure to take steps to pursue the Dissolution Plan. c. Excess Annual Fees

Count I finally alleges that the Outside Directors breached their fiduciary duties by allowing the Investment Manager to continue to earn the same percentage Annual Fee even though the Investment Manager “was providing fewer services with

110 See W. Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 311 A.3d 809, 841–44 (Del. Ch. 2024) (collecting authorities); Canal Cap. Corp. By Klein v. French, 1992 WL 159008, at *2–3 (Del. Ch. July 2, 1992) (same); see also SEC v. Tambone, 550 F.3d 106, 146 (1st Cir. 2008) (“Section 206 [of the Investment Company Act] imposes a fiduciary duty on investment advisers to act at all times in the best interest of the fund . . .”); McRitchie v. Zuckerberg, 315 A.3d 518, 574 (Del. Ch. 2024) (“[C]orporate directors have an obligation to seek to maximize the long-term value of the corporation for the benefit of its stockholders.”); Trados II, 73 A.3d at 20 (“Directors of a Delaware corporation owe fiduciary duties to the corporation and its stockholders which require that they strive prudently and in good faith to maximize the value of the corporation for the benefit of its residual claimants.”).

respect to each dollar under management.”111 This aspect of Count I states a claim on which relief can be granted, but barely and only because of the context surrounding the Outside Directors’ inferably conscious inaction.

Under the Advisor Agreement, the Investment Manager received the Annual Fee equal to 1.00% of the Master Fund’s net AUM. The YWCA argues that this fee compensated the Investment Manager for overseeing a fund of funds comprising at least fifty alternative investment providers, including the need to manage periodic tender offers to provide investors with liquidity. The YWCA argues that it made no sense to pay the Investment Manager at the same percentage of AUM once the Master Fund’s assets were reduced to a single security and the Feeder Funds no longer made tender offers. At that point, the Investment Manager no longer needed to select, manage, and oversee dozens of hedge fund and private equity investments.

The Advisor Agreement renewed on an annual basis, so the Outside Directors could have lowered the fee. Instead, the Outside Directors allowed the Advisor Agreement to renew on the same terms. As a result, since the Asset Sale, the Investment Manager has received $10 million for sitting on a single security that has lost 98% of its value.

The Outside Directors respond that no fee reduction was necessary because the Advisor Agreement ties the dollar amount of the Annual Fee to AUM. Thus, as AUM plummeted, so did the fee. But that response misconstrues the YWCA’s claim. The

111 Answering Brief at 34.

YWCA argues that paying 1% of AUM was too high a rate once the Investment Manager’s responsibilities decreased dramatically.

An analogy helps frame the two sides’ positions. Envision a real estate manager responsible for a botanical wonder similar to the Mount Cuba Center’s gardens. The manager would need a team of highly trained horticulturalists who warranted an hourly wage commensurate with their expertise and experience. For those horticulturalists, maintaining the diverse gardens would be a full-time job. Now assume that the manager sells the gardens and invests all of the proceeds in vacant land. The manager no longer needs a full-time team of highly trained horticulturalists. The manager likely no longer needs expert horticulturalists at all. The manager could make do with a run-of-the-mill commercial landscaping firm that would charge a lower hourly rate.

The Outside Directors’ argument equates to the assertion that if the highly trained horticulturalists worked fewer hours weed whacking the vacant land, then that would be savings enough. The YWCA argues that in that situation, loyal directors would no longer rely on highly trained horticulturalists, but if they did, they would adjust their compensation to reflect that those horticulturalists were engaged in tasks that any run-of-the-mill commercial landscaper could do.

In virtually all settings, the business judgment rule protects those types of hiring and compensation decisions. But some transactions are so extreme on their face as to suggest some form of fiduciary misconduct.112 Here, the Outside Directors allowed the Master Fund to pay the Investment Manager $10 million since the Asset Sale, and during that time the Investment Manager only had to monitor a single investment. Not only that, but the Investment Manager has done nothing with the investment. That’s a lot of money for zero activity.

When presented with a disparity this great, a court can justifiably infer that matters may be amiss sufficient to warrant proceeding past the pleading stage.113 In the corporate context, the vehicle for such a claim can be waste. 114 That claim

112 See In re Fort Howard Corp. S’holders Litig., 1988 WL 83147, at[*12] (Del. Ch. Aug. ^[8], 1988) (explaining that “[r]arely will direct evidence of bad faith— admissions or evidence of conspiracy—be available” and that courts may need to “look imaginatively beneath the surface of events, which, in most instances, will itself be well-crafted and unobjectionable” in stockholder class actions); see also In re Engagesmart, 2026 WL 554442, at[*30] (“Allegations of bad faith do not require a smoking gun.”); In re Fitbit, Inc. S’holder Deriv. Litig., 2018 WL 6587159, at[*15] (Del. Ch. Dec. ^[14], 2018) (same). 113 See IBEW Loc. Union 481 Defined Contribution Plan & Tr. on Behalf of GoDaddy, Inc. v. Winborne, 301 A.3d 596, 621 (Del. Ch. 2023). 114 See In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 138 (Del. Ch. 2009) (inferring at pleading-stage that CEO’s compensation package could be waste); see also Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 784 (Del. Ch. 2016) (drawing inference of waste for executive compensation package), abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019) (addressing presumption of confidentiality).

manifests as a form of bad faith115 and hence is non-exculpable under the DGCL.116 In situations when there are no other pled facts that could provide any reasonably conceivable basis to infer that a fiduciary could have acted for an improper purpose, the court can only evaluate the merits of the decision that the fiduciaries made.117 If the decision is sufficiently extreme, then the court can infer bad faith, but the decision must be so extreme that it could not be rationally explained on another basis.118

Because the LP Agreement preserves liability for a breach of the duty of care,119 the YWCA has not argued bad faith. The YWCA has sought to invoke the lower gross negligence standard and argued that the Outside Directors acted recklessly by knowingly permitting the Investment Manager to continue to reap the Annual Fee while doing nothing.

115 Although waste historically was viewed as a type of ultra vires act that was beyond a fiduciary’s power to take, contemporary Delaware authorities have integrated the concept into the business judgment rule as a means of pleading bad faith. See In re McDonald’s Corp. S’holder Derivative Litig., 291 A.3d 652, 693–94 (Del. Ch. 2023) (collecting cases). 116 See 8 Del. C. § 102(b)(7). 117 In re J.P. Stevens & Co., Inc. S’holders Litig., 542 A.2d 770, 780–81 (Del. Ch. 1988) (“A court may, however, review the substance of a business decision made by an apparently well motivated board for the limited purpose of assessing whether that decision is so far beyond the bounds of reasonable judgment that it seems essentially inexplicable on any ground other than bad faith.”) (internal citation omitted). 118 In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 34 (Del. Ch. 2014). 119 See LPA § 3.9(a).

If that were all the Complaint alleged, then the business judgment rule would likely still apply. But when a plaintiff advances this type of argument, contextual factors may reinforce a court’s concerns. Here, three of the four Outside Directors have been with the Master Fund since its inception in 2003. Mann has been a Director since March 2013. Combined, the four Outside Directors have served for eighty-eight years on the boards of nine different funds created and managed by Perkins and the Investment Manager. They also could expect to serve on new funds that Perkins and the Investment Manager formed.120 Regardless of whether those interests would be sufficient to call into question the independence of the Outside Directors, they suggest a reason why the Outside Directors may have turned a blind eye to the incongruity of paying the Investment Manager $10 million to oversee a single position.

The allegations about the Annual Fee also do not stand alone. They are part of a Complaint that also pleads claims regarding the Asset Sale and the Dissolution Plan. The Complaint as a whole depicts Outside Directors who have been asleep at the switch.

The Outside Directors try to argue that the Investment Manager has been doing things, but that response would require drawing a defendant-friendly inference

120 See Goldstein v. Denner, 2022 WL 1671006, at[*48] (Del. Ch. May 26, 2022) (discussing implications of future positions for independence); Jared A. Ellias et. al., The Rise of Bankruptcy Directors, 95 S. Cal. L. Rev. 1083, 1095–98, 1128, 1136 (2022) (same); Da Lin, Beyond Beholden, 44 J. Corp. L. 515, 525–26, 531–50 (2019) (same).

at the pleading stage. The activities the Outside Directors cite are also weak tea. They highlight the extreme disparity between the compensation and the task.

The act of paying $10 million under these circumstances is sufficiently concerning to permit the plaintiff to conduct discovery. This aspect of Count I survives pleading-stage review.

4. Exculpation

Analyzing the claim for breach of fiduciary duty requires addressing yet one more issue: exculpation. The LP Act authorizes a partnership agreement to exculpate members, managers, and other persons from money damages by “provid[ing] for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties).”121 The LP Agreement addresses exculpation in the following provision:

The Directors, the Investment Manager and the General Partner, including any officer, director, Partner, member, principal, employee or agent of any of them, will not be liable to the Partnership or to any of its Partners for any loss or damage occasioned by any act or omission in the performance of the Person’s services under this Agreement, in the absence of a final judicial decision on the merits . . . that the loss is due to an act or omission of the Person constituting willful misfeasance, bad

121 6 Del. C. § 17-1101(f) (“A partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties) of a partner or other person to a limited partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement; provided, that a partnership agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.”).

faith, gross negligence, or reckless disregard of the Person’s duties under this Agreement.122 The LP Agreement thus preserves liability not only for willful misfeasance and bad faith, but also for “gross negligence, or reckless disregard of the Person’s duties under this Agreement.” The 1940 Act drives that result: That statute does not permit registered investment companies to eliminate the duty of care or provide exculpation for its breach.123

By preserving liability for gross negligence, the LP Agreement preserves liability for a breach of the duty of care.124 Count I therefore states non-exculpated claims against the Outside Directors.

122 LPA § 3.9(a). 123 See 15 U.S.C. § 80(a)-17(h) (“After one year from the effective date of this subchapter, neither the charter, certificate of incorporation, articles of association, indenture of trust, nor the by-laws of any registered investment company, nor any other instrument pursuant to which such a company is organized or administered, shall contain any provision which protects or purports to protect any director or officer of such company against any liability to the company or to its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.”). 124 From a contractarian standpoint, the decision to preserve liability for both gross negligence and recklessness arguably contemplates a distinction between the two. A court strives to give meaning to every term in an agreement. NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007) (“Contractual interpretation operates under the assumption that the parties never include superfluous verbiage in their agreement, and that each word should be given meaning and effect by the court.”), aff’d, 945 A.2d 594 (Del. 2008); Majkowski v. American Imaging Mgmt. Serv., 913 A.2d 572, 588 (Del. Ch. 2006) (explain that courts “attempt to interpret each word or phrase in a contract to have an independent meaning so as to avoid rendering contractual language mere surplusage”). See Star B. Count VI: Aiding And Abetting Breach Of Fiduciary Duty

Count VI asserts that the Buyer and its CEO, Heppner, aided and abetted the sell-side defendants in breaching their fiduciary duties. According to the Complaint, the Buyer and Heppner promised to provide the Investment Manager with seed capital for new funds. Count VI pleads a claim against the Buyer but not against Heppner.

1. The Elements Of An Aiding And Abetting Claim

“A claim for aiding and abetting has four elements: (1) the existence of a fiduciary relationship, (2) a breach of fiduciary duty, (3) knowing participation in that breach, and (4) damages proximately caused by the breach.”125 “[A] claim for aiding

Am. Rail HoldCo, LLC v. Cathcart, 2024 WL 5239938, at *9 (Del. Ch. Dec. ^[17], 2024) (adopting as the only reasonable interpretation of a contract the reading that “gives meaning and effect to each of the contract’s terms”). See generally Restatement (Second) of Contracts § 203 (“In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable: (a) an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect . . .”); id. cmt. b (“Since an agreement is interpreted as a whole, it is assumed in the first instance that no part of it is superfluous.”). And because the liability-preserving language implements a section of the 1940 Act that forbids the elimination of liability for “gross negligence,” the answer could turn on what that statute contemplates the term to mean. Perhaps gross negligence for purposes of the LP Agreement really is just “a higher level of negligence representing an extreme departure from the ordinary standard of care.” Browne, 583 A.2d at 953 (cleaned up). Happily, this decision need not ponder those questions, because the claims survive under a traditional approach. 125 Engagesmart, 2026 WL 554442, at[*35] (citing Malpiede, 780 A.2d at 1096).

and abetting often turns on meeting the ‘knowing participation’ element.” 126 The “knowing participation” element “involves two concepts: knowledge and participation.”127

There are two dimensions to the knowledge concept.128 First, the secondary actor must know that the primary wrongdoer’s conduct constituted a breach. 129 Second, the secondary actor must know that its own participation in the wrongful conduct was legally improper.130 The secondary actor’s conduct need not be wrongful or tortious in its own right, but the secondary actor must know that it was acting wrongfully by participating.131

126 Buttonwood Tree Value P’rs, L.P. v. R. L. Polk & Co., Inc., 2017 WL 3172722, at *9 (Del. Ch. July 24, 2017). 127 Presidio, 251 A.3d at 275. 128 RBC Cap. Mkts., 129 A.3d at 861–62. 129 Id.; accord Malpiede, 780 A.2d at 1097 (“Knowing participation in a board’s fiduciary breach requires that the third party act with the knowledge that the conduct advocated or assisted constitutes such a breach.”). 130 RBC Cap. Mkts., 129 A.3d at 862. 131 New Enter. Assocs. ^[14], L.P. v. Rich (NEA I), 292 A.3d 112, 176 (Del. Ch. 2023) (“The aider and abettor must knowingly assist another in committing a wrongful act. The means by which an aider and abettor provides assistance need not be independently wrongful.”); e.g., Firefighters’ Pension Sys. of City of Kansas City v. Found. Bldg. Mat’ls, Inc., 318 A.3d 1105, 1171 (Del. Ch. 2024) (“The plaintiff has not pled that RBC took action that was independently wrongful, but that is not required. . . . RBC worked closely with the Lone Star-affiliated directors to secure proposals that included a maximum Early Termination Payment. RBC played an integral part in the effort to sell the Company through a transaction that would trigger the Early Termination Payment. The complaint states a claim against RBC for aiding and abetting that alleged breach.”).

“Because the involvement of secondary actors in tortious conduct can take a variety of forms that can differ vastly in their magnitude, effect, and consequential culpability,” the participation concept “requires that the secondary actor have provided ‘substantial assistance’ to the primary violator.”132 To assess substantial assistance, Delaware law applies a five-factor test derived from Section 876 of the Restatement (Second) of Torts. “That framework calls for considering (1) the nature of the act encouraged, (2) the amount of assistance given by the defendant, (3) his presence or absence at the time of the tort, (4) his relation to the other, and (5) his state of mind.”133

Two recent Delaware Supreme Court decisions made the knowing participation element tougher for both knowledge and participation. In Columbia Pipeline, the justices held that the aider and abettor’s knowledge “must be actual knowledge,” not the lower bar of reckless indifference.134 In Mindbody and Columbia

132 In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, at[*41] (Del. Ch. Aug. ^[27], 2015). 133 Engagesmart, 2026 WL 554442, at[*35] (citing Dole, 2015 WL 5052214 at[*42] ); accord In re Mindbody, Inc., S’holder Litig., 332 A.3d 349, 395–96 (Del. 2024). 134 In re Columbia Pipeline Gp., Inc. Merger Litig., 342 A.3d 324, 368 (Del. 2025). The justices defined “actual knowledge” as “‘clear and direct knowledge.’” Id. at 356 & n.194 (quoting Deutsche Bank Nat’l Tr. Co. v. Goldfeder, 86 A.3d 1118 (Del. 2014) (TABLE) (“Actual knowledge is defined as direct and clear knowledge. Constructive knowledge is defined as knowledge that one using reasonable care and diligence should have, and therefore that is attributed by law to a given person.” (cleaned up)). Under RBC Capital, constructive knowledge was enough. RBC Cap. Mkts., 129 A.3d at 862 (“To establish scienter, the plaintiff must demonstrate that the aider and abettor had actual or constructive knowledge that their conduct was Pipeline, the justices limited what qualifies as “substantial assistance.” At least for a third-party acquirer, the plaintiff must plead or prove affirmative conduct,135 and the conscious failure to act in the face of a known duty to act is not sufficient. 136 Thus, “[a]t the pleading stage, a complaint must contain factual allegations supporting a reasonable inference that the aider and abettor actually knew that the primary violator’s conduct was a fiduciary breach, actually knew that its own conduct was legally improper (even if not inherently illegal), and actively participated in the primary violator’s misconduct.”137

legally improper.” (internal quotation marks omitted)); id. (explaining that the aider and abettor must act “knowingly, intentionally, or with reckless indifference” (cleaned up)). In the transition from Mindbody to Columbia Pipeline, the justices also seem to have wanted more to support a finding of knowledge. Compare Mindbody, 332 A.3d at 397–98 (“[T]he record, particularly as to the November 6 and November 10 tips, supports the conclusion that Vista likely knew that the conduct of the primary violator, Stollmeyer, constituted a breach. This knowledge satisfies the first type of required knowledge for a finding of scienter.”) with Columbia Pipeline, 342 A.3d at 357 n.198 (rejecting as insufficient trial court’s finding that “The plaintiffs proved that TransCanada knew that Skaggs and Smith were engaging in a breach of the duty of loyalty and that the Board was failing to provide meaningful oversight.”). 135 Mindbody, 332 A.3d at 403 & n.137 (holding that a failure to act is insufficient absent an independent duty between the alleged aider and abettor and the plaintiff); Columbia Pipeline, 342 A.3d at 369 (discussing and adopting the “affirmative action” requirement in Mindbody). 136 Itis not clear how the active participation requirement from Columbia Pipeline and Mindbody applies to aiders and abettors other than third-party acquirers. Other aiders and abettors, such as sell-side advisors, are differently situated. Read broadly, the requirement would overrule much of the analysis in RBC Capital, which rested on a financial advisor withholding information that it was under a duty to provide. Engagesmart, 2026 WL 554442, at[*41] . 137 Id. at[*35] ; accord Calumet Cap. P’rs, 2026 WL 246995, at[*17] .

For purposes of a motion to dismiss under Rule 12(b)(6), a complaint need only plead facts supporting a reasonable inference of knowledge. 138 Under Rule 9(b), a plaintiff can plead knowledge generally; “there is no requirement that knowing participation be pled with particularity.” 139 To plead participation, a plaintiff can plead that the advisor “participated in the board’s decisions, conspired with [the] board, or otherwise caused the board to make the decisions at issue.” 140 But “‘[c]onclusory statements that are devoid of factual details to support an allegation of knowing participation will fall short of the pleading requirement needed to survive a Rule 12(b)(6) motion to dismiss.’”141

2. Knowing Participation In Perkins And The Investment Manager’s Breach

There are two groups of actors whose sell-side breach could support a claim for aiding and abetting. One group comprises Perkins and the Investment Manager. They did not move to dismiss the breach of fiduciary duty claim under Rule 12(b)(6), so this decision would not otherwise need to address it. But the claim is a

138 See Dent v. Ramtron Int’l Corp., 2014 WL 2931180, at[*17] (Del. Ch. June 30, 2014). 139 Id. 140 Malpiede, 780 A.2d at 1098. 141 Jacobs v. Meghji, 2020 WL 5951410, at *7 (Del. Ch. Oct. ^[8], 2020) (quoting McGowan v. Ferro, 2002 WL 77712, at *2 (Del. Ch. Jan. ^[11], 2002)).

straightforward one for breach of the duty of loyalty, and it is reasonably conceivable that the Buyer knowingly participated in their breach of the duty of loyalty.

Perkins is one of the Directors. Under the LP Agreement, he owes the same duties as a director of a Delaware corporation. Those duties include a duty of loyalty.

A plaintiff can recover monetary damages for a breach of the duty by pleading and later proving that the fiduciary “harbored self-interest adverse to the stockholders’ interests, acted to advance the self-interest of an interested party . . ., or [otherwise] acted in bad faith.”142 The Complaint alleges that the Buyer promised to support Perkins and the Investment Manager financially in their efforts to start new funds.143 As a result of that commitment, Perkins and the Investment Manager harbored a self-interest contrary to the interests of the Master Fund and its investors.

Even after Columbia Pipeline, an acquirer can aid and abet a breach of the duty of loyalty by “creat[ing] the condition giving rise to the conflict of interest.”144 “[A]lthough an offeror may attempt to obtain the lowest possible price for stock through arm’s-length negotiations with the target’s board, it may not knowingly

142 In re Cornerstone Therapeutics Inc., S’holder Litig., 115 A.3d 1173, 1180 (Del. 2015); see Tangoe Inc. S’holders Litig., 2018 WL 6074435, at[*12] (Del. Ch. Nov. ^[20], 2018); Venhill Ltd. P’ship ex rel. Stallkamp, 2008 WL 2270488, at[*22] (Del. Ch. June 3, 2008); McMillan, 768 A.2d at 502. 143 Compl. ¶¶ 5, 69, 87, 158. 144 Columbia Pipeline, 342 A.3d at 361.

participate in the target board’s breach of fiduciary duty by extracting terms which require the opposite party to prefer its interests at the expense of its shareholders.”145

In USACafes, Chancellor Allen dealt with a similar allegation. An acquirer allegedly offered financial incentives to the general partner to cause them to disregard their duties to the limited partnership.146 That was sufficient to support a claim for aiding and abetting against the Buyer. The same is true here, even under the more stringent standard.

The Buyer understandably argues that the assertion about the side deal is conclusory, and that is true. But while this court need not credit conclusory allegations, a court must take into account the extent to which information is in the defendants’ exclusive control.147 If a plaintiff has no ability to access more detailed information, then requiring more detailed pleadings risks closing the courthouse

145 Malpiede, 780 A.2d at 1097. 146 USACafes, 600 A.2d at 56. 147 E.g., United States v. Baxter Int’l, Inc., 345 F.3d 866, 881 (11th Cir. 2003) (“Courts typically allow the pleader an extra modicum of leeway where the information supporting the complainant’s case is under the exclusive control of the defendant.”); United States ex rel. Russell v. Epic Healthcare Mgmt. Gp., 193 F.3d 304, 308 (5th Cir. 1999) (“We have held that when the facts relating to the alleged fraud are peculiarly within the perpetrator’s knowledge, the Rule 9(b) standard is relaxed . . . .”); Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1328 (7th Cir. 1994) (“Specificity requirements may be relaxed, of course, when the details are within the defendant’s exclusive knowledge.”); Weske v. Samsung Elecs., Am., Inc., 934 F. Supp. 2d 698, 709 (D.N.J. 2013) (explaining that courts apply the Rule 9(b) particularity standard more strictly when “information is not within the exclusive control of a defendant” and take a “more relaxed” approach when the defendant has exclusive control of the information).

doors to a plaintiff that is truly injured.148 It is one thing to expect plaintiffs to use the tools at hand when the tools are accessible. It is another thing to require plaintiffs to plead as if they had access to the tools at hand when they don’t.149 If a plaintiff has used the limited information it can access to plead allegations that support a reasonably conceivable claim in a setting involving a highly asymmetric balance of information, more pleading-stage specificity should not be required.150 A court can

148 In re Plasma-Deriv. Protein Therapies Antitrust Litig., 764 F. Supp. 2d 991, 1002 n.10 (N.D. Ill. 2011) (“If private plaintiffs, who do not have access to inside information, are to pursue violations of the law, the pleading standard must take into account the fact that a complaint will ordinarily be limited to allegations pieced together from publicly available data.”); accord In re RealPage, Inc., Rental Software Antitrust Litig. (No. II), 709 F. Supp. 3d 544, 550 (M.D. Tenn. 2023); see In re Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772, 804 (N.D. Ill. 2017). 149 See Inv. Bancorp, Inc. v. Albanese, 2020 WL 1929169, at *8 (Del. Ch. Apr. ^[21], 2020) (“[C]ontext matters when assessing the adequacy of particularized pleading. No rational pleading standard can require a plaintiff to plead specific facts that he has no means to know.”); accord Moran v. Unation, Inc., 2025 WL 3706330, at[*25] n.182 (Del. Ch. Dec. ^[22], 2025); see also Katz v. Household Int’l, Inc., 91 F.3d 1036, 1040 (7th Cir. 1996) (“Rule 9(b) does not require plaintiffs to plead facts to which they lack access prior to discovery.”); Concha v. London, 62 F.3d 1493, 1503 (9th Cir. 1995) (holding that Rule 9(b) only “requires that plaintiffs specifically plead those facts surrounding alleged acts of fraud to which they can reasonably be expected to have access”). 150 See In re Wolf, 64 B.R. 725, 753 (N.D. Ill. Bankr. 2022) (explaining that “Rule 9(b) does not require plaintiffs to plead facts to which they lack access prior to discovery . . . . Courts remain sensitive to information asymmetries that may prevent a plaintiff from offering more detail.”) (internal citations omitted); In re Universal Mktg., Inc., 460 B.R. 828, 835 (E.D. Pa. Bankr. 2011) (“When the evidence relevant to a claim is not in the control of a plaintiff, there is a seeming catch-22 between the need to plead certain facts before getting discovery, and the need to get discovery before having certain facts.”) (internal citations omitted); see also Inv. Bancorp, 2020 WL 1929169, at *9 (“[A] derivative plaintiff rarely has access, pre-discovery, to the facts that would allow him to recount a fly-on-the-wall’s perspective of the alleged exercise its case management authority to allow limited discovery and test critical allegations before permitting full-blown litigation to proceed.

Here, the informational asymmetry is high. The YWCA has relied on the letters it received from the Investment Manager and the limited public information that is available. Together, they depict a highly questionable transaction. At the same time, the structure of the fund complex took away any meaningful access to information beyond those sources. The defendants fault the YWCA for not using Section 220 of the Delaware General Corporation Law,151 ignoring the fact that the Feeder Funds and the Master Fund are not Delaware corporations.

To be sure, the LP Act contains its own books and records provision,152 but in contrast to Section 220, nothing in the LP Act provision explicitly gives a limited partner access to information beyond the partnership in which the limited partner holds an interest. In other words, the LP Act does not provide an express basis for the YWCA to access the Master Fund’s books and records as a Feeder Fund investor. The LP Act also makes access “subject to such reasonable standards (including standards

fiduciary misconduct he is attempting to plead.”); Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 443 (7th Cir. 2011) (discussing the heightened Rule 9(b) standard and explaining that “courts remain sensitive to information asymmetries that may prevent a plaintiff from offering more detail” but noting that “[t]he grounds for the plaintiff’s suspicions must make the allegations plausible”). 151 8 Del. C. § 220. 152 6 Del. C. § 17-305.

governing what information (including books, records and other documents) is to be furnished, at what time and location and at whose expense) as may be set forth in the partnership agreement or otherwise established by the general partners” 153 and authorizes a general partner

to keep confidential from limited partners for such period of time as the general partner deems reasonable, any information which the general partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the general partner in good faith believes is not in the best interest of the limited partnership or could damage the limited partnership or its business or which the limited partnership is required by law or by agreement with a third party to keep confidential.154 The LP Agreement does not give the limited partners any greater rights. 155 The Prospectus indicates that investors have no meaningful ability to access books and records at the Master Fund level and must content themselves with the Master Fund’s annual and semi-annual reports.

That means the YWCA had no way to access the basic documents governing the Asset Sale. The YWCA cannot plead more than it has because it does not have access to more information. The proper approach in this setting is to permit the claim to survive the pleading stage, but limit discovery so that the court can test the core allegation of a side deal before the case proceeds to full-blown litigation. The court

153 Id. § 17-305(a). 154 Id. § 17-305(b). 155 See LPA § 8.10(a).

will not attempt to set those boundaries now; the parties should make the initial attempt.

The Complaint therefore states a claim for aiding and abetting against the Buyer. The YWCA has also named Heppner as a defendant, but the Complaint does not contain allegations sufficient to implicate him. It seems logical that he would have made the promise to support the Investment Manager’s future funds, but the Complaint does not make that allegation. The claim against Heppner is therefore dismissed.

3. Knowing Participation In The Outside Directors’ Breach

The other group of actors whose sell-side breach could support a claim for aiding and abetting comprises the Outside Directors. This decision has already decided that the Complaint pleads a claim against the Outside Directors for breach of the duty of care when approving the Asset Sale and arguably a claim for taking that action in bad faith. But it is not reasonably conceivable that the Buyer aided and abetted that breach. Under Columbia Pipeline, “a bidder who has not colluded or conspired with its negotiating counterpart, who does not create the condition giving rise to a conflict of interest, who does not encourage his counterpart to disregard his fiduciary duties or substantially assist him in committing the breach, does not aid and abet the breach.”156 The Complaint does not contain any allegations suggesting that the Buyer or Heppner contributed to the Outside Directors’ breach.

156 Columbia Pipeline, 342 A.3d at 361.

C. Count VII: Unjust Enrichment

Count VII asserts that Heppner and the Buyer were unjustly enriched by the Asset Sale and the subsequent conversion of Preferred Units into common stock. This claim survives against the Buyer but not against Heppner.

Unjust enrichment is “the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.” 157 The elements of a claim for unjust enrichment are “(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, [and] (4) the absence of justification.”158 “Where an

157 Windsor I, LLC v. CWCap. Asset Mgmt. LLC, 238 A.3d 863, 875 (Del. 2020) (internal quotation marks omitted). 158 See Garfield v. Allen, 277 A.3d 296, 341 (Del. Ch. 2022). In Monsanto, the Delaware Supreme Court agreed with Garfield that “the absence of a remedy provided by law” is not a standalone element of an unjust enrichment claim. State ex rel. Jennings v. Monsanto Co., 299 A.3d 372, 391 & n.115 (Del. 2023). That issue only becomes pertinent if a party challenges the Court of Chancery’s jurisdiction to hear an unjust enrichment claim, in which case showing the absence of a remedy at law becomes critical for establishing equitable jurisdiction. See 10 Del. C. § 342 (“The Court of Chancery shall not have jurisdiction to determine any matter wherein sufficient remedy may be had by common law, or statute, before any other court or jurisdiction of this State.”). In that respect, Monsanto abrogates earlier cases that appeared to require that a plaintiff establish the absence of a remedy at law as part of the basic claim for unjust enrichment, even when equitable jurisdiction was not at issue. Cases reflecting that errant formulation and abrogated in part by Monsanto include Wells Fargo Bank, N.A. v. Estate of Malkin, 278 A.3d 53, 69 (Del. 2022) (describing the elements of an unjust enrichment claim as “(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification, and (5) the absence of a remedy provided by law”); Nemec, 991 A.2d at 1130 (same); Jackson National Life Ins. Co. v. Kennedy, 741 A.2d 377, 393 (Del. Ch. 1999) (same); and Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 585 (Del. Ch. 1998) (same).

investor is only alleged to have participated in a transaction without any knowledge of wrongdoing, its bargained-for benefit is justified, barring circumstances that would render the benefit unconscionable.”159

Here, the unjust enrichment claim turns on whether the Buyer received too good a deal in the Asset Sale. A third party is entitled to bargain in its own self- interest, so absent some type of wrongdoing, obtaining good terms—even extremely good terms—is not unjust.160

As the source of injustice, the YWCA points to the same alleged misconduct underlying the aiding and abetting claim. The YWCA again claims that the Buyer exploited the Investment Manager’s conflict of interest by offering a side deal. The unjust enrichment claim therefore survives to the same degree as the aiding and abetting claim.

159 Jacobs, 2020 WL 5951410, at *1; see also Principal Growth Strategies, LLC v. AGH Parent LLC, 2024 WL 274246, at[*13] (Del. Ch. Jan. ^[25], 2024) (“[T]he claim for unjust enrichment often adds little and could be duplicative or unnecessary.”). 160 See Credit Lyonnais Bank Nederland, N.V. v. Pathe Commc’ns Corp., 1991 WL 277613, at[*24] (Del. Ch. Dec. ^[30], 1991) (“Generally speaking, contracting parties are, to a large extent, entitled to act selfishly to promote their own interests . . . .”); Skye Mineral Invs., LLC v. DXS Cap. (U.S.) Ltd., 2020 WL 881544, at[*30] n.372 (citing Malpiede, 780 A.2d at 1097) (“A . . . contractual counter-party is entitled to negotiate in furtherance of its self-interest without facing aiding and abetting liability.”); see also In re El Paso Corp. S’holder Litig., 41 A.3d 432, 448 (Del. Ch. 2012) (explaining that the a buyer could not be culpable as an aider and abettor because “[i]t bargained hard, as it was entitled to do.”).

A plaintiff often pleads unjust enrichment as a “fallback claim.”161 It is unlikely that the unjust enrichment claim will have any work to do, but it survives Rule 12(b)(6).

III. CONCLUSION

Except for the claims against Heppner, the Rule 12(b)(6) motion is denied. As to the claims against Heppner, the motion is granted.

161 Voigt v. Metcalf, 2020 WL 614999, at[*28] (Del. Ch. Feb. 10, 2020); accord Frederick Hsu Living Tr. v. ODN Holding Corp., 2017 WL 1437308, at[*10] (Del. Ch. Apr. ^[14], 2017) (referring to unjust enrichment as a “fallback count”).