Faiz Khan and Ralph Finger v. Warburg Pincus, LLC

IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE

FAIZ KHAN and RALPH FINGER, on
behalf of themselves and all others similarly
situated,
Plaintiffs,
v. C.A. No. 2024-0523-LWW
WARBURG PINCUS, LLC, WARBURG
PINCUS PRIVATE EQUITY XII, L.P.,
WARBURG PINCUS PRIVATE EQUITY
XII-B, L.P., WARBURG PINCUS
PRIVATE EQUITY XII-D, L.P.,
WARBURG PINCUS PRIVATE EQUITY
XII-E, L.P., WP XII PARTNERS L.P.,
WARBURG PINCUS XII PARTNERS,
L.P., WP CITYMD TOPCO LLC,
WALGREENS BOOTS ALLIANCE, INC.,
and VILLAGE PRACTICE
MANAGEMENT COMPANY LLC,
Defendants.

MEMORANDUM OPINION
Date Submitted: January 23, 2025
Date Decided: April 30, 2025

Ned Weinberger & Michael C. Wagner, LABATON KELLER SUCHAROW LLP,
Wilmington, Delaware; John Vielandi & Jiahui (Rose) Wang, LABATON KELLER
SUCHAROW LLP, New York, New York; Counsel for Plaintiffs Faiz Khan and
Ralph Finger

William M. Lafferty, Ryan D. Stottmann & Rachel R. Tunney, MORRIS NICHOLS
ARSHT & TUNNELL LLP, Wilmington, Delaware; Tariq Mundiya, Sameer
Advani, Vanessa C. Richardson & Richard Li, WILLKIE FARR & GALLAGHER
LLP, New York, New York; Counsel for Defendants Warburg Pincus, LLC,
Warburg Pincus Private Equity XII, L.P., Warburg Pincus Private Equity XII-B,
L.P., Warburg Pincus Private Equity XII-D, L.P., Warburg Pincus Private Equity
XII-E, L.P., WP XII Partners L.P. and Warburg Pincus XII Partners, L.P.

C. Barr Flinn, Paul J. Loughman & Skyler A. C. Speed, YOUNG CONAWAY
STARGATT & TAYLOR, LLP, Wilmington, Delaware; Eric Leon & Nathan
Taylor, LATHAM & WATKINS LLP, New York, New York; Counsel for
Defendants Village Practice Management Company LLC and WP CityMD Topco
LLC

Kevin R. Shannon, Christopher N. Kelly & Callan R. Jackson, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; Kristen R. Seeger, John
M. Skakun III & Takayuki Ono, SIDLEY AUSTIN LLP, Chicago, Illinois; Counsel
for Defendant Walgreens Boots Alliance, Inc.

Will, Vice Chancellor
This case concerns the merger of an urgent care provider and a primary care

provider. The urgent care provider—a limited liability company—was majority

owned by a private equity firm. The remaining owners were physician-members.

These groups held separate classes of units with different rights.

The urgent care provider’s limited liability company agreement gave minority

members a tag-along right to participate in transactions on the same terms as private

equity-affiliated members. The agreement permitted amendments to such rights if a

vote of the affected member class was secured. It also waived fiduciary duties owed

by the private equity affiliates and allowed them to act in their own interests.

The private equity affiliates negotiated disparate consideration for themselves

in the merger. Thus, an amendment to the limited liability company agreement was

required to eliminate the minority’s tag-along right. The requisite class vote was

obtained after members received a detailed information statement.

A year after closing, the minority members’ consideration lost value. They

sued in this court, claiming that they were treated unfairly and coerced into voting

for the amendment. They chiefly assert that the implied covenant of good faith and

fair dealing in the limited liability company agreement was breached. Their

arguments, however, improperly inject common law fiduciary duties into a

contractual relationship that eliminated them.

1
Because the limited liability agreement leaves no room for a quasi-fiduciary

theory disguised as an implied covenant claim, this case is dismissed.

I. FACTUAL BACKGROUND

Unless otherwise noted, the following facts are drawn from the Verified Class

Action Complaint (the “Complaint”) and the documents it incorporates by

reference.1

A. The Summit Merger

CityMD is an urgent care provider with locations across New York and New

Jersey.2 It was cofounded in 2010 by partners including Dr. Faiz Kahn—a plaintiff

in this case.3

Initially, CityMD was owned by its physicians.4 In June 2017, private equity

firm Warburg Pincus acquired a majority stake in CityMD through six funds it

controls (the “WP Investors”).5

1
Verified Class Action Compl. (Dkt. 1) (“Compl.”). Exhibits to the Transmittal Affidavit
of Rachel R. Tunney in Support of Opening Brief in Support of The WP Defendants’
Motion to Dismiss Verified Class Action Complaint (Dkt. 11) are cited as “Defs.’ Ex. __.”
2
Compl. ¶ 18.
3
Id. ¶ 19.
4
Id. ¶ 20.
5
Id. ¶¶ 10, 21-22. Warburg controls the private equity limited partnership funds it manages
as general partner. Id. ¶ 9. The WP Investors are defendants Warburg Pincus Private
Equity XII, L.P., Warburg Pincus Private Equity XII-B, L.P., Warburg Pincus Private
Equity XII-D, L.P., Warburg Pincus Private Equity XII-E, L.P., WP XII Partners L.P., and

2
Two years later, in June 2019, CityMD announced plans to merge with

Summit Medical Group—a physician-led multi-specialty group.6 The merger closed

in August 2019, resulting in a combined entity called WP CityMD Topco LLC (the

“Company”), a Delaware limited liability company.7

CityMD’s and Summit’s investors rolled over their equity into the new

Company. The WP Investors gained 60% ownership of the Company through Class

A units.8 CityMD’s non-Warburg investors held a 17% ownership position through

Class B units.9

B. The LLC Agreement

After closing, the unitholders’ relationships were governed by the Amended

and Restated Limited Liability Company Operating Agreement of WP CityMD

Topco LLC (the “LLC Agreement”).10

The LLC Agreement included several minority protections.11 In an

“Extraordinary Transaction,” each class of unitholders would receive the same form

Warburg Pincus XII Partners, L.P. Id. ¶ 10. Each fund is a Delaware limited partnership
formed by Warburg affiliates as an investment vehicle. Id.
6
Id. ¶ 23.
7
Id. ¶¶ 23-25.
8
Id. ¶¶ 27-28.
9
Id. ¶ 26.
10
Id. ¶ 35; see Defs.’ Ex. A (“LLC Agreement”).
11
Compl. ¶ 36.

3
and amount of consideration based on their “[p]ro [r]ata [p]ortion.”12 The proceeds

would be distributed according to a waterfall in the LLC Agreement, with Class A

units given the most senior position.13 The LLC Agreement further provided

minority unitholders with tag-along rights that allowed them to participate on equal

terms in certain sales of Company units by the WP Investors.14 To amend these

provisions, the LLC Agreement required consent from a majority of any class of

unitholders whose rights would be adversely affected by the amendment.15

The LLC Agreement also included broad waivers of the WP Investors’

fiduciary duties in four provisions.16 It stated that the WP Investors and their

affiliates owed no fiduciary or other duties to the Company or its members beyond

the duty to comply with the LLC Agreement.17 It further provided that each WP

investor was permitted to “act exclusively in . . . its own interest and without regard

12
LLC Agreement § 4.01(a); see Compl. ¶ 37; see also LLC Agreement § 1.01 (defining
“Pro Rata Portion”). An “Extraordinary Transaction” includes “a transaction in which the
current equity holders cease to hold more than 50% of the Company or the right to appoint
a majority of the Board, a sale of substantially all of the assets of the Company or the
liquidation of the Company.” Compl. ¶ 37; see LLC Agreement § 1.01.
13
LLC Agreement § 4.01(b).
14
Compl. ¶ 38; see LLC Agreement §§ 7.03(a)-(b).
15
Compl. ¶¶ 44, 88; see LLC Agreement § 14.04.
16
LLC Agreement §§ 5.03(b), 10.01(b), 14.01(b)(i)-(ii).
17
Id. §§ 5.03(b), 10.01(b), 14.01(b)(i), 14.04(b)(ii).

4
to the interest of any other person,” so long as it complied with the LLC

Agreement.18

C. The VillageMD Merger

In late 2021, Warburg begin exploring a sale of the Company.19 The Company

signed a non-disclosure agreement with Village Practice Management Company

LLC (“VillageMD”), a national primary care provider majority owned by Walgreens

Boots Alliance, Inc.20 Warburg had preliminary discussions with VillageMD in

early 2022, but negotiations stalled.21 They resumed in July 2022 after an exclusivity

period with another potential buyer ended.22

In August, VillageMD sent the Company a non-binding letter of intent.23 The

letter of intent proposed that the Company’s investors receive different consideration

by class. Class A unitholders (the WP Investors) would receive all cash.24 The other

classes (including Class B unitholders)—referred to as the “Partial Rollover

Holders”—would receive a mix of cash and VillageMD equity.25

18
Id. § 5.03(b).
19
Compl. ¶ 45.
20
Id. ¶¶ 46-47
21
Id. ¶ 47.
22
Id.
23
Id. ¶ 49.
24
Id.
25
Id.

5
After negotiations led by Warburg representatives, a final letter of intent was

signed in September and approved by the Company’s Board of Managers.26 It

contemplated mixed consideration of $4.5 billion in cash and $2.5 million in

VillageMD equity, with Class A unitholders receiving all cash.27

D. The Merger Agreement

About three weeks later, the Company’s outside legal counsel sent an initial

draft merger agreement to VillageMD.28 Alston & Bird LLP was selected to act as

outside counsel to the Partial Rollover Holders around this time.29

The parties negotiated a merger agreement over the ensuing weeks. The

merger consideration for Company investors was increased to $7 billion, with $4.95

billion in cash and $2.05 billion in VillageMD equity.30 Class A unitholders would

receive $3.3 billion in cash.31 The Partial Rollover Holders, who were required to

roll at least 40% of their Company units into VillageMD equity, would receive $1.6

billion in cash.32

26
Id. ¶ 51.
27
Id.
28
Id. ¶ 52.
29
Id. ¶ 63; see Defs.’ Ex. D (“Information Statement”) 11.
30
Compl. ¶ 54.
31
Id.; see Information Statement 11.
32
Compl. ¶¶ 56-58.

6
The parties signed the final Merger Agreement on November 7, 2022.33

E. The LLC Agreement Amendment

Because the Merger Agreement contemplated disparate consideration for

different unitholder classes, an amendment to the LLC Agreement was required (the

“Amendment”).34 The merger with VillageMD was conditioned on the Partial

Rollover Holders approving the Amendment.35 The Amendment involved several

changes to the LLC Agreement, including that: (1) the distribution waterfall would

be modified to permit the allocation of merger consideration as provided in the

Merger Agreement;36 and (2) the minority unitholders’ tag-along right would not

apply to the transfer of units through the merger with VillageMD.37

The Merger Agreement also required Partial Rollover Holders to sign and

return a letter of transmittal to receive their merger consideration.38 The letter of

transmittal included a broad release of claims concerning the Merger Agreement and

Amendment.39

33
Id. ¶ 52; see Defs.’ Ex. C (“Merger Agreement”).
34
Compl. ¶ 62.
35
Id.; see LLC Agreement § 14.04.
36
Defs.’ Ex. B (“Amendment”) § 1(b); see LLC Agreement § 4.01.
37
Amendment § 1(d); see LLC Agreement § 7.03.
38
Compl. ¶ 68; see Merger Agreement § 2.17(a).
39
Merger Agreement Ex. G § 4.

7
F. The Information Statement

A week after the Merger Agreement was signed, the Partial Rollover Holders

were sent a November 14 Information Statement.40 The Information Statement

attached the Merger Agreement and the form letter of transmittal.

The Partial Rollover Holders were told that they needed to submit a rollover

election form, letter of transmittal, and consent to the Amendment within 20 days.41

They could elect to roll over as little as 40% of their equity.42 But if they did not

timely return their form and consent, they would by default roll over 55%.43

The Information Statement stated that Class A unitholders and the Partial

Rollover Holders would receive different merger consideration.44 It added that the

purpose of the Amendment to the LLC Agreement was to permit the classes’

disparate consideration. A “Question and Answer” section beginning on the third

page of the Information Statement included: “Why does the [LLC Agreement] need

to be amended? What is the purpose of the [Amendment]?”45 The three-paragraph

answer explained that the Amendment waived the minority unitholders’ “tag-along

40
Compl. ¶ 67.
41
Id.
42
Information Statement 5.
43
Compl. ¶ 67; see Information Statement 8.
44
Id. at 5.
45
Id. at 4.

8
right to . . . [receive] the same form of consideration as [Warburg]” and would

“permit the allocation of the cash and equity consideration as provided in the Merger

Agreement.”46

The Information Statement said that the Partial Rollover Holders had their

own counsel at Alston & Bird LLP. It told the Partial Rollover Holders that they

could contact that counsel if they “ha[d] any questions about the [t]ransaction

[d]ocuments or the [m]erger.”47

The Company also held several information sessions to discuss the transaction

with unitholders.48 The sessions were attended by “numerous minority

unitholders.”49 The information session did not address the implications of a waiver

of tag-along rights.50

46
Id.
47
Id. at 9 (providing counsel’s contact information); see also id. at 2, 7, 11.
48
Compl. ¶ 69.
49
Id.
50
Id. ¶ 70.

9
G. Closing

The requisite class votes were obtained in favor of the merger and the

Amendment.51 Both of the plaintiffs voted in favor. Both also signed and returned

letters of transmittal, receiving millions of dollars in merger consideration.52

The merger closed on January 3, 2023.53 The Company’s Class A unitholders

(the WP Investors) received $3.3 billion in cash consideration.54 They also

purchased $50 million in new (not rolled over) VillageMD equity.55 The Partial

Rollover Holders received at least $2 billion worth of VillageMD equity (since at

least 40% of their Company units were rolled over) and about $1.6 billion of cash

consideration.56

Walgreens controls the combined company.57

H. This Litigation

About a year after the merger closed, in March 2024, Walgreens disclosed a

$12.4 billion goodwill impairment charge on VillageMD.58 It stated that the

51
See id. ¶¶ 61, 71; see also Information Statement 2.
52
See Defs.’ Exs. E, F.
53
Compl. ¶ 71.
54
Id. ¶¶ 55, 57.
55
Id. ¶ 55; Information Statement 5.
56
Compl. ¶¶ 56-57.
57
Id. ¶ 60.
58
Id. ¶ 73.

10
impairment charge was “due to downward revisions in [the combined company’s]

longer term forecast received during” the first quarter of 2024.59

The plaintiffs filed this lawsuit several weeks later, on April 16.60 The

plaintiffs are CityMD cofounder Kahn and Dr. Ralph Finger—both former Company

Class B unitholders.61 They purport to bring suit on behalf of all similarly situated

former Company unitholders.

The plaintiffs seek money damages and declaratory relief for alleged harms

caused by the merger.62 They advance four counts. Count I is a claim for breach of

the implied covenant of good faith and fair dealing against the WP Investors and the

Company.63 Count II is a claim for tortious interference with contractual relations

against Warburg.64 Count III is a claim for tortious interference with contractual

relations against Walgreens and VillageMD.65 And Count IV is a claim for unjust

enrichment against Warburg and the WP Investors.66

59
See Walgreens Boots Alliance, Inc., Quarterly Report on Form 10-Q (filed Mar. 28,
2024) 15.
60
See Dkt. 1.
61
Compl. ¶¶ 7-8.
62
Id. at 36.
63
Id. ¶¶ 82-93. Although Count I is also nominally styled a breach of contract claim, the
plaintiffs are only advancing an implied covenant theory. See infra note 72.
64
Compl. ¶¶ 94-101.
65
Id. ¶¶ 102-06.
66
Id. ¶¶ 107-13.

11
In July 2024, Warburg and the WP Investors, Walgreens, and VillageMD filed

separate motions to dismiss the claims against them.67 The plaintiffs filed an

omnibus answering brief on September 17.68 The defendants filed reply briefs in

support of dismissal a month later.69 The motions were taken under advisement after

oral argument on January 23, 2025.70

II. LEGAL ANALYSIS

The defendants seek dismissal under Court of Chancery Rule 12(b)(6) for

failure to state a claim upon which relief can be granted. Their motions are governed

by the reasonable conceivability standard:

(i) all well-pleaded factual allegations are accepted as true;
(ii) even vague allegations are “well-pleaded” if they give
the opposing party notice of the claim; (iii) the Court must
draw all reasonable inferences in favor of the non-moving
party; and [(iv)] dismissal is inappropriate unless the
“plaintiff would not be entitled to recover under any

67
See Dkts. 10, 12, 13 (Mots. to Dismiss); Dkt. 12 (Walgreens Boots Alliance, Inc.’s
Opening Br. in Supp. of its Mot. to Dismiss); Dkt. 14 (Village Practice Management
Company LLC’s and WP CityMD Topco LLC’s Opening Br. in Supp. of their Mot. to
Dismiss the Verified Class Action Compl.) (“VillageMD Opening Br.”); Dkt. 15 (Opening
Br. of the WP Investors and Warburg Pincus, LLC in Supp. of Their Motion to Dismiss
the Verified Class Action Compl.) (“WP Defs.’ Opening Br.”).
68
Dkt. 38 (Pls.’ Omnibus Answering Br. in Opp’n to Defs.’ Mots. to Dismiss) (“Pls.’
Answering Br.”).
69
Dkt. 41 (Village Practice Management Company LLC’s and WP CityMD Topco LLC’s
Reply Br. in Supp. of Their Mot. to Dismiss the Verified Class Action Compl.); Dkt. 42
(Reply Br. of the WP Investors and Warburg Pincus, LLC in Supp. of Their Mot. to Dismiss
the Verified Class Action Compl.); Dkt. 43 (Walgreens Boots Alliance, Inc.’s Reply Br. in
Supp. of Its Mot. to Dismiss).
70
Dkt. 54; see Dkt. 55.

12
reasonably conceivable set of circumstances susceptible of
proof.”71

The Complaint falls short of this standard. The plaintiffs have not pleaded a

reasonably conceivable breach of contract or breach of the implied covenant of good

faith and fair dealing by the Company or WP Investors. Without an underlying

breach, the tortious interference and unjust enrichment claims necessarily fail.

A. Breach of the Implied Covenant of Good Faith and Fair Dealing

Although the plaintiffs assert that unitholder approval of the merger and

Amendment “did not comply with the LLC Agreement,” they cite no express

provision that was breached.72 Instead, they claim that the WP Investors and

Company breached the implied covenant of good faith and fair dealing by

negotiating away their tag-along right before “coercing” allegedly uninformed

Partial Rollover Holders to consent to an amendment eliminating it.73

71
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (citation omitted).
72
Pls.’ Answering Br. 2. The Complaint nominally includes a claim for breach of the LLC
Agreement’s express terms in Count I. See Compl. ¶¶ 90, 93 (asserting that the Company
and WP Investors violated Sections 4.01, 7.03, 7.04, and 14.04 of the unamended LLC
Agreement). There are no allegations that the amended LLC Agreement was violated. In
any event, the plaintiffs’ briefing is silent on any express breach of contract claim. It is
waived to the extent any such claim was advanced in the first place. See Emerald P’rs v.
Berlin, 726 A.2d 1215 (Del. 1999) (“Issues not briefed are deemed waived.”).
73
See Pls.’ Answering Br. 32-40; see id. at 25 (arguing that their “claims generally arise
from breaches of the implied covenant of good faith and fair dealing in the LLC
Agreement”); see also Compl. ¶¶ 87, 89.

13
To succeed on this claim, the plaintiffs must show “a specific implied

contractual obligation, a breach of that obligation by [the Company and the WP

Investors], and resulting damage to [the plaintiffs].”74 The claim fails on the first

element.

The implied covenant of good faith and fair dealing “is a limited and

extraordinary legal remedy.”75 It is “‘best understood as a way of implying terms in

[an] agreement,’ whether employed to analyze unanticipated developments or to fill

gaps in the contract’s provisions.”76 It “does not apply when the contract addresses

the conduct at issue, but only when the contract is truly silent concerning the matter

at hand.”77

The logical first step in assessing an implied covenant claim is to determine

whether the contract has a gap.78 Of course, if the contract explicitly addresses the

matter at hand, there is no gap for the implied covenant to fill. “[T]he implied

74
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009) (citing Fitzgerald v.
Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998)).
75
Oxbow Carbon & Mins. Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 507
(Del. 2019) (quoting Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010)).
76
Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 441 (Del. 2005) (quoting E.I.
DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, 443 (Del. 1996)).
77
Oxbow, 202 A.3d at 507 (citation omitted); see also Dunlap, 878 A.2d at 441 (“[O]ne
generally cannot base a claim for breach of the implied covenant on conduct authorized by
the terms of the agreement.” (citation omitted)).
78
Miller v. HCP & Co., 2018 WL 656378, *9 (Del. Ch. Feb. 1, 2018), aff’d sub nom. Miller
v. HCP Trumpet Invs., LLC, 194 A.3d 908 (Del. 2018).

14
covenant cannot be used to circumvent the parties’ bargain” when “[e]xisting

contract terms control.”79

Here, the LLC Agreement explicitly addressed the matters at issue. It set out

requirements to amend its terms—including the tag-along right—leaving no gap for

the implied covenant to fill. The plaintiffs’ coercion theory does not save their claim

because the LLC Agreement waived fiduciary duties and permitted the WP Investors

to act in their own interests. Finally, the plaintiffs’ disclosure-related argument is

also foreclosed by the LLC Agreement’s terms.

1. No Implied Term on Eliminating the Tag-Along Right

The plaintiffs first assert that there is an “implicit term” in the LLC Agreement

prohibiting the WP Investors from taking action with “the effect of destroying,

injuring, or frustrating the Class B [unitholder’s] right to receive the fruits of the tag-

along right.”80 Before the Amendment, the tag-along right in Section 7.03(a) of the

LLC Agreement contemplated that if Warburg sold or transferred Class A units at a

favorable price, other unitholders could participate in the deal on the same terms.81

In the plaintiffs’ view, the Class B unitholders expected when signing the LLC

79
Dunlap, 878 A.2d at 441.
80
Pls.’ Answering Br. 30-31.
81
LLC Agreement § 7.03(b) (“Each Prospective Tagging Member shall have the
right . . . to request that the Transferring Member include in the proposed Transfer a
number of Class A Units, vested Class B Units and vested Class I Units held by such
Prospective Tagging Member . . . .”); see also Compl. ¶¶ 38-42.

15
Agreement that the Company’s Class A-affiliated managers would not

“negotiate-away” the tag-along right.82 They contend that this implied term was “so

obvious” that the parties “never would have thought to negotiate terms explicitly

prohibiting [it].”83

The problem for the plaintiffs is that the LLC Agreement contemplates

amendments adversely affecting the rights of a particular class of units and outlines

the steps required for approval of such amendments.84 Section 14.04(c) permits

amendments that “disproportionately affect in a material and adverse manner” a

class of unitholders relative to another class so long as the amendment receives the

“prior written consent” of a majority of the affected class.85 The plaintiffs

acknowledge that a class vote was obtained in favor of the Amendment, which

eliminated the tag-along right.86 “The implied covenant will not infer language that

contradicts a clear exercise of an express contractual right.”87

82
Pls.’ Answering Br. 31.
83
Id.
84
LLC Agreement § 14.04; see Compl. ¶¶ 44, 88.
85
LLC Agreement § 14.04(c) (stating that amendments disproportionately affecting the
rights of a class “shall require the consent of Members holding a majority of Membership
Units of the class or classes of Membership Units so adversely affected”); see Compl. ¶
44.
86
See Pls.’ Answering Br. 2; Compl. ¶¶ 88-90; see also Amendment § 1(d)(v).
87
Nemec, 991 A.2d at 1127.

16
If the parties wanted to include additional protections against amending the

tag-along provision—or to bar changes to it—they could have done so. They did

not. The implied covenant cannot be wielded to rewrite the LLC Agreement or grant

the plaintiffs rights they never bargained for.88

2. No Implied Term Barring Differential Consideration

The plaintiffs also argue that the LLC Agreement contained an implied term

that the WP Investors and Company would not eliminate Class B unitholders’

tag-along right through a “coerced” Amendment to permit differential

consideration.89 According to the plaintiffs, this implicit term prevented the WP

Investors and Company from “conditioning the benefits of the Merger on the Class

B [unitholders’] waiver of [their] tag-along right” through the Amendment.90 The

Amendment purportedly caused a “wrongful transfer” of merger consideration from

the Partial Rollover Holders to the Class A unitholders, which violated the plaintiffs’

“reasonable expectations when they signed the LLC Agreement.”91

88
See Aspen Advisors LLC v. United Artists Theatre Co., 843 A.2d 697, 707 (Del. Ch.
2004) (declining to find a breach of implied covenant where “do[ing] so would be to grant
the plaintiffs, by judicial fiat, contractual protections that they failed to secure for
themselves at the bargaining table”), aff’d, 861 A.2d 1251 (Del. 2004).
89
See Pls.’ Answering Br. 33-38.
90
Id. at 35; see Compl. ¶¶ 4, 61.
91
Pls.’ Answering Br. 36 (quoting In re Delphi Fin. Grp. S’holder Litig., 2012 WL 729232,
at *16 (Del. Ch. Mar. 6, 2012)).

17
In multiple provisions, however, the LLC Agreement eliminated any fiduciary

duties owed by the WP Investors or persons affiliated with them.92 The WP

Investors were not “obligated to do or perform any act or thing in connection with

the Company and its subsidiaries not expressly set forth in th[e] [LLC]

Agreement.”93 The LLC Agreement expressly allowed the WP Investors to “act

exclusively in [their] own interest[s] and without regard to the interest of any other

Person.”94 If there was a “conflict of interest between the Company or its

Subsidiaries, on the one hand, and any Member, Manager or officer [who was a ‘WP

92
See LLC Agreement § 5.03(b) (“[T]o the fullest extent permitted by law, no Member,
Manager or officer of the Company (to the extent such officer is a WP Person) [] shall have
any fiduciary or other duty to the Company or its Subsidiaries or the Members…provided,
however, that this Section 5.03(b) shall not limit any Person’s obligation to comply with
the express terms of this Agreement . . . .”); id. § 10.01(b) (“To the fullest extent permitted
by law [] no Member, Manager or officer of the Company (to the extent such officer is a
WP Person) [] shall (i) have any fiduciary or other duties to the Company or any Member
other than the duty to comply with the applicable terms and provisions . . . .”); id.
§ 14.01(b)(i) (“[T]o the fullest extent permitted by applicable law: (i) confirms that,
notwithstanding anything herein to the contrary, each Member, Manager or officer of the
Company (to the extent such officer is a WP Person) [] has no fiduciary or other duty
(contractual or otherwise) to the Company or any of its Subsidiaries except as may be
expressly set forth in this Agreement . . . .”); id. § 14.01(b)(ii) (“[T]o the fullest extent
permitted by applicable law [] each Member, Manager or officer of the Company (to the
extent such officer is a WP Person) [] has no fiduciary or other duty (contractual or
otherwise) to any Member (other than, in the case of a Member, Manager or officer of the
Company that is a WP Person, to the WP Investors) except as may be expressly set forth
in this Agreement . . . .”).
93
Id. § 10.01(b)(ii).
94
Id. § 5.03(b).

18
Person’], on the other hand, such [WP Person] [could] act solely in their own best

interest.”95

As a result, the LLC Agreement has no gap preventing the WP Investors from

negotiating for disparate consideration—or undertaking an Amendment to permit it.

By its very terms, the LLC Agreement allowed the WP Investors to put their interests

ahead of Class B unitholders, so long as the WP Investors complied with the LLC

Agreement’s terms. The LLC Agreement, as addressed above, permitted

amendments that adversely affected one class. There is no reasonably conceivable

basis to conclude the WP Investors or Company’s actions “frustrat[ed] the fruits of

the bargain that the [plaintiffs] reasonably expected.”96 The contractual arrangement

the parties reached suggests that the plaintiffs would have expected otherwise.

Still, the plaintiffs insist that wrongful conduct “in the corporate context”

constitutes a “violation of the LLC Agreement and the implied proscription against

coerced unitholder approvals.”97 They rely on In re Delphi Financial Group

Shareholder Litigation, where a controlling stockholder allegedly breached his

fiduciary duties by coercing the minority into approving a charter amendment that

95
Id. § 14.01(b)(iii). “WP Person” is defined as “any WP Investor, any Affiliate of any
WP Investor, any WP Manager or any Person appointed by, or acting at the direction of,
any of the foregoing as an officer, manager or director of any Company Entity.” Id. § 1.01.
96
Nemec, 991 A.2d at 1126.
97
Pls.’ Answering Br. 34.

19
allowed him to receive disparate consideration in a merger.98 Yet that case is in the

corporate context.99 All but one of the other “coercion” cases cited by the plaintiffs

in support of their claim likewise concern corporate fiduciaries.100 The only case

cited in the LLC context is inapposite.101

Unfairness in a fiduciary duty analysis—as in Delphi—is distinct from the

implied covenant theory brought here. In analyzing an implied covenant claim, the

court is not resolving whether a “fiduciary acted fairly when engaging in the

challenged transaction as measured by duties of loyalty and care whose contours are

mapped out by Delaware precedents.”102 The court is instead assessing “fairness”

98
Id.
99
Further, the court in Delphi did not address whether the controlling stockholder’s conduct
violated the implied covenant of good faith and fair dealing. See 2012 WL 729232, at *17.
100
See Pls.’ Answering Br. 37-38 nn.103-105 (citing corporate cases about coercion); cf.
In re Dell Techs. Inc. Class V S’holder Litig., 2020 WL 3096748, at *20-21 (Del. Ch. June
11, 2020) (warning that “[r]eflexively applying language from a decision issued in one
context to a factual scenario implicating a different context, just because the decision uses
the term ‘coercion,’ can lead to erroneous results”).
101
The plaintiffs cite Bakerman v. Sidney Frank Importing Co., where the court allowed
an implied covenant claim to survive alongside claims for breach of fiduciary duty and
breach of contract. 2006 WL 3927242, at *6 (Del. Ch. Oct. 10, 2006). But Bakerman
involved allegations that the plaintiff’s consent to a transaction was obtained under
duress—specifically, “a threat to file a lawsuit against [the plaintiff] and a threat to
terminate his employment.” Id. at *16. The plaintiffs here do not allege any such duress.
102
Gerber v. Enter. Prods. Hldgs., LLC, 67 A.3d 400, 418-19 (Del. 2013), overruled on
other grounds by Winshall v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013).

20
and “good faith” in view of the terms and purpose of a contract.103 Fiduciary duty

claims are not a replacement for implied covenant claims, particularly where

fiduciary duties are disclaimed in an LLC agreement.

Delaware law upholds the elimination of fiduciary duties in LLC

agreements.104 Our courts are “all the more hesitant to resort to the implied

covenant” where, as here, an alternative entity agreement “eliminates fiduciary

duties as part of a detailed contractual governance scheme.”105 “Respecting the

elimination of fiduciary duties requires that courts not bend an alternative and less

powerful tool”—the implied covenant—“into a fiduciary substitute.”106

The plaintiffs next argue that the LLC Agreement is “subject to general

equitable principles” and “provides that Company officers owe members and the

Company fiduciary duties coextensive with what corporate officers generally owe

under Delaware law.”107 The LLC Agreement states that Company officers “other

103
Id. at 419; see also Miller, 2018 WL 656378, at *9 (“‘[F]air dealing’ here does not imply
equitable behavior. The term ‘fair’ is something of a misnomer here; it simply means
actions consonant ‘with the terms of the parties’ agreement and its purpose.’” (citing
Gerber, 67 A.3d at 419)).
104
See, e.g., AM Gen. Hldgs. LLC v. The Renco Grp., Inc., 2016 WL 4440476, at *15 (Del.
Ch. Aug. 22, 2016) (noting that “the LLC Act enables contracting parties to alter and even
eliminate equitable fiduciary duties in the LLC context”); see also 6 Del. C. § 18-1101(c).
105
Lonergan v. EPE Hldgs., LLC, 5 A.3d 1008, 1018 (Del. Ch. 2010).
106
Id. at 1018-19.
107
Pls.’ Answering Br. 34.

21
than an officer that is a WP Person” owe fiduciary duties to the Company and its

members comparable to duties owed in the corporate context.108 But the plaintiffs

are not pursuing claims against non-Warburg Company officers.109 The narrow

provision addressing non-Warburg officers’ fiduciary duties in no way overrides the

broad waiver of fiduciary duties for Warburg and its affiliates.

3. No Implied Term on Disclosures

The plaintiffs’ final implied covenant argument is that the “LLC Agreement,

under the implied covenant, required full material disclosure before a unitholder

vote.”110 They allege that minority unitholders’ votes were solicited without the

benefit of all material information—in particular, about the elimination of the tag-

along right and Class A unitholders’ conflicts of interest in negotiating differential

merger consideration.111 At the same time, they say that the Information Statement

was too long to review in the 20 days allotted.112

108
LLC Agreement § 6.01.
109
The plaintiffs’ answering brief argues that the Company’s “CEO’s and President’s
conduct” is “imputed to the Company” for purposes of their claim. Pls.’ Answering Br.
42. The Complaint makes no mention of actions taken by the CEO or President.
110
Id. at 40.
111
Id. at 39-40.
112
Id. at 22; see also id. at 39-40 (arguing that the Partial Rollover Holders did not receive
adequate notice of the meeting).

22
As an initial matter, this argument is unsupported by the Complaint.113 Even

if it is fairly presented, it fails on the merits. Once again, the LLC Agreement

forecloses it.

No free-floating duty of disclosure was owed because, as discussed, the LLC

Agreement eliminated fiduciary duties.114 Further, as the plaintiffs acknowledge,

the LLC Agreement addresses notice to unitholders.115 Section 3.11(b) of the LLC

Agreement requires “[r]easonable and sufficient notice of each [member] meeting”

to Class A and Class B unitholders.116 If the parties wanted the provision to address

substantive disclosure requirements in the context of a vote by written consent, the

LLC Agreement could have said so.117

* * *

The plaintiffs paint the unitholder vote on the merger and Amendment as a

Hobbesian choice. The Partial Rollover Holders could accept the Amendment and

receive merger consideration. Or they could reject the Amendment and lose the

113
See Cal. Pub. Emps. Ret. Sys. v. Coulter, 2002 WL 31888343, at *12 (Del. Ch. Dec. 18,
2002) (“Arguments in briefs do not serve to amend the pleadings.”).
114
See supra notes 16-18, 92-95 and accompanying text.
115
Pls.’ Answering Br. 17; see also id. at 40.
116
LLC Agreement § 3.11(b).
117
See Fisk Ventures, LLC v. Segal, 2008 WL 1961156, at *10 (Del. Ch. May 7, 2008)
(explaining that the implied covenant “cannot be invoked where the contract itself
expressly covers the subject at issue”), aff’d, 984 A.2d 124 (Del. 2009) (TABLE).

23
merger.118 They chose the former outcome after receiving a detailed Information

Statement and the opportunity to confer with counsel representing them.

The Partial Rollover Holders now wish for a different deal. But the implied

covenant is not a means to obtain it. The LLC Agreement waived the Warburg

affiliates’ fiduciary duties and permitted them to act solely in their own interests. It

also outlined the process for amendments that adversely affected one unitholder

class, which was followed.

The Company was not a corporation; the plaintiffs are not stockholders. The

matters at hand are contractual ones. Delaware law does not provide for

quasi-fiduciary damages for a breach of the implied covenant where the contract

belies the plaintiff’s position. “The implied covenant, like the rest of our contracts

jurisprudence, is meant to enforce the intent of the parties, and not to modify that

expressed intent when remorse has set in.”119

Count I is dismissed for failure to state a claim.

B. Tortious Interference with Contractual Relations

The plaintiffs advance claims for tortious interference with contractual

relations against Warburg (Count II) and against Walgreens and VillageMD (Count

III). They allege that Warburg knew of the LLC Agreement and negotiated the

118
Pls.’ Answering Br. 37-38.
119
Miller, 2018 WL 656378, at *1.

24
merger with Walgreens to eliminate the tag-along right, which benefitted Class A

unitholders at the expense of Class B unitholders.120 As to Walgreens and

VillageMD, the Complaint states that they were also aware of the LLC Agreement

and negotiated with Warburg to limit the cash consideration to Class B

unitholders.121

A claim for tortious interference with business relations requires: “(1) a

contract, (2) about which defendant knew and (3) an intentional act that is a

significant factor in causing the breach of such contract (4) without justification

(5) which causes injury.”122 An underlying contractual breach is a necessary

factor.123 The plaintiffs have not, however, sufficiently alleged a breach of any

express or implied term the LLC Agreement. Their tortious interference claims are

therefore dismissed.

120
Compl. ¶¶ 94-101.
121
Id. ¶¶ 102-06.
122
Aspen Advisors LLC v. United Artists Theatre Co., 861 A.2d 1251, 1266-67 (Del. 2004)
(citation omitted).
123
Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1036 (Del. Ch. 2006)
(explaining that “[t]o state a tortious interference claim, a plaintiff must properly allege an
underlying breach of contract” and dismissing the claim where no such breach was
pleaded); Cousins v. Goodier, 283 A.3d 1140, 1160 (Del. 2022) (“[T]o prevail on a tortious
interference claim, a plaintiff must show that the defendant knew of a contract involving
the plaintiff, intentionally and improperly interfered with it, and was a significant factor in
causing the contract to be breached or otherwise terminated.”).

25
C. Unjust Enrichment

Finally, the plaintiffs bring a claim for unjust enrichment against Warburg and

the WP Investors. They assert that the Warburg and the WP Investors were unjustly

enriched by a scheme to eliminate Class B unitholders’ right to receive the same

merger consideration as Class A unitholders.124 The elements of this claim are:

“(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment,

[and] (4) the absence of justification . . . .”125

Unjust enrichment is a “remedy [in] the absence of a formal contract.”126

When analyzing an unjust enrichment claim, Delaware courts first consider whether

“an express, enforceable contract” controls the parties’ relationship.127 The

plaintiffs’ claim arises from the LLC Agreement and concerns the elimination of the

tag-along right through a class vote required by the LLC Agreement.128 The LLC

Agreement governs the matters at hand. An unjust enrichment claim is not a means

124
Compl. ¶¶ 107-13.
125
Jackson Nat’l Life Ins. Co. v. Kennedy, 741 A.2d 377, 393 (Del. Ch. 1999); see
also Garfield ex rel. ODP Corp. v. Allen, 277 A.3d 296, 351 (Del. Ch. 2022).
126
Bakerman, 2006 WL 3927242, at *18.
127
Id.
128
Compl. ¶¶ 108-10.

26
to “rewrite a comprehensive contract governing the entirety of the parties’

relationship after finding disappointment in the resulting agreement.”129

Accordingly, the claim cannot proceed against the WP Investors, which are

parties to the LLC Agreement. Nor can it be used to extend the obligations of the

LLC Agreement to Warburg, which is not a contractual party. “[U]njust enrichment

cannot be used to circumvent basic contract principles [recognizing] that a person

not a party to [a] contract cannot be held liable to it.”130

The unjust enrichment claim (Count IV) is dismissed.

D. Release of Claims

The defendants argue that, even if the Complaint were viable, dismissal is

required because the plaintiffs released their claims in the letters of transmittal they

signed.131 The plaintiffs respond that the releases in the letter of transmittal are

unenforceable for lack of consideration.132 In arguing for their respective positions,

the parties’ briefs explore Cigna Health & Life Insurance Co. v. Audax Health

129
Midcap Funding X Trust v. Graebel Cos., Inc., 2020 WL 2095899, at *18 (Del. Ch.
Apr. 30, 2020) (quoting BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin
Corp., 2009 WL 264088, at *8 (Del. Ch. Feb. 3, 2009)).
130
Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d 26, 59 (Del. Ch. 2012) (emphasis
omitted).
See WP Defs.’ Opening Br. 30-31; VillageMD Opening Br. 30-31; see also Merger
131

Agreement Ex. G § 4.A.
132
See Pls.’ Answering Br. 43-44.

27
Solutions, Inc., where the Court of Chancery held that a similar release in a letter of

transmittal was unenforceable because stockholders only received in exchange the

merger consideration already owed to them by statute.133

This case presents notable distinctions from Cigna. For example, it involves

an LLC—not a corporation—and does not implicate the statute highlighted in

Cigna.134 Unlike in Cigna, the Information Statement told unitholders that the

releases were a condition to receiving merger consideration and the Merger

Agreement attached a copy of the letter of transmittal.135 At the same time, though,

the Merger Agreement did not mention the releases in the body of the agreement

itself and was signed before the Information Statement discussing the releases was

distributed.136

There is scant case law on this issue in the corporate context—much less as

applied to an LLC. The parties’ briefs also devote few words to the subject.

133
107 A.3d 1082, 1085 (Del. Ch. 2014).
134
See id. at 1089 (holding that the preexisting duty to merger consideration was derived
from a statutory right specific to corporations).
See Merger Agreement Ex. G; Information Statement 37, 56-57; see also WP Defs.’
135

Opening Br. 30-31.
136
In Cigna, the court rejected the defendants’ argument that releases in a letter of
transmittal formed part of the merger consideration where the releases were not mentioned
in the merger agreement itself. 107 A.3d at 1091 (noting that the merger agreement
“provided no indication to stockholders that they might have to agree to a release”). But
Cigna does not address whether attaching the letter of transmittal containing releases to the
merger agreement—as with the Merger Agreement here—would change the outcome.

28
Fortunately, I need not resolve it. I have concluded the Complaint fails to state a

claim. Assuming (without deciding) that the claims were not released, the

Complaint must be dismissed.

III. CONCLUSION

The Complaint fails to state a claim on which relief can be granted. It is

therefore dismissed with prejudice under Rule 12(b)(6).

29