## Facts

- Bernstein invested as a minority owner in a closely held business or investment vehicle governed by a written agreement allocating control and economic risk.
- Nemeyer held a controlling or managerial role and participated in structuring or approving a challenged transaction affecting the enterprise (e.g., financing, restructuring, or asset-related action).
- Bernstein alleged the transaction benefited Nemeyer or affiliated insiders at the minority’s expense and amounted to self-dealing and unfair treatment.
- The parties’ governing documents and deal materials purportedly addressed managerial discretion, conflict-related risks, and the allocation of downside risk to investors.
- Bernstein’s theory relied on fiduciary-duty limits (loyalty, fairness, and disclosure) rather than solely on express contractual protections.
- The trial court entered judgment for Nemeyer (or otherwise rejected Bernstein’s fiduciary-duty claims), and Bernstein appealed.

## Issues

1. Whether a controlling manager breaches fiduciary duties of loyalty or fairness by implementing a transaction that disadvantages a minority investor when the transaction falls within authority granted by the parties’ written agreement.
2. Whether business-judgment deference (or similar managerial discretion principles) applies, or whether a stricter self-dealing standard should govern due to an alleged conflict of interest.
3. Whether disclosures and contractual risk allocation to sophisticated investors limit fiduciary-duty remedies absent proof of deception, concealment, or materially misleading omissions.

## Decision

- The appellate court affirmed the judgment in favor of Nemeyer.
- The court treated the written agreement and disclosed deal structure as central to evaluating the challenged conduct.
- The court declined to impose liability based on after-the-fact claims of unfairness where the complained-of risks and control features were part of the bargain or were reasonably apparent from the disclosures.
- The court found no sufficient basis to recharacterize a contractually authorized, disclosed arrangement as a fiduciary breach without strong evidence of undisclosed self-dealing or deceptive conduct.

## Legal Principles

- When sophisticated parties allocate control rights and downside risk by contract, courts generally resist using fiduciary doctrine to rewrite that bargain.
- A fiduciary’s loyalty and disclosure obligations are evaluated in light of the parties’ agreed governance structure; contractually authorized discretion weighs against imposing liability absent misleading nondisclosure or bad-faith concealment.
- Claims attacking the fairness of an outcome face substantial obstacles where the investor had notice, access to information, or agreed ex ante to the relevant conflict or financing structure.
- Judicial review is limited where the dispute primarily reflects an ex post dissatisfaction with a disclosed, negotiated allocation of risk rather than deception or undisclosed conflict.

## Conclusion

The court rejected the minority investor’s fiduciary-duty challenge, holding that sophisticated parties’ contractual allocation of control and risk, together with adequate disclosure of the transaction structure and potential conflicts, constrained judicial intervention absent proof of deceptive or undisclosed self-dealing.


Bernstein v. Nemeyer, 000 F.3d 000 (0000)