## Facts

- A Delaware limited partnership formed in 1982 provided FCC-licensed “Cellular Service” in the Cincinnati, Columbus, and Dayton, Ohio markets.
- A limited partner, Cincinnati Bell Cellular Systems Co., was bound by a partnership agreement containing a noncompete clause restricting competition in “Cellular Service” within the Cincinnati SMSA during the partnership and for five years after withdrawal.
- The agreement defined “Cellular Service” by reference to FCC regulation under Part 22 and otherwise permitted partners to engage in independent business activities outside the stated restriction.
- In the 1990s, the FCC began licensing Personal Communications Services (PCS) under Part 24, a different regulatory framework from Part 22 cellular service.
- In 1997, Cincinnati Bell obtained a PCS license to serve the Cincinnati area independent of the partnership.
- The partnership sued, alleging that PCS competed directly with its business and that the implied covenant of good faith and fair dealing required treating PCS as covered by the agreement’s noncompete.
- The Court of Chancery dismissed under Rule 12(b)(6) for failure to state a claim, and the partnership appealed.

## Issues

1. Whether the implied covenant of good faith and fair dealing can imply an additional noncompetition restriction into an unambiguous limited partnership agreement to bar a limited partner from providing PCS service.
2. Whether a complaint states a claim when the agreement’s noncompete is expressly limited to “Cellular Service” as defined by FCC Part 22, and PCS is regulated under Part 24.

## Decision

- The Delaware Supreme Court affirmed the Rule 12(b)(6) dismissal.
- The court held the agreement’s relevant terms were unambiguous and left no contractual gap for the implied covenant to fill.
- Even accepting the allegation that PCS is commercially similar to cellular service, the implied covenant could not expand the noncompete beyond its express, regulation-linked definition.

## Legal Principles

- The implied covenant of good faith and fair dealing is a limited doctrine that may fill contractual gaps to effectuate the parties’ reasonable expectations, but it cannot rewrite or add substantive terms to an unambiguous agreement.
- Delaware’s policy favoring freedom of contract in entity agreements requires courts to enforce clear partnership terms as written.
- A noncompete clause tied to a specific, defined regulatory category will not be judicially expanded to cover later-developed technologies or services absent contractual language reaching them.
- On a Rule 12(b)(6) motion, dismissal is proper when the unambiguous agreement forecloses the plaintiff’s legal theory, even if the pleaded factual allegations are assumed true.

## Conclusion

Because the partnership agreement clearly restricted only “Cellular Service” as defined by FCC Part 22 and otherwise allowed partners to pursue other ventures, the implied covenant could not be used to impose a new, broader noncompete covering PCS; the dismissal for failure to state a claim was affirmed.


Cincinnati SMSA L.P. v. Cincinnati Bell Cellular Sys. Co., 708 A.2d 989 (Del. 1998)