## Facts

- Genitrix, LLC, a Delaware biotechnology LLC, had three equity classes: Class A (majority held by founder Andrew Segal), Class B (held by Fisk-affiliated investors including H. Fisk Johnson), and Class C (passive investors).
- The LLC agreement vested governance in a Board of Member Representatives; after missed milestones, the board expanded to five seats, giving Class B members an additional appointee.
- Most board actions required a 75% supermajority, effectively giving Class A and Class B veto power over each other.
- The agreement granted Class B members a contractual put right to require Genitrix to buy their Class B interests at an appraised price, which Segal alleged deterred new financing.
- Genitrix experienced persistent cash shortages; Segal sought additional fundraising and prepared a private placement memorandum, but Class B representatives did not consent, and a requested board meeting did not occur due to nonparticipation by Class A representatives.
- Fisk filed a petition for judicial dissolution based on deadlock and business failure.
- Segal counterclaimed and filed third-party claims against Fisk, Johnson, and others, alleging they blocked financing and refused to suspend put rights, constituting breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duties.
- Defendants moved to dismiss for failure to state a claim; Johnson also moved to dismiss for lack of personal jurisdiction.

## Issues

1. Whether Delaware courts had personal jurisdiction over an out-of-state Class B investor who was not a designated LLC manager but appointed board representatives and consulted with them.
2. Whether refusing to approve financing steps and insisting on retention of contractual veto and put rights stated a claim for breach of the LLC agreement.
3. Whether the implied covenant of good faith and fair dealing could impose liability for conduct expressly permitted by the LLC agreement’s governance and put-right provisions.
4. Whether fiduciary-duty claims survived where the LLC agreement disclaimed or limited member duties and the alleged misconduct consisted of exercising contractual rights.

## Decision

- The court dismissed the claims against H. Fisk Johnson for lack of personal jurisdiction.
- The court granted the motions to dismiss Segal’s counterclaims and third-party claims for failure to state a claim.
- The court held that exercising bargained-for governance and economic rights in an LLC agreement—without well-pled facts showing conduct outside that framework—does not support claims for breach of contract, implied covenant, or fiduciary duty.

## Legal Principles

- Delaware LLC agreements are enforced as written; members generally do not incur liability merely by exercising express contractual rights (including veto and put rights).
- The implied covenant of good faith and fair dealing is narrow and cannot be used to override or reallocate risks and rights that the contract expressly addresses.
- An LLC agreement’s exculpatory language and express limitation/disclaimer of duties may displace default fiduciary duties, constraining fiduciary-duty claims to conduct not authorized by the contract.
- Personal jurisdiction under Delaware’s LLC manager-jurisdiction statute requires manager status or “material participation” in management; appointing board representatives and conferring with them, without more, is insufficient.
- Long-arm jurisdiction requires that the asserted claims arise from the defendant’s Delaware contacts; unrelated Delaware activity does not establish jurisdiction.

## Conclusion

The Court of Chancery enforced the LLC agreement’s negotiated governance structure and investor protections, dismissing claims premised on defendants’ use of contractual veto and put rights, and it declined to assert jurisdiction over a non-manager investor whose involvement did not amount to material participation in management.


Fisk Ventures, LLC v. Segal, C.A. No. 3017-CC, 2008 WL 1961156 (Del. Ch. May 7, 2008)