## Facts

- USACafes, L.P. was a Delaware limited partnership formed in a 1986 reorganization; its general partner was USACafes General Partner, Inc., a Delaware corporation.
- Sam and Charles Wyly owned all stock of the corporate general partner, sat on its board, and also held a large limited-partnership interest; other directors/officers of the corporate general partner included Rogers, Tuley, Francis, and Taylor.
- In October 1989, Metsa Acquisition Corp. bought substantially all partnership assets for $72.6 million ($10.25 per unit).
- Limited partners filed consolidated class actions alleging the sale price was unfairly low because directors/controllers of the corporate general partner accepted personal benefits tied to the transaction.
- The complaints alleged side payments and related benefits totaling roughly $15–$17 million for directors/officers, including substantial payments to the Wylys characterized as noncompete consideration, loan forgiveness for certain directors, and change-in-control payments and employment arrangements.
- Plaintiffs sought damages and constructive trusts over funds received in connection with the sale and alleged that Metsa knowingly participated by offering the personal benefits to induce breaches.

## Issues

1. Whether directors and controlling shareholders of a corporate general partner can owe fiduciary duties directly to a limited partnership and its limited partners regarding the use of control over partnership property.
2. Whether allegations that such directors/controllers accepted sale-related personal benefits that induced acceptance of an unfair price state a claim sufficient to survive a Rule 12(b)(6) motion.

## Decision

- The Court of Chancery denied the director defendants’ motion to dismiss the fiduciary-duty claims.
- The court held that directors of a corporate general partner (and those who control it) may owe fiduciary duties to the limited partnership and its limited partners when exercising control over partnership assets.
- The court concluded the pleadings adequately alleged self-interested conduct—accepting personal consideration linked to the asset sale—potentially at the expense of the partnership and its limited partners.

## Legal Principles

- A general partner is a fiduciary to the limited partnership and limited partners, owing duties of loyalty and care in managing partnership affairs.
- Individuals who control a corporate general partner and thereby control partnership property can be subject to equitable fiduciary obligations not to use that control for personal gain at the partnership’s expense.
- Corporate separateness does not bar recognizing fiduciary accountability where directors/controllers of the fiduciary entity allegedly divert transaction value for themselves in connection with partnership assets.
- On a motion to dismiss, well-pleaded allegations of sale-related side payments and conflicted decisionmaking are sufficient to state a loyalty-based claim against directors/controllers who controlled the partnership’s property through the corporate general partner.

## Conclusion

The court permitted limited partners’ fiduciary-duty claims to proceed against directors/controllers of a corporate general partner, recognizing that those who wield control over partnership assets may owe a duty of loyalty to limited partners and may be liable for self-dealing tied to a partnership asset sale.


In re USACafes, L.P. Litig., 600 A.2d 43 (Del. Ch. 1991)