## Facts

- Joseph Nemec and Gerd Wittkemper were former Booz Allen Hamilton Inc. officers compensated in part with stock rights under an officers’ stock rights plan.
- Under the plan, after an officer’s retirement:
  - The officer had a two-year right to “put” shares to the company at book value.
  - After that two-year period expired, the company had a contractual right (not an obligation) to redeem the retired officer’s shares at book value at any time.
- Nemec and Wittkemper retired on March 31, 2006; their two-year put rights expired on March 31, 2008.
- Booz Allen negotiated a sale of its government consulting business to The Carlyle Group, expected (but not achieved) to close by March 31, 2008, and ultimately closed on July 31, 2008.
- In April 2008—after the put rights expired but before the Carlyle closing—Booz Allen redeemed plaintiffs’ shares at book value pursuant to the plan, paying $162.46 per share.
- Shareholders who remained through the Carlyle transaction later received more than $700 per share; plaintiffs alleged the redemption timing diverted approximately $60 million to remaining shareholders, including about $6 million to director-shareholders.
- Plaintiffs sued Booz Allen and its directors alleging (1) breach of the implied covenant of good faith and fair dealing, (2) breach of fiduciary duty of loyalty, and (3) unjust enrichment.
- The Court of Chancery dismissed for failure to state a claim; the Delaware Supreme Court affirmed.

## Issues

1. Whether exercising an express contractual redemption right at book value, after retirees’ put rights expired and shortly before a major transaction, could breach the implied covenant of good faith and fair dealing.
2. Whether directors breach fiduciary duties by using an express contractual redemption power in a manner alleged to benefit directors as shareholders at retirees’ expense.
3. Whether unjust enrichment is available when an express contract governs the challenged redemption and allocation of economic benefits.

## Decision

- The Delaware Supreme Court affirmed dismissal of all claims.
- The implied covenant claim failed because the contract expressly authorized redemption at book value after the put period, leaving no gap for the implied covenant to fill.
- The fiduciary duty claim failed because the challenged conduct was the exercise of contractually defined rights; fiduciary principles would not be applied to alter that negotiated allocation.
- The unjust enrichment claim failed because an express contract governed the subject matter, foreclosing quasi-contract relief.

## Legal Principles

- The implied covenant of good faith and fair dealing is a limited, gap-filling doctrine; it cannot be used to reallocate risks or rewrite an agreement after the fact.
- When a contract expressly addresses the conduct at issue (including timing and price discretion), the implied covenant generally does not apply.
- Where duties and outcomes are defined by contract, courts treat the dispute as contractual and do not superimpose fiduciary duty theories to reach a different result.
- Unjust enrichment is generally unavailable when an express contract governs the parties’ relationship and the subject matter of the claim.

## Conclusion

Delaware enforced the stock plan as written, holding that retirees could not use the implied covenant, fiduciary duty, or unjust enrichment theories to obtain transaction upside foreclosed by an express redemption right at book value after their put rights expired.


Nemec v. Shrader, 991 A.2d 1120 (Del. 2010)