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BankruptcyThe Bankruptcy StrategistFeatures

In LLC Stakeholder Claim Disputes, Pay Strict Attention to Agreement Terms and Possible Waivers

By Andrew C. Kassner
June 30, 2025

Disputes in restructuring matters often are adjudicated under state law. Given the increasing use of Delaware limited liability companies in private equity transactions, today we review a case involving a dispute between a private equity firm and physician minority equity holders in connection with the merger of a health care provider where the limited liability company agreement included broad waivers of the private equity firms’ fiduciary duties. In Khan v. Warburg Pincus, C.A. No. 2024-0523-LWW (Del. Ch. April 30, 2025), the Delaware Court of Chancery granted a motion to dismiss a complaint filed by two minority equity holders against the majority holder private equity firm and third party involved in the merger for failure to state claims for breach of the implied covenant of good faith and fair dealing, tortuous interference with contractual relations, and for unjust enrichment.

Minority Equity Holders’ Merger Consideration Subsequently Lost Value


According to the opinion, CityMD was a provider of urgent medical care in New York and New Jersey that was founded in 2010 by partner physicians. A private equity firm acquired a majority stake in the company in 2017. CityMD merged with Summit Medical Group two years later, resulting in a combined Delaware limited liability company named WP CityMD Topco LLC (the company). The private equity investors gained 60% ownership of the company through Class A units and the non-private equity investors held a 17% ownership position through Class B units.

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