- Case dealt with the substance of the fiduciary duty owed by a general partner to the partnership and its limited partners.
- Founders (a limited partnership) owned Forest (a hedge fund adviser) and Forum (a broker-dealer). A corporation controlled by defendant Boyd was the GP of founders. Plaintiff Hartley led Forum’s corporate finance department.
- Founders sold Forum to First Union Bank and Forest to a group controlled by Boyd. There were no other bidders for either entity, and both entities were sold for multiples of book value.
- Plaintiff Hartley participated in every partnership meeting at which the sales were discussed, and Founders was advised by an investment bank, law firm and accounting firm.
- Boyd owed a fiduciary duty to Founders and its LPs, including Hartley. As such, he had to prove by clear and convincing evidence that he dealt “fairly” with his LPs in the sale.
- Elements of fairness in this context were: (1) free and frank disclosure, (2) adequate consideration, (3) competent and independent advice and (4) relative sophistication of parties.
- Court found that Boyd satisfied his fiduciary duty.
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