Michael B. Gonen of Duane Morris. Courtesy photo Chancery Holds Covenants Not to Sue for Breach of Fiduciary Duty Are Enforceable Only in Part
The court reasoned that Delaware law permits such covenants, subject to two ifs and one but—and declined to dismiss, reasoning that the covenant at issue was valid but that plaintiffs had adequately pleaded intentional fiduciary misconduct.
June 21, 2023 at 12:10 PM
8 minute read
In New Enterprise Associates 14 v. Rich, C.A. 2022-0406-JTL, 2023 WL 3195927 (Del. Ch. May 2, 2023) (NEA), the Delaware Court of Chancery discussed the enforceability of covenants not to sue for breach of fiduciary duty contained in stockholders' agreements. The court reasoned that Delaware law permits such covenants, subject to two ifs and one but—and declined to dismiss, reasoning that the covenant at issue was valid but that plaintiffs had adequately pleaded intentional fiduciary misconduct.
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