Oxbow Carbon & Minerals Holdings, Inc. v. Crestview-Oxbow Acquisition, LLC

Summary

The Delaware Supreme Court reviewed a dispute concerning the interpretation of an LLC agreement, including minority members’ put and exit-sale rights, the effect of a 1.5x return condition, and the admission and rights of additional members. The court held that the Court of Chancery correctly interpreted the agreement’s plain language but erred in finding a contractual gap concerning the admission of certain minority holders. It affirmed in part, reversed in part, and vacated the Court of Chancery’s remedies decision.

Holdings

1. The LLC Agreement's plain language requires the Highest Amount Interpretation: an Exit Sale cannot proceed unless every Member receives at least 1.5 times its aggregate capital contributions, and all Members receive the same consideration.
2. The LLC Agreement does not contain a contractual gap concerning the admission terms or rights of the Small Holders.
3. The implied covenant of good faith and fair dealing does not authorize a Seller Top-Off because the contract addresses the relevant conduct and the admission of new Members and their effect on the Exit Sale could have been anticipated and expressly negotiated.
4. Because no Exit Sale was available that could satisfy the LLC Agreement's express requirements under prevailing market conditions, the Court of Chancery's remedies decision must be vacated.

Questions Presented

1. Whether the LLC Agreement's plain language requires the Highest Amount Interpretation, under which an Exit Sale cannot proceed unless every Member receives at least 1.5 times its capital contribution and all Members receive equal consideration.
2. Whether the LLC Agreement contains a contractual gap concerning the rights of the Small Holders when they were admitted as Members.
3. Whether the implied covenant of good faith and fair dealing permits implying a Seller Top-Off right for the Minority Members.
4. Whether Oxbow breached the LLC Agreement's Reasonable Efforts Provision.
5. Whether the Court of Chancery's remedies decision should stand.

Disposition

other