The Delaware Court of Chancery denied limited partners’ efforts to hold the corporate parent of their general partner liable for the general partner’s management of the limited partnership. The derivate suit related to the limited partnership’s production and sale of contaminated ice cream, which resulted in a recall of its products and the shutdown of its facilities. The Court dismissed the limited partners’ claims against the parent company of the general partner, and it denied the legal equivalent of “a request for seconds” in relatively short order.
In denying the motion for reargument, the Court explained that the basis for its dismissal of the claims against the parent corporation was well-grounded in Delaware law. First, a principal may not be held vicariously liable for its agent’s non-tortious breach of a contract. This ruling adheres to the general rule that only parties to a contract may be held liable under the contract. Second, there is no viable claim under a direct agency theory where the principal was not a party to the underlying agreement, the agreement expressly stated that the agent possessed exclusive authority over the management of the limited partnership, and there was no indication that the principal authorized the agent to bind the principal in the agreement. In the absence thereof, the limited partners could not show that the parent corporation directed the general partner to enter into the limited partnership agreement. Third, “there exists a presumption of corporate separateness, even when a parent wholly owns its subsidiary and the entities have identical officers and directors.” While the limited partners sought to pierce the corporate veil based on allegations of domination and control, the Court found that the parent corporation’s mere ownership of the general partner and the overlap of officers and directors between the parent corporation and general partner were insufficient. In short, Wenske proves as unremarkable as a bowl of vanilla ice cream in light of Delaware legal precedent.
Wenske v. Blue Bell Creameries, Inc., et al., C.A. No. 2017-0699-JRS (Del. Ch. Nov. 13, 2018).