In Blue Chip Capital Fund II Limited Partnership v. Tubergen, read opinion here , the Chancery Court addressed the claims of a minority preferred stockholder that the board breached the company’s certificate of incorporation when, after the sale of substantially all of the company’s assets, it distributed an inflated amount of the proceeds to the holders of a class of preferred stock which included the company’s controller. The stockholder brought the suit both derivatively and directly against the individual directors for breach of fiduciary duty and against the company for breach of contract based on the alleged breach of an implied covenant of good faith and fair dealing. The court concluded that the allegations were sufficient to sustain a direct claim against the company for breach of contract and breach of the implied covenant of good faith and fair dealing, however, the court granted the motion to dismiss the fiduciary duty claims which were based on the same facts–because the plaintiffs could achieve full recovery if they were successful on their contract claims.
The court discussed the principle that–especially as it relates to the rights of preferred shareholders which are governed generally by contract law–to allow a fiduciary duty claim to co-exist in parallel with an implied contractual claim, would undermine the primacy of contract law over fiduciary duty law in matters involving the essentially contractual rights and obligations of preferred stockholders. (citing Rale v. Bershad, 1998 Del. Ch. LEXIS 37 *1-2 (Del. Ch. Mar. 3, 1998)).