AMF Trust Ventures LLC et al. v. 180 Group LLC et al.; Hemingway Group LLC v. 180 Group LLC et al.
Attorneys and Parties
Brief Summary
Private investment fund management: whether Class B members’ revenue-sharing rights in a fund manager extend to fees earned by a newly formed affiliate manager for successor funds, and the limits of a manager’s mandatory redemption power exercised in “reasonable discretion.”
Granted plaintiffs partial summary judgment on liability for breach of contract and breach of the implied covenant of good faith and fair dealing on revenue share allegations, and granted plaintiffs summary judgment on mandatory redemption claims; denied defendants’ motions aimed at dismissing the revenue share theories.
Dismissed the breach of contract claim to the extent it sought revenue share from fees earned by i80 Group Vintage LLC and vacated plaintiffs’ summary judgment on the mandatory redemption claims; otherwise affirmed, including liability on the implied covenant claim tied to the revenue share.
The i80 Manager LLC agreement unambiguously limits revenue-sharing to fees “received by” i80 Group LLC (i80 Manager), not a separate entity; however, evidence of the parties’ fundamental expectations supported an implied covenant finding that defendants could not restructure to a new manager to deprive plaintiffs of the fruits of their bargain. Fact disputes over whether Marc Helwani reasonably exercised discretion under Section 3.8 of the LLC agreements precluded summary judgment on mandatory redemption.
Background
Plaintiffs invested as Class B members in i80 Group LLC (i80 Manager) and i80 Group Lending Opportunities GP LLC (i80 GP), vehicles formed by Marc Helwani to operate the i80 Group Lending Opportunities LP fund. The limited liability company (LLC) agreements, amended in 2019, allocated management fee and carried interest revenues to Class B members. In 2021, Helwani launched new Iconiq-backed funds managed by a new entity, i80 Group Vintage LLC (i80 Vintage), rather than i80 Manager. Plaintiffs alleged they were improperly deprived of their bargained-for revenue share and, after objecting, were subjected to mandatory redemption under Section 3.8 of the LLC agreements, which permitted withdrawal if the manager, in “reasonable discretion,” determined a member’s continued participation would be detrimental.
Lower Court Decision
The Supreme Court (New York County) granted plaintiffs’ motions for partial summary judgment on liability for both breach of contract and breach of the implied covenant of good faith and fair dealing based on the revenue share allegations, and granted plaintiffs summary judgment on the mandatory redemption claims. It denied defendants’ motions to dismiss those claims insofar as premised on the revenue share allegations.
Appellate Division Reversal
Modified. As to the revenue share allegations, the court held the i80 Manager LLC agreement defines management fees as income “received by the Company” (i80 Manager) for its advisory services; fees earned by a separate entity (i80 Vintage) are outside the contract’s scope, and plaintiffs did not seek veil piercing. Accordingly, defendants were entitled to summary judgment dismissing the breach of contract claim premised on revenue shares from i80 Vintage. Nonetheless, the court affirmed summary judgment for plaintiffs on the implied covenant of good faith and fair dealing: the record showed a mutual understanding that plaintiffs’ initial investment entitled them to share in the economics of future i80 Group funds, and defendants could not create a new management vehicle to strip those rights. The implied covenant appropriately filled a contractual gap where the parties’ fundamental expectations were not expressly addressed. The court rejected the notion that Iconiq’s demands excused defendants’ conduct. On the mandatory redemption claims, the court vacated plaintiffs’ summary judgment, finding triable issues under Delaware law on whether Helwani acted within his “reasonable discretion” under Section 3.8—an objective, fact-intensive inquiry—given competing evidence of alleged harassment/disparagement versus retaliation for plaintiffs’ dissent. The court also rejected defendants’ proximate causation arguments as premature because damages would exist if liability is established.
Legal Significance
The decision underscores corporate separateness for express contract claims: revenue-sharing language tied to fees “received by” a specified manager will not extend to an affiliate’s fees absent express coverage or veil piercing. At the same time, the implied covenant of good faith and fair dealing can prevent opportunistic restructurings that evade bargained-for economics when the parties’ fundamental expectations are clear and the contract contains a gap. It also highlights that a manager’s “reasonable discretion” to mandatorily redeem members is judged under an objective reasonableness standard and often presents fact issues unsuitable for summary judgment. Extrinsic evidence may be considered for implied covenant claims even when not admissible for contract interpretation.
Express revenue-share rights are limited to the contracting entity’s fees, but managers cannot sidestep investors’ economic bargain by moving successor funds to a new affiliate; such conduct risks liability under the implied covenant. Mandatory redemption clauses invoking “reasonable discretion” typically require trial due to fact disputes over motive and detriment.