FDH attorneys David I. Albin and Cole Mayhew authored “Recent Developments on the Implied Covenant of Good Faith and Fair Dealing and Their Implications for Connecticut Law,” a Trends and Developments article appearing in Chambers and Partners (Corporate M&A 2026 USA – Connecticut). The article examines how recent Delaware court decisions are redefining the implied covenant of good faith and fair dealing. It focuses on LLC disputes where fiduciary duties have been contractually waived, leaving minority investors to rely on the implied covenant as a primary remedy when controlling parties take actions viewed as unfair or contrary to the parties’ expectations. Three recent Delaware Chancery Court decisions provide important guidance on the limits and application of the doctrine.
Two of the cases — Campus Eye Management Holdings v. Didonato and Gunderson v. The Trade Desk, Inc. — reinforce Delaware’s Independent Legal Significance Doctrine, which allows parties to use statutory mechanisms such as mergers or reincorporations even when doing so effectively eliminates contractual protections. The courts held that because these actions were expressly authorized by statute, the implied covenant could not be used to override them. The decisions underscore the importance of carefully drafting agreements, especially when representing minority investors, to address restructurings and similar transactions directly and how similar issues may be approached under Connecticut law.
By contrast, Calumet Capital demonstrates that the implied covenant still has force where contractual discretion is exercised in bad faith. There, the court allowed claims to proceed where a party allegedly used contractual rights strategically to undermine its counterparty’s business opportunities. The ruling confirms that even “sole discretion” provisions remain subject to an obligation of good faith and consistency with the parties’ reasonable expectations.
The article also explores how Connecticut courts may approach similar disputes. While Connecticut recognizes the implied covenant and generally requires evidence of bad faith, it has not yet addressed cases involving the type of statutory restructuring tactics seen in Delaware. These recent decisions may therefore shape how Connecticut courts balance contractual freedom against protections for minority investors in future business disputes.
Read the complete article on the Chambers and Partners website here.