Court of Chancery Issues Reminder That Equity Has Its Limits
By Benjamin M. Potts, Young Conaway Stargatt & Taylor, LLP
In The Ravenswood Investment Company, L.P. v. The Estate of Bassett S. Winmill, et al., C.A. No. 3730-VCS (Del Ch. Mar. 22, 2018), the Delaware Court of Chancery addressed the rare situation where a plaintiff proves a breach of fiduciary duties but fails to provide evidence supporting a remedy for that breach. In a post-trial decision, the court acknowledged the “problematic” dynamic that arises when small companies’ decision-makers grant themselves compensation. The court found that such a dynamic resulted in a breach of fiduciary duty, but it also found that no remedy was warranted. As the court cautioned, “[w]hile this court endeavors always to remedy breaches of fiduciary duty, it cannot create what does not exist in the evidentiary record[.]” In other words, “[e]quity is not a license to make stuff up.” While this result may seem harsh, the court’s decision serves as a reminder that to succeed on a claim for breach of fiduciary duty, a plaintiff must prove both a breach and damages caused by that breach.