The Delaware Court of Chancery recently issued an opinion that offers useful guidance for parties seeking to draft joint venture exit provisions. In In re Oxbow Carbon Unitholder Litigation, C.A. No. 12447-VCL (Del. Ch. Feb. 12, 2018), the court invoked the implied covenant of good faith and fair dealing to resolve a dispute over whether certain minority members of Oxbow Carbon LLC (Oxbow) had a contractual right under Oxbow’s limited liability company agreement (the LLC agreement) to force Oxbow to engage in an “exit sale.” The decision highlights the need for parties to devote special attention when drafting joint venture exit provisions.

The dispute arose when two minority members of Oxbow, both of which were owned by the private equity fund Crestview Partners L.P. and together owned approximately one-third of the outstanding equity of Oxbow, sought to enforce a contractual right under the LLC agreement to force Oxbow to engage in an exit sale.