Implied-Covenant Liability for Fund Restructuring that Diverts Bargained-for Revenue Share Beyond the Contract’s Defined Fee-Recipient

1. Introduction

AMF Trust Ventures LLC v. i80 Group LLC (2026 NY Slip Op 00073) is a First Department decision arising from disputes between early investors (Class B members) and the sponsor/manager-side defendants behind the “i80” credit fund platform. Plaintiffs invested in and became Class B members of two Delaware LLCs—i80 Group LLC (the manager, “i80 Manager”) and i80 Group Lending Opportunities GP LLC (the general partner entity, “i80 GP”)—under LLC agreements later amended in 2019.

Two issue clusters drove the appeal:

Revenue Share Allegations: whether plaintiffs were deprived of their bargained-for share of management fees/carry when defendant Marc Helwani launched new funds (the “Iconiq Funds”) and positioned a different entity, i80 Group Vintage LLC (“i80 Vintage”), to manage them and receive the economics.
Mandatory Redemption Allegations: whether Helwani improperly invoked Section 3.8 of the LLC agreements to force plaintiffs’ withdrawal/mandatory redemption after plaintiffs objected to the restructuring.

The First Department’s central doctrinal contribution is a sharp separation between (i) the four-corners limits of a revenue-share definition tied to fees “received by” a particular company, and (ii) the implied covenant as a gap-filler that can police deliberate structural workarounds that deprive investors of the “fruits of the bargain.”

2. Summary of the Opinion

The Appellate Division modified the motion court’s summary-judgment orders:

Breach of contract (Revenue Share Allegations): Defendants were entitled to summary judgment dismissing these contract claims because the i80 Manager LLC agreement defined management fees as income “received by” i80 Manager; fees received by a separate entity (i80 Vintage) were outside the contractual definition, and plaintiffs did not pursue veil piercing.
Implied covenant (Revenue Share Allegations): Plaintiffs were properly awarded summary judgment. The record supported that the parties understood defendants could not create a new vehicle to avoid paying plaintiffs their agreed revenue share; restructuring to route fees through i80 Vintage breached the implied covenant even if the contract did not expressly address that contingency.
Mandatory Redemption Allegations: Plaintiffs were not entitled to summary judgment. Under Delaware law, “reasonable discretion” in Section 3.8 presented fact-intensive questions with competing accounts (retaliatory evasion vs. response to alleged harassment), requiring credibility determinations unsuitable for summary judgment on this record.
Proximate causation/damages arguments: Defendants’ contention that Iconiq required elimination/dilution of plaintiffs’ revenue share was rejected as unavailing at this stage, particularly given that damages remained to be determined and some damages would exist if liability theories were validated.

3. Analysis

3.1 Precedents Cited

A. Prior appellate posture and contractual baseline

Hemingway Group LLC v i80 Group LLC, 222 AD3d 422 (1st Dept 2023), framed the dispute on an earlier motion. There, the Court held the motion court properly refused to dismiss a contract theory that i80 Manager had to pay a bargained-for share when it “provided investment management or advisory services to funds other than the Fund.” In the present decision, the First Department emphasized what Hemingway did not decide: whether plaintiffs’ contract entitlement extends to fees earned by a different management company (i80 Vintage). The Court answered that question “no” on the contract claim, based on the agreement’s specific definition tying fees to those “received by” i80 Manager.

B. Implied covenant as anti-evasion doctrine

For implied covenant liability, the Court relied on both New York and Delaware authorities to support a “fruits of the bargain” theory:

Shatz v Chertok, 180 AD3d 609 (1st Dept 2020): cited to support that implied covenant claims can proceed where a party’s conduct deprives the counterparty of expected contractual benefits.
Richbell Info. Servs. v Jupiter Partners, 309 AD2d 288 (1st Dept 2003): a leading First Department case recognizing the implied covenant’s role in preventing opportunistic conduct that defeats the contract’s purpose, even when the conduct fits within literal contractual rights.
NAMA Holdings, LLC v Related WMC LLC, 2014 WL 6436647 (Del Ch, Nov. 17, 2014, C.A. No. 7934-VCL): invoked for the classic Delaware articulation that no contract can anticipate every contingency and that the implied covenant may “fill a gap” in the agreement when unforeseen circumstances arise.
Cygnus Opportunity Fund, LLC v Washington Prime Group, LLC, 302 A3d 430 (Del Ch 2023): cited for the proposition that implied covenant analysis can turn on “understandings or expectations” so fundamental the parties did not negotiate them expressly.

These cases collectively supply the doctrinal bridge the Court used: while the contract’s literal definition capped the contract claim, the implied covenant addressed the alleged “workaround” structure that—on this record—violated the parties’ basic expectation that plaintiffs’ economics would not be stripped by re-papering the manager entity.

C. “Reasonable discretion” and summary judgment limits

Leo Investments Hong Kong Limited v Tomales Bay Capital Anduril III, L.P., 342 A3d 1166 (Del Ch 2025): used to define the Delaware standard for “reasonable discretion” as an objective inquiry—whether a reasonable person could conclude the actor was justified.
Desert Equities, Inc. v Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A2d 1199 (Del 1993): cited for the proposition that this reasonableness inquiry is typically fact-intensive, often requiring credibility determinations.
Asabor v Archdiocese of N.Y., 102 AD3d 524 (1st Dept 2013): cited for the procedural point that where credibility determinations and weighing of evidence are required, summary judgment is improper.

D. Damages/proximate causation at an interim stage

In re Essar Steel Minnesota LLC, 2024 WL 4047451 (Bankr D Del, Aug. 27, 2024), clarified by 2024 WL 4429208: cited to support the practical point that if liability is established, some damages exist—even if the exact quantum remains unresolved. This helped the Court reject defendants’ attempt to defeat claims on a proximate causation narrative tied to Iconiq’s alleged demands.

E. Evidentiary points tied to implied covenant and credibility

Horizon Personal Communications, Inc. v Sprint Corp ., 2006 WL 2337592 (Del Ch, Aug. 4, 2006, No. 1518-N), and Madryn Asset Management, LP v Trailmark Inc., 2024 WL 1348869 (SD NY, Mar. 30, 2024, No. 23 Civ. 3704 (JPC)): cited in Footnote 1 to support that extrinsic evidence may be considered for implied covenant analysis even if it would not be relevant to the breach of contract claim.
Miller v City of New York, 253 AD2d 394 (1st Dept 1998): cited in Footnote 2 for the proposition that testimony is not disregarded merely as “self-serving” absent a basis such as conflict with prior testimony.

3.2 Legal Reasoning

A. Why the contract claim failed on the Revenue Share Allegations

The Court applied a straightforward interpretive move: the i80 Manager LLC agreement defined “management fees” as income “received by the Company [i80 Manager]” for providing investment management/advisory services. Because i80 Vintage is a separate entity, fees paid to i80 Vintage are not “received by” i80 Manager. The Court stressed two limiting facts:

No other entity was listed in the definition, and the Court declined to expand the defined term beyond its textual referent.
Even if the entities shared employees, space, and strategy, plaintiffs did not seek to pierce the corporate veil—so separateness controlled.

In short, the Court treated the contract claim as bounded by entity-level receipt of income: a drafting choice with real consequences in multi-entity fund platforms.

B. Why the implied covenant claim succeeded on the same facts

The implied covenant holding is the opinion’s most consequential element. The Court concluded that—even though the agreement did not explicitly address the creation of a new manager entity—plaintiffs proved that the parties shared a fundamental expectation: defendants could not simply create a new investment management vehicle to avoid paying plaintiffs their agreed revenue share.

Two aspects of the Court’s reasoning matter:

Gap-filling anchored in shared expectations: Relying on Delaware Chancery formulations (notably NAMA Holdings, LLC v Related WMC LLC and Cygnus Opportunity Fund, LLC v Washington Prime Group, LLC), the Court held it was appropriate to “fill a gap” where the parties’ bargain assumed continuity of economics across the platform’s future funds, and the disputed restructuring was not expressly contemplated.
Anti-circumvention function: Echoing First Department implied-covenant doctrine (Richbell Info. Servs. v Jupiter Partners; Shatz v Chertok), the Court treated the restructuring as an opportunistic maneuver that deprived plaintiffs of the “fruits of [their] bargain.”

The Court also rejected the notion that Iconiq’s preferences could excuse the breach, reasoning that third-party pressure does not absolve a party from its (implicit) contractual commitments—especially where the record did not show the carve-out of plaintiffs’ economics was a necessary precondition to Iconiq’s investment.

C. Why summary judgment was denied on the Mandatory Redemption Allegations

Section 3.8 allowed Helwani to require withdrawal if he determined, in his “reasonable discretion,” that a member’s continued membership would be “detrimental to the Company.” Applying Delaware law, the Court framed the question objectively (per Leo Investments Hong Kong Limited v Tomales Bay Capital Anduril III, L.P.): could an objective, reasonable person reach the same conclusion on the facts?

The competing narratives created triable issues:

Plaintiffs’ version: withdrawals were forced to evade contractual rights and retaliate for dissent and legal enforcement.
Defendants’ version: Helwani acted after months of alleged harassment, threats, disparagement, and confidentiality breaches.

Because deciding between these accounts requires credibility assessments and weighing of evidence (per Desert Equities, Inc. v Morgan Stanley Leveraged Equity Fund, II, L.P. and Asabor v Archdiocese of N.Y.), plaintiffs could not win summary judgment on this aspect. The Court also declined to discard Helwani’s testimony as “self-serving” (Footnote 2, citing Miller v City of New York).

3.3 Impact

A. Drafting and structuring consequences for fund platforms

The decision underscores a practical, deal-driven lesson: if an investor’s revenue share is meant to follow economics across affiliates, successor managers, or newly formed vehicles, the agreement must say so clearly. Otherwise, a “fees received by the Company” definition may defeat a breach of contract claim when fees are routed to an affiliate.

But the Court simultaneously warns managers that entity engineering may not avoid liability: the implied covenant can still attach if the restructuring is found (as it was here, on summary judgment) to be a deliberate end-run around foundational expectations.

B. Litigation posture: contract vs implied covenant bifurcation

The opinion provides a roadmap for how New York courts (applying Delaware law where chosen) may separate:

Text-limited contract entitlement (what the defined terms literally cover), from
Expectation-protective implied covenant relief (where the record shows a shared, fundamental assumption frustrated by opportunistic conduct).

This bifurcation is likely to shape pleading, discovery, and summary judgment strategy in sponsor-investor disputes involving platform reorganizations, successor vehicles, and fee-routing mechanics.

C. Governance/removal provisions with “reasonable discretion”

For LLC agreements granting a manager “reasonable discretion” to expel or redeem members, the decision reinforces that:

Delaware’s “reasonable discretion” is an objective standard, but
it often cannot be resolved on summary judgment where motive and contested conduct are central.

4. Complex Concepts Simplified

Implied covenant of good faith and fair dealing: A background rule read into every contract that bars a party from using technicalities or unforeseen gaps to destroy the other side’s expected benefit of the deal. It does not rewrite the contract; it polices opportunistic behavior inconsistent with the bargain’s purpose.
“Fruits of the bargain”: The real economic benefit the parties reasonably understood the contract would deliver—not merely what the most literal reading might allow in an unanticipated scenario.
“Fees received by the Company” (entity limitation): A drafting choice that confines payment obligations to revenue actually booked by the signatory entity. If the business later routes fees to another entity, contract claims may fail absent broader language (or veil piercing).
Veil piercing: A doctrine allowing a court to treat separate entities as one when separateness is abused. The Court emphasized plaintiffs did not pursue it, so corporate separateness remained controlling for the contract claim.
“Reasonable discretion” (Delaware): Not “anything goes.” It asks whether an objective reasonable person could view the decision as justified; disputes over what happened and why frequently require trial-level factfinding.
Summary judgment: A pretrial ruling available only where no material fact disputes exist. If deciding the issue requires choosing between competing stories, courts generally deny summary judgment.

5. Conclusion

AMF Trust Ventures LLC v. i80 Group LLC establishes a consequential two-track rule for platform restructurings: a contract definition tethered to fees “received by” a particular entity can defeat a breach of contract claim when economics are routed to a newly formed affiliate, yet the implied covenant can still impose liability where the restructuring is shown to be an end-run around a shared, fundamental expectation that investors would receive their bargained-for revenue share across the business’s future funds.

The decision also signals caution in litigating forced-withdrawal clauses governed by Delaware “reasonable discretion”: where parties contest the underlying conduct and motive, summary judgment is often inappropriate.