Good faith and fair dealing<\/td> Non-transfer of the deed undermined the good faith basis of the entire venture<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nPapa’s argument essentially that shared profits in 2013 should excuse the missing deed didn’t hold up. The court distinguished this from In re Mobilactive Media, LLC<\/em>, where partial performance had more direct bearing on the core bargain. Running a golf course wasn’t the same thing as actually funding the LLC with the property that was supposed to anchor it.<\/p>\n\n\n\n3. Termination: Valid \u2014 No ADR Required First<\/h3>\n\n\n\n Papa argued the ADR clause in the LLC agreement should have been triggered before Costantini could terminate. Noble rejected this cleanly. The ADR clause applied to disputes arising after a successful formation not to situations where the LLC was never properly funded. Costantini’s January 21, 2014 letter validly exercised his termination rights under the Term Sheets.<\/p>\n\n\n\n
Scope your ADR clauses carefully. A clause drafted to govern disputes ‘between members’ of an LLC may not reach situations where the LLC was never properly formed. If you want ADR to apply to formation failures too, that has to be explicit.<\/p>\n\n\n\n
4. Remedies: Equity Trimmed the Windfall on Both Sides<\/h3>\n\n\n\n Costantini wanted nearly $3.9 million or the full note judgment amount. The court wasn’t going to award that; it would have been a windfall well beyond the parties’ actual bargain. But the court also wasn’t about to let Papa walk away after benefiting from over $1.29 million in contributions.<\/p>\n\n\n\n
“Equity regards that as done which in good conscience ought to be done.”<\/em><\/p>\n\n\n\nVice Chancellor Noble built a remedy around the parties’ actual bargained expectations:<\/p>\n\n\n\nRemedy Component<\/strong><\/td>Amount \/ Terms<\/strong><\/td><\/tr><\/thead>Note payoff (Term Sheet’s understood principal)<\/td> $800,000<\/td><\/tr> Other proven itemized cash advances<\/td> ~$750,000<\/td><\/tr> Additional differential amount ($800k principal minus $500k purchase price)<\/td> $300,000<\/td><\/tr> Interest rate on all amounts<\/td> 10% per annum from date of each advance<\/td><\/tr> First $150k of additional amount triggered by<\/td> Termination effective January 21, 2014<\/td><\/tr> Second $150k triggered by<\/td> 45 days after termination<\/td><\/tr> Financing window before enforcement<\/td> 60 days for Defendants to obtain financing<\/td><\/tr> Restaurant rent collection right (437 W. Rio Grande)<\/td> Applied to reduce outstanding obligation<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nThe note was confirmed in Costantini’s personal name, not in St. Thomas LLC’s name. On the LLC itself, the court suggested a 50\/50 split of any remaining Wildwood Mini Golf LLC funds after repayment, though full dissolution records were incomplete.<\/p>\n\n\n\n
Practical Lessons & Takeaways<\/h2>\n\n\n\n Twenty-plus years of practice has taught me that most joint venture disputes aren’t really about greed. They’re about assumptions. Each side assumes the other will handle something. Nobody writes it down. Then something goes sideways and everyone remembers the deal differently.<\/p>\n\n\n\n
Here’s what Costantini tells practitioners and clients:<\/p>\n\n\n\n
Lesson 1 \u2014 Term Sheets Are Binding. Treat Them That Way.<\/h3>\n\n\n\n Parties routinely sign term sheets thinking they’re just a starting point. Delaware courts<\/a> read them for what they actually say. If your term sheet has deadlines, those deadlines are enforceable. If it has termination remedies, those remedies are real. Don’t sign something you haven’t actually negotiated and don’t assume the LLC agreement you execute later will quietly override it.<\/p>\n\n\n\nLesson 2 \u2014 Document Every Contribution, Cash and In-Kind.<\/h3>\n\n\n\n Costantini recovered on $130,000 in in-kind services because he could prove them. Vague claims about what you ‘put into the deal’ don’t survive trial. Wire confirmations, check copies, service logs keep all of it from day one, not after the dispute begins.<\/p>\n\n\n\n
Lesson 3 \u2014 Deed Recording Is a Closing Condition, Not an Afterthought.<\/h3>\n\n\n\n The entire case turns on one thing: Papa never recorded the deed. That should have been a hard, Day 1 closing condition. If property transfer is fundamental to your joint venture and it usually is in real estate deals make it a condition precedent. No transfer, no deal proceeds. Period.<\/p>\n\n\n\n
Lesson 4 \u2014 ADR Clauses Don’t Always Reach Pre-Formation Disputes.<\/h3>\n\n\n\n Scope your arbitration or mediation clauses with precision. A clause covering disputes ‘between members’ may have nothing to say about a situation where the entity was never properly funded to begin with. If you want ADR to apply to formation failures, drafting that has to be explicit.<\/p>\n\n\n\n
Lesson 5 \u2014 Delaware Equity Is Flexible, but Not a Safety Net.<\/h3>\n\n\n\n The court didn’t just apply contract math. It fashioned a remedy that prevented unjust enrichment on both sides that flexibility is a genuine feature of Delaware Chancery. But it’s not a backstop for poor drafting. The better your documents, the less room there is for expensive uncertainty at trial.<\/p>\n\n\n\n\n
\n
\n
\n
Contributions made<\/p>\n
$1.29M<\/p>\n <\/div>\n
\n
Court’s equitable remedy<\/p>\n
$1.85M<\/p>\n <\/div>\n
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Original claim sought<\/p>\n
$3.9M<\/p>\n <\/div>\n <\/div>\n\n
\n
<\/span>Contributions made<\/span>\n <\/span>Court’s equitable remedy<\/span>\n <\/span>Original claim sought<\/span>\n <\/div>\n\n \n
<\/canvas>\n <\/div>\n\n \n Costantini v. GJP Developers, Inc. \u2014 C.A. No. 9423-VCN (Del. Ch. 2015) | Interest included in equitable remedy figure\n <\/p>\n<\/div>\n\n
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