(CN) - Investors in a Princeton, N.J.-based venture fund can pursue their claims against top company executives as a class, Vice Chancellor Leo Strine Jr. ruled, after the defendants barely put up a fight against the certification.
     Former partners in Zon Capital Partners LP, Robert and Diana Garrett, filed suit in Delaware Chancery Court after the partnership was converted into a limited liability company, Zon Capital Partners LLC, that "altered the distribution hierarchy drastically, enabling the General Partner to receive distributions that it would not have received under the original Partnership Agreement," according to the ruling.
     The Garretts claim the general partner's three principles, William Bridgers, E. Michael Forgash Jr. and H. Donald Perkins Jr., breached their fiduciary duties when they signed off on the conversion at the expense of Zon's limited partners.
     Under the newly-formed LLC, which included four classes of members, the 39 former limited partners were granted Class B membership, according to the ruling.
     Ten members also invested more money in order to attain Class A membership alongside the conversion's primary contributor, Paul Capital, according to the ruling.
     Strine found the defendants had agreed "that Plaintiffs have satisfied the liberal standard for class certification under [Court of Chancery] Rule 23."
     However, they did contest the inclusion of the ten Class B members who also hold Class A status.
     "The defendants argue ... that the Class B Members who are also Class A Members 'potentially have different economic interests than those who are only Class B Members,'" Strine states.
     The defendants claim that "the issue of whether these ten overlapping Class A/B Members should be included in the Class can most prudently be determined after counsel for the parties engage in early settlement negotiations," according to the ruling.
     Strine writes that the parties' failure to reach a settlement makes no difference on whether Class A/B members can be included in the class action. If the class prevails, the Class A/B members will be entitled to the same damages as those awarded to strictly-Class B members, Strine says.
     "That the Class A/B Members hold a Class A Membership interest does not change that reality, and nothing the class action complaint seeks to accomplish would negatively affect Class A Members as Class A Members," the judge writes.
     If the Garretts win their case, the general partner will have to repay the improper distributions it made to itself as a Class C member, which would have no adverse affect on Class A members, according to the ruling.
     The defendants claim that certain Class A/B members may not like the class action "because they want to provide the benefits at issue to the General Partner as an instrumental means of encouraging the General Partner to continue its service as manager of Zon LLC - benefits that are supposedly vital in their (unidentified) minds," the ruling states.
     "Of course, if this argument is true, these particular class members can renounce their share of any recovery, or transfer some of their own units or their share of any award received to the General Partner in order to convince it to stay," the opinion states.