Litigation
Delaware Business Litigation Report 
Provides business-related litigation information which has been summarized by attorneys currently practicing in Delaware's courts. Searchable Case Summary Database contains summaries of court opinions released since January 2005. Provides links to other resources such as the Delaware Code and administrative rules.
Post Frequency: 0.8/day Last Entry: November 13, 2009 at 10:39:10 Recent Entries: 264
By Morris James LLP
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Court of Chancery Holds Arbitrator Decides Limitations Defense
Posted on November 13, 2009Lefkowitz v. HWF Holdings LLC, C.A. 4381-VCP (November 11, 2009) The Delaware Arbitration Act has a unique provision that permits the Court of Chancery to enjoin an arbitration when the claim asserted is barred by a statute of limitations...
Court of Chancery Expands Dissolution Remedy
Posted on November 12, 2009Lola Cars International Limited v. Krohn Racing LLC, C.A. 4479-VCN (November, 12, 2009) The Delaware Limited Liability Company Act permits the Court of Chancery to dissolve an LLC when it is not "reasonably practicable to carry on the business" of the LLC...
Court of Chancery Explains Duty of Good Faith and Fair Dealing
Posted on November 09, 2009Amirsaleh v. Board of Trade of The City of New York, Inc., C.A.2822-CC (November 9, 2009) The law of good faith and fair dealing in contracts is a 'judicial tool used to imply terms in a contract that protect the reasonable expectations of the parties...
Court of Chancery Demonstrates its Understanding of Modern Discovery
Posted on October 31, 2009eBay Domestic Holdings, Inc. v. Newmark, C.A. 3705-CC (October 29, 2009) Modern discovery is often subject to problems, particularly with electronic "documents." As a result, some courts have imposed harsh sanctions for a party's failures to follow all the requirements...
Court of Chancery Resolves How to Treat Preemption Issue
Posted on October 28, 2009Petroplast Petrofisa Plasticos S.A. v. Ameron International Corp., C.A. 4304-CC (October 28, 2009) When does the Uniform Trade Secrets Act preempt claims arising out of the misuse of documents based on other legal theories such as conversion? While not answering that question definitively, this decision does go a long way to clarifying how to decide that issue at the pleading stage...
District Court Finds Late Fee is Not Liquidated Damages
Posted on October 20, 2009Leeseberg v. Converted Organics Inc., C.A. No. 08-926-GMS (D. Del. Oct. 7, 2009). Applying Delaware law, the district court concluded that a late fee provision was not a liquidated damages clause and dismissed the defendant's motion to dismiss the plaintiff's claim for actual damages...
District Court Rejects Recommendation that Complaint Is Not Adequately Specific
Posted on October 20, 2009Collins & Aikman Corp. v. Stockman, C.A. No. 07-265-SLR/LPS (D. Del. Sept. 30, 2009). Upon review of the Report and Recommendation issued by Magistrate Judge Leonard P. Stark, and the objections thereto, the district court rejected Judge Stark's recommendation that the complaint did not contain adequately specific allegations that the defendants knew or should have known that the company's financial statements were false in connection with a Rule 10b-5 claim...
Court of Chancery Explains McWane Exceptions
Posted on October 15, 2009Choice Hotels International Inc. v. Columbus-Hunt Park DR BNK Investors LLC, C.A. 4353-VCP (October 15, 2009) Delaware courts frequently must decide if a case filed in Delaware should be stayed in favor of another action filed elsewhere. While we wonder why anyone would want to leave Delaware, it happens...
Court of Chancery Upholds Jurisdiction Over Nonresident Partner
Posted on October 09, 2009Total Holdings USA Inc. v. Curran Composites, Inc., C.A. 4494-VCS (October 9, 2009). In a case of first impression, the Court of Chancery has upheld its jurisdiction over a nonresident partner in a Delaware partnership. The current version of the Delaware Uniform Partnership Act authorizes jurisdiction over nonresident partners for disputes arising out of the internal affairs of the partnership...
Court of Chancery Upholds Forum for Trade Secret Litigation
Posted on October 07, 2009LeCroy Corporation v. Hallberg, C.A. 4328-VCP (October 7, 2009). This decision is another example of why Delaware is more frequently chosen to litigate trade secret or unfair competition disputes. For, while the defendant had no ties to Delaware other than its incorporation here, the Court declined to dismiss the litigation on venue grounds...
Vice Chancellor Strine Discusses Stockholders' Role in Corporate Troubles
Posted on October 06, 2009In this New York Times piece, http://dealbook.blogs.nytimes.com/2009/10/05/dealbook-dialogue-leo-strine/, Vice Chancellor Strine discusses the role of stockholders, particularly institutional investors, in recent corporate woes.
Court of Chancery Explains Lynch, Again
Posted on October 02, 2009In re John Q. Hammons Hotels Inc. Shareholder Litigation. C.A. 758-CC (October 2, 2009). The application of the Lynch doctrine to a merger is an often discussed topic. This decision does a great job of summarizing and explaining the rationale for applying the entire fairness test to a merger that has the majority stockholder on both sides of the deal...
Court of Chancery Appoints Lead Counsel
Posted on October 02, 2009Dutiel v. Tween Brands Inc., C.A. 4743-CC (October 2, 2009). The Court has recently explained the criteria to determine who should be appointed lead counsel in a class action. In this decision it added a new twist, giving advantage to counsel that has shown it gets along best with co-counsel in the case...
Court of Chancery Enforces Non-Compete Agreement
Posted on September 30, 2009Concord Steel Inc. v. Wilmington Steel Processing Co. Inc., C.A. 3369-VCP ( September 30, 2009). This is another in a line of decisions enforcing agreements not to compete. What is striking about this case is the apparent utter disbelief of the defendants that the agreement would actually be enforced...
Court of Chancery Explains the "Parnex Exception"
Posted on September 30, 2009In re NYMEX Shareholders Litigation, C.A. 3621-VCN (September 30, 2009). When is a claim that the merger was unfair a derivative and not a direct claim? This is a perplexing question under Delaware law. Generally, a claim that the merger price is too low because management manipulated the process to drive down value is derivative, because the claim asserts it is the company that was hurt by the actions taken...
Court of Chancery Rejects Attack on Board Discretion to Retain Directors
Posted on September 28, 2009City of Westland Police & Fire Retirement System v. Axcelis Technologies, Inc., C.A. 4473-VCN (September 28, 2009). This is the first Delaware decision to deal with the so-called Pfizer policy on when directors may be retained despite a shareholder vote on dissatisfaction...
Conference Board Issues Report on Executive Compensation
Posted on September 23, 2009On September 21, 2009, the Conference Board Task Force on Executive Compensation issued its recommendations on executive compensation. Recommendations include the use of clawback policies and the avoidance of controversial pay practices such as excessive golden parachutes and gross-ups...
Court of Chancery Enjoins Violation of No Compete
Posted on September 21, 2009Zrii LLC v. Wellness Acquisition Group, Inc., C.A. 4374-VCP (September 21, 2009). This is an interesting case because of the limitations on the remedy imposed for violating a no competition agreement. The decision illustrates the rule that no matter how wrong the conduct, the remedy of an injunction will be limited to stopping the competition for the period provided for in the agreement...
Court of Chancery Enjoins Violation of Non-Compete
Posted on September 21, 2009Zrii LLC v. Wellness Acquisition Group, Inc., C.A. 4374-VCP (September 21, 2009). This is an interesting case because of the limitations on the remedy imposed for violating a non-competition agreement. The decision illustrates the rule that no matter how wrong the conduct, the remedy of an injunction will be limited to stopping the competition for the period provided for in the agreement...
Court of Chancery Upholds Claw Back Agreement
Posted on September 16, 2009eBay Domestic Inc. v. Holdings Inc., C.A. 7705-CC (September 16, 2009). This decision upholds the right to claw back privileged documents inadvertently produced in discovery, at least when there is an agreement permitting claw back rights.
District Court Applies Stone v. Ritter in Rule 23.1 Case
Posted on September 11, 2009King v. Baldino, C.A. No. 08-54-GMS-MPT (D. Del. Aug. 26, 2009). This memorandum order issued by Magistrate Mary Pat Thynge is an example of the continued judicial reluctance to impose oversight responsibility on boards of directors, where the plaintiff fails to plead that the board was on notice, through 'red flags,' of corporate misconduct...
Court of Chancery Holds That Statutory Right to Fair Value May Be Arbitrable
Posted on September 10, 2009Julian v. Julian, C.A. 4137-VCP (September 9, 2009). For a number of reasons, a plaintiff may seek to litigate his claim in the Court of Chancery rather than trust his case to arbitration. This decision illustrates how hard it is to avoid arbitration when the arbitration clause in the parties' contract is broadly drafted...
Court of Chancery Tackles Contested Advancement Issue
Posted on September 10, 2009Martinez v. Regions Financial Corporation, C.A. 4128-VCP (September 9, 2009). There is a recurring problem of what is the Court to do when the parties fight over the reasonableness of fees requested in an advancement case. As the fee requests are recurring, the Court has made it clear it does not want to be put in the role of monitoring play in the sandbox every month...
Court of Chancery Explains Beneficial Ownership Proof Requirement
Posted on August 31, 2009Smith v Horizon Lines, Inc., C.A. 4573-CC (August 31, 2009) When the statute governing demands for inspection rights was changed to permit a demand by a beneficial owner, it also required proof of beneficial ownership. This decision explains what form that proof must take...
Court of Chancery Approves Settlement in Countrywide Financial Case
Posted on August 27, 2009Vice Chancellor Noble has approved a settlement in the class action arising from the merger of Countrywide Financial Corporation and Bank of America. The opinion approving the settlement can be viewed here.
Court of Chancery Explains Scope of Permitted Release
Posted on August 24, 2009In Re Countrywide Corporation Shareholders Litigation, C.A. 3464-VCN (August 24, 2009) This is another in a series of decisions explaining the limits of a release in settlement of a class action. The opinion particularly focuses on when a common law fraud or federal securities law claim may be released.
Court of Chancery Addresses Affect of Typical Merger Agreement Provision
Posted on August 21, 2009Case Financial Inc. v. Alden, C.A. 1184-VCP (August 21, 2009) This decision is of interest because it explains the affect of a common merger agreement provision that is often misunderstood. It is common for such an agreement to say that representations expire at a certain date, such as the merger date...
Court of Chancery Addresses Effect of Typical Merger Agreement Provision
Posted on August 21, 2009Case Financial Inc. v. Alden, C.A. 1184-VCP (August 21, 2009) This decision is of interest because it explains the effect of a common merger agreement provision that is often misunderstood. It is common for such an agreement to say that representations expire at a certain date, such as the merger date...
Laster Nominated for Vice Chancellor
Posted on August 20, 2009J. Travis Laster, a highly-regarded Delaware corporate litigator and founding partner of the firm Abrams & Laster, has been nominated by Governor Jack Markell to fill Vice Chancellor Lamb's seat on the Court of Chancery. An article from the Delaware New Journal announcing the nomination can be viewed here.
Court of Chancery Explains Limits of Review of Arbitration Award
Posted on August 18, 2009World-Win Marketing Inc. v. Ganley Management Co., C.A. 3905-CC (August 18, 2009). The extent to which a court will review an arbitration award is a tricky question. The court may do so when the arbitrator exceeds his authority. But, what does that really mean? This decision explains this vague standard of review...
Three Nominated for Vice Chancellor
Posted on August 14, 2009Delaware's Judicial Nominating Commission, a panel tasked with screening candidates for judgeships in Delaware, has forwarded three candidates to Governor Jack Markell for his consideration as potential replacements for Vice Chancellor Lamb on the Court of Chancery...
Court of Chancery Extends Time To Seek Indemnification
Posted on August 14, 2009Wesley T. O'Brien v. IAC/Interactive Corp., C.A. 3892-VCP (August 14, 2009). In this decision, the Court dealt with an odd set of facts that are not likely to be repeated. However, the opinion is noteworthy because the Court declined to bar a suit for indemnification even when the complaint had been filed more than three years after the right to indemnification arose...
Delaware State Bar Association Submits Comments on SEC Proxy Access Proposal
Posted on August 10, 2009In what may be the first time that the Delaware State Bar Association (DSBA) has ever submitted comments upon a proposed SEC rule, the DSBA has recently submitted comments upon proposed Rule 14a-11, the SEC's proposed proxy access rule...
Summary of Amendments to Delaware Alternative Entity Statutes
Posted on August 06, 2009The Harvard Law School Forum on Corporate Governance and Financial Regulation has posted a useful summary of the recent amendments to Delaware's alternative entity statutes, drafted by Delaware practitioner Louis G. Hering. The post can be viewed here.
ABA Corporate Governance Committee Issues Report on Corporate Roles and Responsibilities
Posted on August 06, 2009In response to the ongoing financial crisis, the Corporate Governance Committee of the ABA Section of Business Law formed a Task Force on the Delineation of Governance Roles and Responsibilities in the summer of 2008. The Task Force included Lawrence Hammermesh, the Ruby Vale Professor of Corporate and Business Law at Widener University here in Delaware...
Court of Chancery Upholds Advancement Right in Employment Contract
Posted on August 06, 2009Martinez v. Regions Financial Corporation, C.A. 4128-VCP (August 8, 2009). This decision deals with an unusual right to have attorney fees advanced to an employee who is suing to enforce her interpretation of her employment agreement. The Court upheld the right to advancement based on the broad language used that made it clear that even if the employee lost her suit, she was entitled to attorney fees...
Court of Chancery Awards Fees in Small Class Action
Posted on July 31, 2009In re National City Corp. Shareholders Litigation, C.A. 4123-CC (July 31, 2009). This is an example of the Court of Chancery, even absent an objection from the corporation involved, carefully examining a fee request. The Court cut the request, because the benefit conferred was not significant...
Court of Chancery Finds Plaintiff Caused Transaction to be Withdrawn
Posted on July 30, 2009Kuo v. Genius Products Inc., C.A. 3329-CC (July 30, 2009). It is settled law that, when a corporation abandons a proposed corporate transaction after a suit is filed, to avoid payment of fees, the corporation must prove the litigation was not the cause of the transaction's termination...
Court of Chancery Acts to Resolve Inspection Suit
Posted on July 30, 2009Bosse v. WorldWebDex Corp. C.A. 4443-CC (July 30, 2009). The Court of Chancery frequently acts to promptly resolve actions seeking inspection rights even faster than the parties might expect or ask. This is an example of the Court reviewing the complaint and response and deciding to grant judgment on the pleadings when there does not seem to be any valid defense.
Court of Chancery Applies Corporate Law to Books and Records of LLC
Posted on July 28, 2009Mickman v. American International Processing LLC, C.A. 3869-VCP (July 28, 2009). This decision applies corporate case law to a demand for the records of an LLC. The Court held that a right to review "all books and records" under the LLC agreement means just that, all the pertinent records...
Court of Chancery Explains Role of Special Committee
Posted on July 28, 2009Louisiana Municipal Police Employees' Retirement System v. Fertitta, C.A. 4339-VCL (July 28, 2009). This is a major decision with implications for all special committees. The Court denied a motion to dismiss, because the special committee did not stand up to the controlling stockholder...
Court of Chancery Clarifies Directors Duties in Common/Preferred Stock Conflict
Posted on July 24, 2009In re Trados Incorporated Shareholder Litigation, C.A. 1512-CC (July 24, 2009). Directors sometimes face a conflict between what is best for the common stockholders compared to what is best for the preferred stockholders. While it is generally recognized that preferred stockholder rights are largely contractual and not based on fiduciary duties, that does not resolve all conflicts with common stockholders...
Court of Chancery Clarifies Duties Under Stockholder Agreements
Posted on July 24, 2009Latesco, L.P. v. Wayport, Inc., C.A. 4167-VCL (July 24, 2009). The question sometimes arises over what are the disclosure duties of the buyer under a stockholder agreement that compels a stockholder to sell her stock upon some triggering event, such as retirement...
Court of Chancery Interprets Confusing Indemnification Provision
Posted on July 14, 2009David A. Stockman v. Heartland Industrial Partners, LP, C.A. 4227-VCS (July 14, 2009) This is possibly the best decision to read to understand how to interpret the often confusing advancement and indemnification rights contained in limited partnership agreements...
Supreme Court Established New Remedy For Disclosure Violation
Posted on July 07, 2009Berger v. Pubco Corporation, Del Supr. C.A. 509, 2008 (July 9, 2009) In this precedent setting decision, the Supreme Court holds that stockholders who are cashed out in a short-form merger may bring a class action for damages when there are violations of the duty of disclosure in the materials sent to them notifying them of the merger...
Supreme Court Establishes New Remedy For Disclosure Violation
Posted on July 07, 2009Berger v. Pubco Corporation, Del Supr. C.A. 509, 2008 (July 9, 2009) In this precedent setting decision, the Supreme Court holds that stockholders who are cashed out in a short-form merger may bring a class action for damages when there are violations of the duty of disclosure in the materials sent to them notifying them of the merger...
Lead Plaintiff and Counsel Appointed
Posted on July 01, 2009City of Roseville Employees' Ret. Sys., v. Horizon Lines Inc., C.A. No. 08-969 (D. Del. June 18, 2009) In this putative class action, the plaintiffs allege that Horizon, a container shipping and logistics company, fraudulently inflated the value of its securities by entering into illegal price-fixing agreements with its competitors in order to manipulate prices in certain markets...
Court of Chancery Awards Fees of 27.5%
Posted on June 25, 2009In re TD Banknorth Shareholders Litigation, C.A. 2557-VCL (June 25, 2009) In this order, the Court awarded 27.5% of the class recovery of $964,086 to class counsel. This illustrates that sometimes, the smaller the pie, the larger the slice for class counsel...
Court of Chancery Extends Claim Filing Deadline
Posted on June 25, 2009CME Group Inc.v. Chicago Board Options Exchange Inc., C.A. 2369-VCN (June 25, 2009) Class action settlements often have a claim procedure that is complicated. Class members miss the deadlines and mess up their filings. However, as this decision illustrates, the Court is liberal in extending deadlines and forgiving filing mistakes.
Rales Test Applied to Allegation of Board Inaction
Posted on June 23, 2009In re Intel Corp. Derivative Litig., C.A. No. 08-93-JJF (D. Del. June 4, 2009) This opinion discusses when a court will apply the Rales test rather than the Aronson test in deciding whether a derivative plaintiff has pled particularized facts establishing demand futility...
Explicit Promise of Favorable Financing Not An Implied Obligation
Posted on June 23, 2009Southern Track & Pump Inc. v. Terex Corp., C.A. No. 08-543-JJF (D. Del. June 9, 2009) By granting, in part, the defendant's motion to dismiss its claim for breach of the implied covenant of good faith and fair dealing, the district court found that financing promises may not be regarded as an implied contractual obligation when there is no explicit reference in the agreement...
Court of Chancery Upholds In Pari Dilecto Defense
Posted on June 17, 2009American International Group Inc. Consolidated Derivative Litigation, C.A. 769-VCS (June 17, 2009) This is the latest decision in the continuing saga of the AIG litigation. In this case, the Court declined to permit a derivative stockholder of AIG to sue the co-conspirators of AIG in the various frauds alleged to have hurt AIG and its stockholders...
Court of Chancery Explains Limits on Offensive Advancement
Posted on June 16, 2009Duthie v. CorSolutions Medical Inc., C.A. 3048-VCN (June 16, 2009) It is well known that directors with advancement rights may call on those rights even when acting as a plaintiff. This decision explains the limits on that doctrine. In general, when there is no need to bring suit as a defensive maneuver to protect the director, then the right to have expenses advanced ends for a plaintiff.
Court of Chacnery Examines IP Claims
Posted on June 16, 2009Sinomab Bioscience Limited v. Immunomedics, Inc., C.A. 2471-VCS (June 16, 2009) In this rare case for the Court of Chancery, the Court determines the scope of noncompetition employment agreements. What is particularly interesting is the way the Court analyzed the testimony of the key witness to determine if he was telling the truth...
Court of Chancery Examines IP Claims
Posted on June 16, 2009Sinomab Bioscience Limited v. Immunomedics, Inc., C.A. 2471-VCS (June 16, 2009) In this rare case for the Court of Chancery, the Court determines the scope of noncompetition employment agreements. What is particularly interesting is the way the Court analyzed the testimony of the key witness to determine if he was telling the truth...
Court of Chancery Signals Concern Over Fees to be Paid by the Benefited Company
Posted on June 12, 2009Gatz v. Ponsoldt, C.A. 174-CC (June 12, 2009) This decision raises an interesting question over whether attorneys fees should be paid when the fees in a way that does not benefit the company for whom the suit was filed. briefly, the facts were that the defendant directors were found to be entitled to have the settlement of the claims against them paid by their company under their rights to be indemnified...
Court of Chancery Rejects Claim of Financial Support for Merger
Posted on June 11, 2009James Cable LLC v. Millennium Digital Media Systems LLC, C.A. 3637-VCL (June 11, 2009) When a party to a merger agreement must rely on the financial support of a third party to complete the deal, that must be spelled out in written agreement. Absent that written commitment, the deal is then just an option to close held by the party without assets who is then fee to back out...
Licensor's Action to Recover Royalties Overcomes Motion to Dismiss in Superior Court
Posted on June 02, 2009Boyce Thompson Institute For Plant Research v. MedImmune, Inc., C.A. No. 07C-11-217 JRS (Del. Super. May 19, 2009) (applying New York law per choice of law provision) This opinion discusses some interesting contractual interpretation and jurisdictional issues arising out of a licensing agreement...
Superior Court: Action May Proceed Against Licensor Despite First-Filed Actions
Posted on June 02, 2009STMicroelectronics N.V. v. Agere Sys., Inc., C.A. No. 08C-09-099 MMJ (Del. Super. May 19, 2009) (applying New York law per choice of law provision) This case illustrates the series of events that may arise when a subsidiary is party to a licensing agreement, but its parent is not...
Claim of Material Misstatement Regarding Gray Marketing Survives Motion for Summary Judgment
Posted on June 01, 2009In re Adams Golf, Inc., Secs. Litig., C.A. No. 99-371-GMS (D. Del. May 26, 2009) Chief District Judge Gregory M. Sleet rejected the defendants' motion for summary judgment finding remaining issues of material fact concerning disclosures of gray marketing (marketing that legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer)...
Allegations of Accounting Schemes and Material Misstatements Survive Motion to Dismiss
Posted on June 01, 2009Collins & Aikman Corp. v. Stockman, Civ. No. 07-265-SLR-LPS (D. Del. May 20, 2009) Magistrate Judge Leonard P. Stark considered the plaintiffs' state law claims of breach of fiduciary duty and denied the defendants' motion to dismiss these claims against certain individual defendants...
Court of Chancery Sanctions Electronic Discovery Abuse
Posted on May 29, 2009Beard Research Inc. v. Kates, C.A. 1316-VCP (May 29, 2009) The Court of Chancery has become increasingly unhappy with litigants who fail to preserve electronic "documents" such as email. In this latest expression of the concern, the Court sets out in detail the duties of client and counsel and explains when sanctions will be imposed for the failure to preserve evidence...
Court of Chancery Resolves Unclaimed Settlement Proceeds
Posted on May 29, 2009Oliver v. Boston University, C.A. 16570-VCN (May 29, 2009) What to do about unclaimed funds from a class action settlement is often a problem. While the funds should not go back to the defendants, thereby rewarding them, the funds otherwise might be escheated to the State or sent to a charity...
"Handshake Agreement" Overcomes Motion to Dismiss in Superior Court
Posted on May 22, 2009Sunstar Ventures, LLC v. Tigani, C.A. No. 08C-04-042 JAP (Del. Super. April 30, 2009) This case illustrates the exception to the statute of frauds of "substantial part performance." The seller of a $5MM home, and other items, brought a breach of contract action, because the buyer backed away...
Court of Chancery Resolves Fee Dispute Among Plainitffs Counsel
Posted on May 22, 2009In Re Cablevision/Rainbow Media Group, C.A. 19819-VCN (May 22, 2009) In the good old days, the multiple counsel for plaintiffs class or derivative litigation always seemed to be able to agree on how to split the fee awarded by the Court. Well, the good old days are over...
Court of Chancery Defines When a "Controlling Stockholder" Exists
Posted on May 22, 2009Dubroff v. Wren Holdings LLC, C.A. 3940-VCN (May 22, 2009) A claim that stockholders were wrongly diluted by the issuance of additional stock is generally consider a derivative claim that must meet tough pleading standards. However, when the dilution is caused by a controlling stockholder, the claim is also a direct claim that may be filed without meeting the rules for derivative suits...
Court of Chancery Delineates Employee Duties in Case of First Impression
Posted on May 18, 2009Triton Construction Company Inc v. Eastern Shore Electrical Services Inc., C.A. 32390-VCP (May 18, 2009) While it is well known that directors and officers have fiduciary duties, what about employees who are neither a director nor an officer? This decision addresses that issue...
Court of Chancery Approves "Continuing Directors"
Posted on May 12, 2009San Antonio Fire & Police Pension Fund v. Amylin Pharmaceuticals Inc., C.A. 4446-VCL (May 12, 2009) One defense against a hostile takeover is a provision that permits only "continuing directors" to approve certain important corporate acts...
Court of Chancery Orders Dissolution Upon End of Term
Posted on May 06, 2009In re Nextmedia Investors LLC, C.A. 4067-VCS (May 6, 2009) This is an interesting case, because it upholds the right of a member of an LLC to have it dissolved at the end of the term set for its existence in the LLC Agreement even when more than 90% of the members want it to continue...
Court of Chancery Limits Inspection Rights in LLC
Posted on May 06, 2009Jakks Pacific, Inc.v. THQ/Jakks PAcific LLC. C.A. 4295-VCL (May 5, 2009) When the business of an LLC is limited, so too may inspection rights be limited. Here the "business" was to exploit a license that was about to come to an end, and the Court held there was no need to inspect business records to value the business as there may well be nothing left to value...
Court of Chancery Limits Turning Contracts Into Fiduciary Duties
Posted on April 30, 2009Nemec v. Shrader, C.A. 3878-CC (April 30, 2009) A contract right does not create a fiduciary duty. Here the plainitffs had a contract that gave their former employer the right to buy back company stock at book value. The employer did so on the eve of a big transaction, greatly increasing the company's book value...
Chancellor Warns of the Perils of Inaction
Posted on April 29, 2009Tooley v. AKA Financial Inc., C.A. 18414-CC (April 29, 2009) While it is well know that the failure to prosecute a class action may lead to the case being dismissed, many practitioners just do not believe in the need to move a case along or risk losing it...
Corporation's Ability to Take Advantage of Corporate Opportunity an Issue of Material Fact
Posted on April 28, 2009Norman v. Elkin, C.A. No. 06-005-JJF (D. Del. Apr. 28, 2009) The district court denied motions for summary judgment for claims of breach of contract, usurpation of corporate opportunities, breaches of fiduciary duty, breach of the duty of disclosure, conversion and misappropriation, and fraudulent representation...
Court of Chancery Explains Scope of Representation Clauses
Posted on April 27, 2009Ivize of Milwaukee, LLC v. Compex Litigation Support LLC, C.A. 3158-VCL (April 22, 2009) While a statement may not be a lie unless the speaker knows he has failed to tell the truth, a contractual representation does not require knowledge that it is false for it to be actionable if untrue...
Spear Complaint Not Fatally Speculative
Posted on April 27, 2009Spear Pharm. Inc. v. William Blair & Co. LLC, C.A No. 07-821-JJF (D. Del. Apr. 27 2009) The district court denied motions to dismiss the complaint and found the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) instructive...
District Court Denies Motion for Summary Judgment Based on Void Ab Initio Defense
Posted on April 03, 2009Lynch v. Coinmaster USA, Inc., C.A. No. 06-365-JJF (D. Del. Mar. 30, 2009) In this opinion, the court denied a broad application of the ultra vires doctrine. Seeking damages for breach of an employment agreement with Coinmaster USA, Inc., the plaintiff claimed that he was owed outstanding monthly pay, a termination fee, profits and stock options...
District Court Denies Motion for Summary Judgment Based on Void Ab Initio Defense
Posted on April 03, 2009Lynch v. Coinmaster USA, Inc., C.A. No. 06-365-JJF (D. Del. Mar. 30, 2009) In this opinion, the court denied a broad application of the ultra vires doctrine. Seeking damages for breach of an employment agreement with Coinmaster USA, Inc., the plaintiff claimed that he was owed outstanding monthly pay, a termination fee, profits and stock options...
Court of Chancery Holds When There Is No Contribution There Is No Fee
Posted on April 02, 2009In re William Lyon Homes Shareholders Litigation, C.A. No. 2015-VCN (Del Ch. April 4, 2009) This decision deals with when a plaintiff may receive a fee when a merger price is increased after he files suit and then his case is mooted. The general rule applied here is that while the defense has the burden of proving the plaintiff did not contribute to the increased price, when the merger consideration was increased without any help from the plaintiff, there is no fee...
Court of Chancery Holds When There Is No Contribution There Is No Fee
Posted on April 02, 2009In re William Lyon Homes Shareholders Litigation, C.A. No. 2015-VCN (Del Ch. April 4, 2009) This decision deals with when a plaintiff may receive a fee when a merger price is increased after he files suit and then his case is mooted. The general rule applied here is that while the defense has the burden of proving the plaintiff did not contribute to the increased price, when the merger consideration was increased without any help from the plaintiff, there is no fee...
The 21st Tulane Corporate Law Institute Begins Tomorrow
Posted on April 01, 2009Here is the brochure for the program, which takes place April 2-3. The panelists are among the most respected and knowledgeable legal minds and financial experts involved in corporate law and M&A, including Chief Justice Myron T. Steele and Justice Jack B...
Court of Chancery Upholds Right of "Beneficial" Member To Sue in LLC Case
Posted on April 01, 2009Mickman v. American International Processing LLC, C.A. No. 3869-VCP (Del. Ch. April 1, 2009) In the case of an LLC, unlike in a Delaware corporation, the statutory definitions of who may seek court relief have not been broadened. Generally, only a member or manager has those rights, and who is a member is determined by the LLC operating agreement...
Court of Chancery Upholds Right of "Beneficial" Member To Sue in LLC Case
Posted on April 01, 2009Mickman v. American International Processing LLC, C.A. No. 3869-VCP (Del. Ch. April 1, 2009) In the case of an LLC, unlike in a Delaware corporation, the statutory definitions of who may seek court relief have not been broadened. Generally, only a member or manager has those rights, and who is a member is determined by the LLC operating agreement...
The 21st Tulane Corporate Law Institute Begins Tomorrow
Posted on April 01, 2009Here is the brochure for the program, which takes place April 2-3. The panelists are among the most respected and knowledgeable legal minds and financial experts involved in corporate law and M&A, including Chief Justice Myron T. Steele and Justice Jack B...
Court of Chancey Explains Class Release Rules
Posted on March 31, 2009In re Countrywide Corporation Shareholders Litigation, C.A. No. 3464-VCN (Del. Ch. March 31, 2009) This decision provides an excellent outline of what claims may be released in a class action settlement. Here the objectors to the settlement had a damage claim unique to them but that the proposed settlement would have released...
Court of Chancey Explains Class Release Rules
Posted on March 31, 2009In re Countrywide Corporation Shareholders Litigation, C.A. No. 3464-VCN (Del. Ch. March 31, 2009) This decision provides an excellent outline of what claims may be released in a class action settlement. Here the objectors to the settlement had a damage claim unique to them but that the proposed settlement would have released...
Delaware Supreme Court Limits Revlon and Defines Good Faith, Again
Posted on March 25, 2009Lyondell Chemical Company v. Ryan, C.A. 401, 2008 (Del Sup March 25, 2009) In this expected reversal of a decision by the Court of Chancery, the Supreme Court has again defined what constitutes "bad faith." The reversal was expected because of the unusual action of the Supreme Court in taking an interlocutory appeal from a decision denying summary judgment ...
Court of Chancery Limits Use of Interested Directors' Votes
Posted on March 23, 2009Sutherland v. Sutherland, C.A. No. 2399-VCL (Del. Ch. March 23, 2009) This decision is a good outline of the effect of Section 144 of the Delaware General Corporation Law that permits transactions to be judged on their merits even if they are with interested directors...
Court of Chancery Limits Use of Interested Directors' Votes
Posted on March 23, 2009Sutherland v. Sutherland, C.A. No. 2399-VCL (Del. Ch. March 23, 2009) This decision is a good outline of the effect of Section 144 of the Delaware General Corporation Law that permits transactions to be judged on their merits even if they are with interested directors...
Court of Chancery Explains Scope of Exculpation Clause
Posted on March 18, 2009Addy v. Piedmonte, C.A. 3571-VCP (Del. Ch. March 18, 2009) It is now common to include a clause in contracts that asserts a buyer has not relied on anything she was told and instead has only relied on her own investigation and the promises contained in her written contract...
Court of Chancery Explains Scope of Exculpation Clause
Posted on March 18, 2009Addy v. Piedmonte, C.A. 3571-VCP (Del. Ch. March 18, 2009) It is now common to include a clause in contracts that asserts a buyer has not relied on anything she was told and instead has only relied on her own investigation and the promises contained in her written contract...
District Court Denies Partial Summary Judgment on Breach of Implied Covenant of Good Faith and Fair Dealing Claim
Posted on March 10, 2009Zwanenberg Food Group (USA) Inc. v. Tyson Refrigerated Processed Meats, Inc., Civ. No. 08-329-LPS (D. Del. Feb. 27, 2009). United States Magistrate Judge Leonard P. Stark denied Tyson Refrigerated Processed Meats, Inc.'s ('Tyson') motion for partial summary judgment of Zwanenberg Food Group (USA) Inc...
District Court Denies Partial Summary Judgment on Breach of Implied Covenant of Good Faith and Fair Dealing Claim
Posted on March 10, 2009Zwanenberg Food Group (USA) Inc. v. Tyson Refrigerated Processed Meats, Inc., Civ. No. 08-329-LPS (D. Del. Feb. 27, 2009). United States Magistrate Judge Leonard P. Stark denied Tyson Refrigerated Processed Meats, Inc.'s ('Tyson') motion for partial summary judgment of Zwanenberg Food Group (USA) Inc...
Court of Chancery Awards Fees Based on Intangible Benefit
Posted on March 06, 2009In re Yahoo! Shareholders Litigation, C.A. 3561-CC (Del. Ch. Mar. 6, 2009) This is another in a line of cases where substantial attorney fees ($8,400,000) are awarded to a stockholder whose complaint achieves an intangible benefit for the corporation...
Court of Chancery Awards Fees Based on Intangible Benefit
Posted on March 06, 2009In re Yahoo! Shareholders Litigation, C.A. 3561-CC (Del. Ch. Mar. 6, 2009) This is another in a line of cases where substantial attorney fees ($8,400,000) are awarded to a stockholder whose complaint achieves an intangible benefit for the corporation...
Court of Chancery Denies Buy Out Claim Based on Change of Control
Posted on March 03, 2009BASF Corp. v. POSM II Properties Partnership L.P., C.A. 3608-VCS (Del. Ch. Mar. 3, 2009) The plaintiff in this case argued it was entitled to be bought out of the partnership because the partnership agreement provided buy out rights when control of the partnership changed...
Court of Chancery Denies Buy Out Claim Based on Change of Control
Posted on March 03, 2009BASF Corp. v. POSM II Properties Partnership L.P., C.A. 3608-VCS (Del. Ch. Mar. 3, 2009) The plaintiff in this case argued it was entitled to be bought out of the partnership because the partnership agreement provided buy out rights when control of the partnership changed...
Court of Chancery Denies Request for Reformation of Merger Agreement
Posted on February 27, 2009Metcap Securities LLC v. Pearl Senior Care Inc., C.A. 2129-VCN (Del. Ch. Feb. 27, 2009) In this decision the Court explains when it will grant reformation of a contract based on mistake. Most importantly, it held that an attorney was authorized to agree to the amendment to a contract that his client later argued was a mistake...
Court of Chancery Denies Request for Reformation of Merger Agreement
Posted on February 27, 2009Metcap Securities LLC v. Pearl Senior Care Inc., C.A. 2129-VCN (Del. Ch. Feb. 27, 2009) In this decision the Court explains when it will grant reformation of a contract based on mistake. Most importantly, it held that an attorney was authorized to agree to the amendment to a contract that his client later argued was a mistake...
Court of Chancery Approves Master Report on Fees
Posted on February 26, 2009Kosseff v. Ciocia, C.A. 188-MG (Del. Ch. Feb. 26, 2009) This decision points to a new method of handling attorney fee requests following a settlement. The Court referred the request to one of its Masters for a report, reviewed the report, and upheld the Master's award.
Court of Chancery Explains Interaction with PSLRA
Posted on February 26, 2009Beiser v. PMC-Sierra Inc., C.A. 3893-VCL (Del. Ch. Feb. 26, 2009) Under the federal PSLRA, discovery may be stayed while a motion to dismiss is pending. Parties have tried to get around this stay by filling a books and records complaint in the Court of Chancery...
Court of Chancery Approves Master Report on Fees
Posted on February 26, 2009Kosseff v. Ciocia, C.A. 188-MG (Del. Ch. Feb. 26, 2009) This decision points to a new method of handling attorney fee requests following a settlement. The Court referred the request to one of its Masters for a report, reviewed the report, and upheld the Master's award.
Court of Chancery Calculates Reasonable Attorney Fees
Posted on February 25, 2009Lillis v. AT&T Corp., C.A. 717-VCL (Del. Ch. Feb. 25, 2009) In what surely must have been a boring use of judicial time, in this case the Court of Chancery was required to decide what fees were reasonable in a complex indemnification case...
Court of Chancery Decides Formula for Fee Advancement
Posted on February 24, 2009Underbrink v. Warrior Energy Services Corp., C.A. 2982-VCP (Del. Ch. Feb. 24, 2009) When a party is entitled to have her attorney fees advanced while litigation is pending, the Court of Chancery is faced with the possible task of reviewing each monthly bill to decide what is reasonable...
Court of Chancery Reaffirms The Business Judgment Rule
Posted on February 24, 2009In re Citigroup Inc. Shareholder Derivative Litig., C.A. 3338-CC (Del. Ch. Feb. 24, 2009) After the recent decision in the AIG case denying a motion to dismiss a complaint, there was some concern that perhaps the Court of Chancery was loosening the pleading requirements to state a claim under the Caremark line of case law...
Court of Chancery Awards Attorney Fees in Contract Case
Posted on February 23, 2009West Willow-Bay Court LLC v. Robino-Bay Court Plaza LLC, C.A. 2741-VCN (Del. Ch. Feb. 23, 2009) When attorney fees are awarded under the terms of a contract, the question sometimes comes up on how to calculate the fees when there was only partial success by the prevailing party...
Court of Chancery Denies Request for a Receiver
Posted on February 18, 2009Banet v. Fonds de Regulation et de Controle Cafe Cacao, C.A. 3742-CC (Del. Ch. Feb. 18, 2009) This is an excellent summary of the law governing when the Court of Chancery will appoint a receiver for either an insolvent or a solvent corporation...
Court of Chancery Denies Redundant Inspection
Posted on February 12, 2009Norfolk Country Retirement System v. Jos. A. Bank Clothiers, Inc., C.A. 3443-VCP (Del. Ch. Feb. 12, 2009) Repeated books and records demands by different stockholders should be viewed favorably. When, as here, a special litigation committee (SLC) has reviewed the conduct sought to be investigated by the plaintiff, and the independence and diligence of the SLC cannot be fairly questioned, then a stockholder who demands inspection may receive the SLC report and some backup materials, but no more absent a stronger showing of real justification to think the SLC did not do its job.
Court of Chancery Denies Redundant Inspection
Posted on February 12, 2009Norfolk Country Retirement System v. Jos. A. Bank Clothiers, Inc., C.A. 3443-VCP (Del. Ch. Feb. 12, 2009) Repeated books and records demands by different stockholders should be viewed favorably. When, as here, a special litigation committee (SLC) has reviewed the conduct sought to be investigated by the plaintiff, and the independence and diligence of the SLC cannot be fairly questioned, then a stockholder who demands inspection may receive the SLC report and some backup materials, but no more absent a stronger showing of real justification to think the SLC did not do its job.
Court of Chancery Explains how To Infer Scienter
Posted on February 10, 2009American International Group Consolidated Derivative Litigation, C.A. 769 (Del. Ch. Feb. 10, 2009) The Court of Chancery is often faced with the difficult task of deciding when a complaint has enough factual allegations to survive a motion to dismiss, particularly when there is no self dealing by directors and the business judgment rule is raised as a defense...
Court of Chancery Explains how To Infer Scienter
Posted on February 10, 2009American International Group Consolidated Derivative Litigation, C.A. 769 (Del. Ch. Feb. 10, 2009) The Court of Chancery is often faced with the difficult task of deciding when a complaint has enough factual allegations to survive a motion to dismiss, particularly when there is no self dealing by directors and the business judgment rule is raised as a defense...
Court of Chancery Explains "Validly In Litigation"
Posted on February 06, 2009In re: Affiliated Computer Services, Inc. Shareholders Litigation, C.A. 2821-VCL (Del. Ch. Feb. 6, 2009) Determining when a derivative complaint should be dismissed becomes complicated when the composition of the board of directors changes. What board do you look to to determine if a demand must be made on the board before suit may proceed? You start by looking at the board that existed at the time the complaint was filed...
Court of Chancery Upholds LLC Dissolution Provision
Posted on February 06, 2009Spellman v. Katz, C.A. 1838-VCN (Del. Ch. Feb. 6, 2009) In drafting an LLC operating agreement, the key point to remember is that you get what you agreed to even if you later come to regret it. Here, the operating agreement included a provision that the LLC would be dissolved when certain events occurred...
Court of Chancery Clarifies when there is a Contract
Posted on February 03, 2009BAE Systems Information and Electronic Systems Integration, Inc. v. Lockheed Martin Corp., C.A. 3099-VCN (Del. Ch. Feb. 3, 2009) It is sometimes difficult to decide when a writing is an enforceable contract or merely an agreement to agree. This decision sets out the methodology to decide that question...
Supreme Court Clarifies Stockholder Ratification Law
Posted on January 27, 2009Gantler v. Stephens, C.A. 132,2008 (Del. Jan. 27, 2009) This is an important decision because it limits when stockholder approval of a transaction has the effect of ratifying director action. Moreover, it limits the effect of stockholder ratification by holding that the business judgment level of review still applies to the directors' action, rather than holding that ratification extinguishes any claim...
Delaware's Top 10: The Most Important Corporate Law Decisions of 2008
Posted on January 22, 2009The following is a summary of the top 10 most important corporate law decisions published in 2008. The Delaware courts addressed a range of issues this past year in the areas of fiduciary duty, the negligence - bad faith continuum, advancements and mergers...
Court of Chancery Denies TRO for Laches
Posted on January 21, 2009Topspin Partners L.P. v. Rocksolid Systems. Inc., C.A. 4275-VCL (Del. Ch. Jan. 21, 2009) This decision illustrates the sometimes forgotten Delaware rule that if you get a TRO you better act fast. Here the plaintiff sat on its rights for ten months and the Court, while finding that irreparable harm might occur and that the claims appeared meritorious, denied immediate relief because of the delay...
Court of Chancery Refuses To Dismiss Business Tort Case
Posted on January 20, 2009Agilent Technologies, Inc. v. Kirkland, C.A. 3512-VCS (Del. Ch. Jan. 20, 2009) This decision is interesting because it illustrates what a party to litigation can or cannot say about the case. The failure to adhere to the rules results in a business tort claim for unfair practices, etc...
Superior Court Holds Chancery Has Exclusive Jurisdiction To Appoint Arbitrator
Posted on January 16, 2009Firemen's Insurance Co. v. Birch Pointe Condo. Assoc., Inc., C.A. No. 08C-04-081 JAP (Del. Super. Dec. 17, 2008). In this decision, the Superior Court ruled sua sponte that it lacked subject matter jurisdiction over an action seeking declaratory relief and requesting the appointment of an arbitrator...
Court of Chancery Explains the Role of Merger Subs
Posted on January 15, 2009Alliance Data Systems Corporation v. Blackstone Capital Partners V, LP, C.A. 3796-VCS (Del. Ch. Jan. 15, 2009) Here the target tried to argue that the parent entity should be responsible to pay damages for its sub’s failure to close under the facts of this case...
Court of Chancery Awards Fees in Closely Held Entity Litigation
Posted on January 14, 2009Julian v. Eastern States Construction Company, C.A. 1892-VCP (Del. Ch. Jan. 14, 2009) This decision answers the question of whether the normal rules governing attorney fee awards in derivative litigation will be applied in closely held entities...
Court of Chancery Dissolves a Deadlocked LLC
Posted on January 13, 2009Fisk Ventures, LLC v. Segal, C.A. 3017-CC (Del. Ch. Jan. 13, 2009) It has long been established that a limited partnership may be dissolved when a deadlock makes it impossible to carry on the partnership business. Here the Court of Chancery applied that same law to an LLC as the statute also provides for a judicial dissolution when it is "not reasonably practical to carry on the business" for which the entity was created...
Court of Chancery Approves Option Back Dating Case Settlement
Posted on January 02, 2009Ryan v. Gifford, C.A. 2213-CC (Del. Ch. Jan. 2, 2009) In this decision the Court approves the settlement of a stock option back dating case. The opinion carefully goes through all the analysis of when to approve a settlement, particularly when the recovery is adequate under the circumstances...
Court of Chancery Approves Opt Out Settlement
Posted on December 19, 2008Marie Raymond Revocable Trust v. MAT Five LLC, C.A. 3843-VCL (Del. Ch. Dec. 19, 2008) This decision has a good summary of the law governing certification of a class and when to approve a class settlement. Here the settlement permitted class members to opt out without the loss of any rights to pursue other related litigation...
Court of Chancery Upholds Post Merger Arbitration
Posted on December 11, 2008Aveta Inc. v. Bengoa, C.A. 3598-VCL (Del. Ch. Dec. 11, 2008) It is now common to provide for post merger payouts and the arbitration of any disputes about those payouts. This case illustrates the problem of what happens when one party feels it does not have enough information to go into arbitration where discovery may be limited...
Court of Chancery Interprets LLC Exculpation Clause
Posted on December 11, 2008Kahn v. Portnoy, C.A. 3515-CC (Del. Ch. Dec. 12, 2008) This important decision illustrates how hard it is to make an LLC agreement cover all future events. While there is a growing school of thought that advocates letting the parties make their own bed in the form of the LLC agreement, that approach fails to appreciate how hard it is to do that well...
Court of Chancery Refuses To Impose Costs on Proxy Loser
Posted on December 05, 2008TravelCenters of America v. Brog, C.A. 3751-CC (Del. Ch. Dec. 5, 2008) In this unusual case, the LLC sought to require the loser of a proxy contest to pay the costs. The LLC Agreement had a provision that imposed costs on those members who violated any of their obligations in the agreement...
Court of Chancery Rejects Settlement
Posted on November 26, 2008Off v. Ross, C.A. 3468-VCP (Del. Ch. Nov. 26, 2008) The Court of Chancery rejected the proposed settlement of this derivative suit for two reasons. First, the transaction under attack in the litigation was completed after a modification favorable to stockholders before the settlement was presented for approval, the modification was considered by the board before suit was filed, and the transaction was not dependent on approval of the settlement...
District Court Awards Punitive Damages Based in Part on Discovery Abuse, Denies Attorneys' Fees for Inadequate Proof
Posted on November 24, 2008Christ v. Cormick, 2008 WL 4889127 (D. Del. Nov. 10, 2008) In this opinion the Court sanctioned the defendant’s conduct, including discovery abuse, by awarding punitive damages. The Court first entered default judgment against the defendant after his “repeated dilatory discovery conduct and his refusal to appear for deposition...
Court of Chancery Denies Jurisdiction Over Stock Appreciation Rights Suit
Posted on November 21, 2008Testa v. Nixon Uniform Service, Inc., C.A.3886-VCS (Del. Ch. Nov. 21, 2008) In a novel attempt to invoke the jurisdiction of the Court of Chancery, the plaintiff tried to rely upon Section 111(a)(2) of the Delaware General Corporation Law that provides the Court of Chancery jurisdiction in disputes over stock...
Court of Chancery Clarifies Statutory Trust Law
Posted on November 07, 2008Cargill, Incorporated v. JWH Special Circumstance LLC, C.A. 3234-VCP (Del. Ch. Nov. 7, 2008) In this major opinion, the Court of Chancery held that a manager of a Delaware Statutory Trust has a fiduciary duty to the Trust absent a clear exclusion of that duty in the trust instrument...
Court of Chancery Denies Stay in Merrill Lynch Case
Posted on October 28, 2008County of York Employees Retirement Plan v. Merrill Lynch & Co., Inc., C.A. 4066-VCN (Del. Ch. Oct. 28, 2008) In this decision, the Court of Chancery again affirms it disinclination to stay proceedings in Delaware just because a federal securities case was filed first elsewhere...
The Delaware "Bad Faith" Dilemma: The Problem And A Possible Solution
Posted on October 22, 2008Introduction A recent Delaware Court of Chancery decision has generated much discussion over whether disinterested directors may be held liable for approving a transaction that appeared reasonable to them and their advisors. Indeed, by holding that the directors may have acted in “bad faith,” the decision seemed to some to be a threat to the core principles embodied in the business judgment rule...
Court of Chancery Applies Statute of Frauds to LLC Agreement
Posted on October 22, 2008Brian T. Olson v. O. Andreas Halvrosen, C.A. 1884-VCL (Del Ch. Oct. 22, 2008) This decision invalidates a provision in an unsigned LLC agreement for violating the statute of frauds. The Delaware LLC Act permits an oral LLC agreement; however, when the promise in that oral agreement cannot be performed within a year, the promise must be in writing...
District Court Finds Indemnity Provision Repugnant to Delaware Public Policy, Refuses to Enforce
Posted on October 21, 2008Kempski v. Toll Bros., Inc., 2008 WL 4642633 (D. Del. Oct. 21, 2008) In this opinion, the District Court reinforced Delaware’s law that indemnity provisions that require one party to indemnify another party for the second party’s own negligence are void as against Delaware’s public policy...
Court of Chancery Affirms Limitations Period for Dissolved Entity
Posted on October 14, 2008In the Matter of Dow Chemical International Inc. of Delaware, C.A. 3972-CC (Del. Ch. Oct. 14, 2008) This decision has a good outline of when the right to sue a Delaware corporation expires after it is dissolved. The basic rule is that after three years no suit may be filed...
Court of Chancery Upholds Merger Agreement
Posted on September 29, 2008Hexion Specialty Chemicals Inc. v Huntsman Corp., C.A. 3841-VCL (Del. Ch. Sept. 29, 2008) This ninety-one page opinion is must reading on how to interpret a merger agreement and on the parameters of the obligation to proceed in good faith to close a deal...
Court of Chancery Refuses Dissolution of LLC
Posted on September 23, 2008In re Seneca Investment LLC, C.A. 3624-CC (Del. Ch. Sept. 23, 2008) This decision applies the corporate law rule that the Court of Chancery will not dissolve a solvent entity except for extraordinary reasons. Merely acting as a holding company without an active business is not even close to good enough to warrant dissolution.
Court of Chancery Denies Application for Receiver
Posted on September 23, 2008Weir v. JMACK Inc., C.A. 3263-CC (Del. Ch. Sept. 23, 2008) This decision repeats the settled Delaware law that the Court of Chancery will not appoint a receiver for a solvent Delaware corporation absent extraordinary circumstances. Of course, having a court tell the world that your tax evasion is not "extraordinary" justification for a receiver may have been punishment enough.
Superior Ct Employs Objective Contract Principles, Grants SJ To Builder
Posted on September 22, 2008Capano Homes, Inc. v. Syed, 2008 WL 4182039 (Del. Super. Ct. Sept. 8, 2008). This decision implements the objective theory of contracts adopted by the Delaware courts. The dispute involved a homebuyer who refused to proceed to settlement, claiming that the builder breached their written agreement and that the buyer should therefore be excused from performing...
Superior Court Employs Objective Contract Principles, Grants SJ To Builder
Posted on September 22, 2008Capano Homes, Inc. v. Syed, 2008 WL 4182039 (Del. Super. Ct. Sept. 8, 2008). This decision implements the objective theory of contracts adopted by the Delaware courts. The dispute involved a homebuyer who refused to proceed to settlement, claiming that the builder breached their written agreement and that the buyer should therefore be excused from performing...
Superior Court Denies SJ, Leaves For Jury Whether Agent Had Authority
Posted on September 11, 2008Jack J. Morris Assoc. v. Mispillion Street Partners, LLC, 2008 WL 3906755 (Del. Super. Ct. Aug. 26, 2008). This decision briefly reviews the three types of authority by which an agent may bind a principal: actual authority, implied authority, and apparent authority...
Superior Court Addresses Allocation Of Defense Costs Across Multiple Towers
Posted on September 11, 2008HLTH Corp. v. Agricultural Excess and Surplus Ins. Co., 2008 WL 3413327 (Del. Super. Ct. July 31, 2008). When one company acquires several other companies, which carry their own D&O liability coverage, the resulting entity then holds multiple towers of coverage...
Court of Chancery Establishes Procedures for Contested Advancement Claims
Posted on September 10, 2008Duthie v. CorSolutions Medical, Inc., C.A. 3048-VCN (Del. Ch. Sept. 10, 2008) When advancement is sought, the amounts are often objected to as too large. While the Court of Chancery in the past has not wanted to monitor fees in such cases (leaving the amounts to be finally determined at the indemnification stage), here the Court agreed to appoint a special master to review the advancement requests...
Court of Chancery Permits Settlement of Suit with Suit To Be Filed Against Insurers
Posted on September 04, 2008In re Electronics for Imaging Inc. S’holders Litig., C.A. 2797-VCL (Del. Ch. Sept. 4, 2008) It is common for the settlement of a derivative suit to be funded by the D&O insurers. Here, however, in a twist to that common event, the Court upheld a settlement where the company is permitted to sue the D&O insurers, with counsel for the stockholder plaintiff as its attorneys, to force the insurers to fund...
Court of Chancery Dismisses Derivative Suit for Bad Conduct and Lack of Standing
Posted on September 04, 2008Parfi Holding A.B. v. Mirror Image Internet Inc., C.A. 18507-VCS (Del. Ch. Sept. 4, 2008) In this highly unusual case, the Court of Chancery dismissed the complaint because the plaintiff had not told the truth as to why it was not proceeding promptly and because the named plaintiff had lost standing by conveying away any economic interest in the stock it held in the company...
Court of Chancery Permits Discovery for a Settlement Hearing
Posted on September 03, 2008In re Countrywide Corp. S'holders Litig., C.A. 3464-VCN (Del. Ch. Sept. 3, 2008) In this admittedly unusual case, the Court of Chancery has expanded the limited discovery available to an objector of a proposed settlement of a derivative case. The discovery includes the valuation of the derivative claims' value to the company...
Court of Chancery Upholds Director Decision Rejected by Stockholders
Posted on September 02, 2008In re Lear Corp. S'holder Litig., C.A. 2778-VCS (Del. Ch. Sept. 2, 2008) In this decision the court dismissed claims against directors whose decision to approve a merger was rejected by the stockholders and the company then had to pay a termination fee...
Court of Chancery Defines Bad Faith, Again
Posted on August 29, 2008McPadden v. Sidhu, C.A. 3310-CC (Del Ch. Aug. 29, 2008) This decision again affirms that bad faith is not the same a gross negligence and explains the difference. That distinction is important because usually directors are immunized from decisions made in good faith, even if negligent...
Court of Chancery Permits Reasonable Time To Invoke MAC Clause
Posted on August 26, 2008Henkel Corp. v. Innovative Brands Holdings LLC, C.A. 3663-VCN (Del. Ch. Aug. 26, 2008) Merger agreements frequently permit a merger to be terminated in the event of a materially adverse change to the business of the company to be acquired. When the right to invoke such a MAC clause is not set by the agreement, this decision holds that it must be invoked within a reasonable time...
Superior Court Holds D&O Insurer's Consent Was Required For Settlement
Posted on August 21, 2008Federal Ins. Co. v. Hilco Capital, LP, 2008 WL 3021109 (Del. Super. Ct. Aug. 5, 2008). This coverage dispute arises out of the settlement of an underlying breach of fiduciary duty action. The plaintiffs and defendants (insureds) in that underlying action, along with the first-layer D&O carrier, reached a settlement agreement without the consent of the excess liability carrier, despite the settlement implicating that policy...
Court of Chancery Answers its Critics of the Ryan Decision
Posted on August 20, 2008Ryan v. Lyondell Chemical Company, C.A. 3176-VCN (Del Ch. Aug. 29, 2008) The recent decision in this case denying summary judgment has set off a storm of protest that the Court of Chancery is ignoring the business judgment rule and the director exculpation statute...
Court of Chancery Sanctions Counsel
Posted on August 20, 2008Postorivo v. AG Paintball Holdings Inc., C.A. 2991-VCP (Del. Ch. Aug. 20, 2008) This decision carefully reviews the rules that attorneys must follow in Delaware when dealing with possibly privileged documents belonging to another party or in interviewing former employees of an opposing party...
Court of Chancery Upholds Waiver of Dissolution and Receiver Rights in LLC
Posted on August 19, 2008R&R Capital, LLC v. Buck & Doe Run Valley Farms, LLC, C.A. 3803-CC (Del. Ch. Aug. 8, 2008) This decision upholds provisions in an LLC agreement that waived the rights of members to seek its dissolution or the appointment of a receiver. Thus, once again, the Court has held that the principle of freedom of contract will be enforced in Delaware...
Superior Court Bars Indemnification Claim Brought By Successful Chancery Plaintiffs
Posted on August 18, 2008LaPoint v. Amerisourcebergen Corp., 2008 WL 2955511 (Del. Super. Ct. July 25, 2008). This decision will counsel plaintiffs to seek indemnification under a contract during the underlying action for breach of that contract, and not to initiate a subsequent, separate action...
Court of Chancery Explains Quasi Appraisal Remedy
Posted on May 30, 2008Berger v. Pubco Corp., C.A. 3414-CC (Del. Ch. May 30, 2008) More often than we may expect, Delaware corporations commit errors in notifying stockholders of their right to an appraisal after a merger. For some reason, on several occasions the wrong version of the appraisal statute was sent to the stockholders, violating the statutory requirement that a current version accompany the notice of appraisal rights...
Special Committee Releases Report on Delaware Superior Court Toxic Tort Litigation
Posted on May 27, 2008A Special Committee appointed by the Delaware Superior Court has released its report and recommendations on Superior Court toxic tort litigation. The report (copy available here) followed the Special Committee’s investigation into concerns expressed by the Delaware State Chamber of Commerce that an increasingly large number of asbestos cases was adversely impacting the ability of the Delaware Superior Court to effectively and fairly adjudicate civil cases...
Court of Chancery Determines Complex Indemnification Claim
Posted on May 23, 2008Zaman v. Amedeo Holdings Inc., C.A. 3115-VCS (Del. Ch. May 23, 2008) Determining when indemnification rights apply is sometimes tough to do. The claims for which indemnification are sought are often drafted so as to avoid alleging that the defendant is being sued for something he did as an officer or director, but instead allege that he acted in a personal or agency relationship such as a lawyer...
Superior Court Alters ADR Rules, Substitutes Mediation as Default Format
Posted on May 23, 2008Effective March 1, 2008, the Superior Court amended Civil Rule 16 and repealed Civil Rule 16.1 to alter the compulsory alternative dispute resolution ("ADR") process mandated under Court rules. The amendments, found here, substitute mediation for arbitration as the Court's default format for ADR in the event the parties cannot agree...
District Court Dismisses Declaratory Relief, Contract Claim for Lack of Personal Jurisdiction
Posted on May 16, 2008Solae, LLC v. Hershey Canada Inc., 2008 WL 2011914 (D. Del. May 9, 2008)Solae LLC (“Solae”), a Delaware LLC with a principal place of business in Missouri, brought a declaratory relief and breach of contract action in Delaware District Court against Hershey Canada, Inc...
Court of Chancery Upholds LLC Agreement Voting Rights
Posted on May 07, 2008Fisk Ventuers LLC v. Segal, C.A. 3017-CC (Del. Ch. May 7, 2008)A Delaware LLC is a creature of the members' contract. Here the LLC agreement gave voting rights to a class of members that effectively gave them veto rights over certain actions. When those members exercised those veto rights, the other members sued claiming that constituted a breach of duty...
Court of Chancery Again Rejects a One Person Special Litigation Committee
Posted on May 05, 2008Sutherland v. Sutherland, C.A. 2399-VCL (Del. Ch. May 5, 2008)Once again, the Court of Chancery has shot down a motion to dismiss a derivative suit based on the work of a one person SLC. This time while finding the SLC was independent, the Court felt its work was not adequate because of a lack of effort in reviewing accounting records...
Court of Chancery Interprets Limitations Law on Arbitration Demands
Posted on May 05, 2008Personnel Decisions Inc. v. Business Planning Systems Inc., C.A. 3213-VCS (Del. Ch. May 5, 2008)The Delaware Arbitration Act has a statute of limitations that is not found in some other arbitration acts. Here the court held that a demand for arbitration was barred by that limitation and as a result, arbitration would be enjoined...
Court of Chancery Denies Inspection of Partnership Records
Posted on May 01, 2008Madison Real Estate Immobilien-Anlagegesellschaft Beschrankt Haftende KG v. KanAm USA XIX LP, C.A. 2863-VCP (Del. Ch. May 1, 2008) This case sets out the law governing the right to inspect a limited partnership's records, particularly in the context of a possible tender offer...
Court of Chancery Permits Special Committee Discovery
Posted on April 25, 2008Young v. Klaassan, C.A. 2770-VCL (Del. Ch. April 25, 2008) The use of a special committee of the board to avoid derivative suits over allegations of breach of duty is well recognized. What is less well known is how to use the work of such a committee...
Delaware Retains Top Ranking for Fairness of Litigation Climate
Posted on April 23, 2008For the seventh year in a row, Delaware received the highest score in a nationwide survey of state liability systems undertaken by the U.S. Chamber Institute for Legal Reform. Delaware ranked at the top of eight of the twelve categories ranked, including judicial competence, judicial impartiality, timeliness of summary judgment or dismissal, treatment of class action suits, and overall treatment of tort and contract litigation...
Ebay Brings Stockholder Action In Court of Chancery Against Craigslist And Its Directors For Diluting Its Minority Stake
Posted on April 23, 2008Yesterday eBay Domestic Holdings Inc. brought an action in the Court of Chancery, C.A. 3705-CC, against Craigslist and certain of its directors, challenging recent transactions implemented by the Craigslist board. According to this statement on its website, eBay acquired a minority ownership interest in Craigslist (28...
Superior Court Dismisses Negligent Misrepresentation Claim Because Contract Barred Reliance On Extra-Contractual Representations
Posted on April 22, 2008Transched Sys. Ltd. v. Versyss Transit Solutions, LLC, 2008 WL 948307 (Del. Super. Apr. 2, 2008)This case illustrates Delaware’s objective theory of contract interpretation and underscores the importance of certain standard contractual provisions...
Court of Chancery Upholds Right To Nominate Directors
Posted on April 14, 2008Levitt Corp. v. Office Depot, Inc., C.A. No. 3622-VCN (Del. Ch. April 14, 2008)This is a case of bylaws gone bad. While the obvious intent of the company's advance notice bylaw was to obtain notice of what directors a dissident slate might want to nominate, the language of the bylaws was fatally deficient...
Court of Chancery Explains Causation Rules for Attorney Fee Award
Posted on April 11, 2008Helaba Invest Kapitalanlagegesellschaft v. Fialkow, C.A. No. 2683-VCL (Del. Ch. April 11, 2008) Attorneys who cause a benefit for stockholders are entitled to be awarded. However, the benefit must be caused by the litigation they filed and not just happen to follow the institution of litigation...
Court of Chancery Stays Action Against Bear Stearns In DE In Favor Of NY Proceedings
Posted on April 10, 2008In re The Bear Stearns Companies, Inc., Shareholder Litig., C.A. No. 3643-VCP (Del. Ch. Apr. 9, 2008).In an opinion issued yesterday by Vice Chancellor Parsons (HT: M&A Law Prof and Pileggi), which you can access here, the Court of Chancery ordered a stay of the Delaware actions filed against Bear Stearns in favor of those filed in New York...
Preeminence of Delaware Courts for Business Litigation Highlighted
Posted on April 10, 2008In the most recent edition of the ABA's Business Law Today publication, Vice Chancellor Donald F. Parsons, Jr., of the Delaware Court of Chancery, and Judge Joseph R. Slights, III, of the Delaware Superior Court review the history and development of the Delaware courts as the leading business courts in the country...
Court of Chancery Finds Duty To Speak
Posted on April 10, 2008Corporate Property Associates 14 Inc. v. CHR Holding Corp., C.A. No. 3231-VCS (Del. C. April 10, 2008) In this case of first impression, the Court of Chancery held that a corporation had a duty to a warrant holder to truthfully answer its inquiries about corporate plans...
Delaware Bankruptcy Court Applies Caremark to Officers
Posted on April 09, 2008Miller v. McDonald, C.A. 07-51350 (Bankr. Del. April 9, 2008)In a case of apparent fist impression, a bankruptcy court in Delaware has held that Caremark duties apply to corporate officers as well as directors. Thus, corporate officers also have the duty to exercise reasonable care in oversight of corporate operations in their area of responsibility...
Court of Chancery Confirms Limits of Inspection Litigation
Posted on March 31, 2008TravelCenters of America LLC v. Brog, C.A. 3516-CC (Del. Ch. March 31, 2008)This decision confirms that for limited liability companies the rule applies from corporate law that a suit for inspection of books and records is a limited case that may not also include other claims such as breach of fiduciary duty.
Court of Chancery Upholds Proxy Power
Posted on March 28, 2008In Re IAC/Interactivecorp, C.A. 3486-VCL (Del. Ch. March 28, 2008) In this widely reported decision, the Court of Chancery applied well established principles of contract construction to determine when a proxy would be upheld. Once again, the Court rejected an attempt to modify the contract language to imply a duty of good faith and fair dealing, or a fiduciary duty that would override the rights given in the contract.
Court of Chancey Holds Only Compulsory Counterclaims Warrant Advancement
Posted on March 28, 2008Reinhard & Kreinberg v. The Dow Chemical Co., C.A. 3003-CC (Del. Ch. March 28, 2008)Corporate bylaws sometimes provide advancement rights in litigation filed by a director, but that is rare. However, when a director is sued, the question remains if he has advancement rights in that circumstance, and whether he may get those rights to cover a counterclaim in the absence of a bylaw right to do so when bringing litigation...
Court of Chancery Limits Advancement Rights Upon Bylaw Amendment
Posted on March 28, 2008Schoon v. Troy, C.A. 2362-VCL (Del. Ch. March 28, 2008) Directors who rely on advancement rights under a corporate bylaw need to be aware that those rights may be lost if the bylaw is amended. Delaware law, as this decision notes, permits elimination of advancement rights in a bylaw at least up to the moment those rights "vest" by the filling of a suit that entitled the director to advancement...
Supreme Court Affirms PHLX Settlement
Posted on March 27, 2008In The Matter Of The Philadelphia Stock Exchange Inc., Del. Sup., C.A. 613/615, 2007 (Del. March 27, 2008)This comprehensive decision explains Delaware law on the settlement of a class action when the proceeds of a settlement will involve buyers, sellers, and holders of stock in a Delaware corporation...
Class Action Filed Against Bear Stearns in Delaware Seeking to Enjoin Acquisition by JPMorgan
Posted on March 24, 2008Last Thursday, a class action complaint was filed against Bear Stearns and its directors in the Court of Chancery. The complaint alleges that the company has failed to maximize shareholder value by agreeing to be purchased by JPMorgan Chase for $2 per share...
Superior Court Denies Motion to Dismiss or Stay First-Filed Delaware Action
Posted on March 24, 2008Certain Underwriters at Lloyds Severally Subscribing Policy Number DP359504 v. Tyson, 2008 WL 660485 (Del. Super. March 7, 2008)This case is an insurance coverage dispute between Tyson Foods, Inc., and certain of its underwriters over damages caused by Hurricane Katrina...
Abbott Labs Sued by States Under Sherman Act
Posted on March 20, 2008State of Florida, et al. v. Abbott Laboratories et al., Del. District Court 1:08-CV-00155 (filed March 18, 2008).A group of eighteen states and the District of Columbia filed a complaint in Delaware District Court against Abbot Laboratories, Fournier Industrie et Sante and Laboratoires Fournier S...
SLC Formed after Demand Excused is not "Too Late"
Posted on March 19, 2008In re infoUSA, Inc. Shareholders Litigation, Consol. C.A. No. 1956-CC (March 17, 2008).A special litigation committee was formed by the board of infoUSA, Inc. at the end of December, after a motion to dismiss derivative litigation had been denied and after a finding had been made by the Court of Chancery that demand was excused...
Court of Chancery Explains Options Cases
Posted on March 07, 2008Weiss v. Swanson, C.A. 2828-VCL (March 7, 2008)In the latest of the Chancery decisions on complaints challenging the grant of options, the Court has explained what it takes to state a derivative complaint that excuses demand on the Board. Briefly, the Court here focused on what was disclosed to the stockholders when they were asked to approve option plans or elect directors who had received option grants...
Court of Chancery Reviews Class Representative Qualifications
Posted on March 06, 2008In re Technologies, Inc. Shareholders Litigation, C.A. No. 1525-VCL (March 6, 2008). For a long time it has been evident that some plaintiffs show up frequently as class representatives. The recent scandal involving perhaps the major securities class action law firm has only reminded everyone of the odd "coincidence" that one person could have so many class actions to bring...
Court of Chancery Denies Standing For Lost Shares
Posted on February 29, 2008Postorivo v. AG Paintball Holdings Inc., C.A. No. 2991-VCP (February 29, 2008). It has long been recognized that a stockholder may lose her standing to bring derivative litigation by losing her shares in a merger. There is a recognized exception to this rule for mergers designed just to eliminate derivative litigation...
Court of Chancery Interprets Indenture
Posted on February 29, 2008Wilmington Trust Co. v. Tropicana Entertainment LLC, C.A. 3502-VCN (February 29, 2008)The Court of Chancery rarely interprets bond indentures; so in the spirit of the date of this decision, the Court did so here. What is particularly interesting about this case is the way the Court reasoned to the result...
Additional Complaints Filed Against Yahoo! in Delaware
Posted on February 28, 2008Yesterday, February 27, 2008, two new complaints were filed against Yahoo! in the Court of Chancery. The first is a class and derivative action, Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund v. Yahoo!, C.A. 3578, which you can access here...
Class Actions Filed in Delaware Challenge the Yahoo! Board's Rejection of Microsoft's Offer
Posted on February 22, 2008On Monday, February 11th, and Thursday, February 21st, two related class actions were filed in the Court of Chancery against the directors of Yahoo! for breach of fiduciary duties in connection with the offer by Microsoft, made on February 1st, to acquire Yahoo! for $31 per share, a price which reflected a 62 percent premium above the Yahoo! share value at the close of the day prior to the offer...
Delaware Supreme Court Rules That Directors Lack Standing to Bring Derivative Suits
Posted on February 19, 2008Schoon v. Smith, C.A. No. 554, 2006 (Del. Feb. 12, 2008).In an important ruling, the Delaware Supreme Court upheld bedrock principles of Delaware corporate law and governance and rejected plaintiff’s argument that directors of Delaware corporations should have standing to bring derivative suits on behalf of companies upon whose boards they sit...
District Court Grants Summary Judgment on Consumer Fraud, Breach Claims
Posted on February 18, 2008Millett v. Truelink, Inc., 2008 WL 345937 (D.Del. Feb. 7, 2008)In this opinion the District Court granted the provider of a credit report monitoring service summary judgment on claims that it violated state consumer protection provisions and contractual obligations...
District Court Finds Insurance Policy Language Precludes Breach Claim, But Estoppel and Waiver Claims Survive
Posted on February 18, 2008Drexel v. Harleysville Ins. Co., 2008 WL 356938 (D.Del. Feb. 11, 2008)Here the District Court evaluated a claim from an insured that a denial of coverage based on policy expiration constituted a breach of contract. The insured owned a property that sustained fire damage, and submitted a claim to Defendant, his insurer...
Court of Chancery Dismisses Suit Over Decision To Not Pursue A Merger
Posted on February 18, 2008Gantler v. Stephens, C .A. No. 2392-VCP (February 14, 2008). This decision illustrates the confusion that exists over the scope of review of a board's decision to not pursue a merger and largely eliminates the uncertainty. Briefly, the board here decided not to pursue a merger opportunity and the potential acquirer then withdrew its offer...
Court of Chancery Explains Requirements For SLC Report
Posted on February 18, 2008Sutherland v. Sutherland, C.A. No. 2399-VCL (February 14, 2008). This is another decision that explains what must be done to have the report of a special litigation committee ("SLC") respected by the court. To begin with, the use of a single board member for the SLC "pressed the theory of Zapata to the extreme"...
District Court Finds That Participation in Delaware Merger Confers Jurisdiction, Denies Motion to Dismiss
Posted on February 03, 2008G & G LLC v. White, 2008 WL 205150 (D. Del. Jan. 25, 2008)In this opinion declining to dismiss for lack of personal jurisdiction, the District Court found that it had personal jurisdiction over both the directors/officers of a Delaware corporation and over a foreign corporation that invested in a Delaware corporation...
Court of Chancery Dismisses Complaint Based On Conjecture
Posted on February 03, 2008Pfeffer v. Redstone, C.A. No. 2317-VCL (February 1, 2008). At first this seems like a common disclosure case. It is more than that, however. The court here shows that it expects claims to be based on more than mere conjecture to survive a motion to dismiss...
Superior Court Allows Expert Testimony On "Materiality" When Not An Ultimate Issue
Posted on February 03, 2008Mizel v. Xenonics, Inc., 2008 WL 116203 (Del. Super. Jan. 11, 2008).This decision addresses the question of whether an expert can testify as to materiality under the securities laws. The moving party argued that materiality was an ultimate issue in this breach of contract action and thus could not be the subject of expert testimony, citing Hill v...
Court of Chancery Orders Meeting For Bankrupt
Posted on February 03, 2008Fogel v U.S. Energy Systems, Inc., C.A. No. 3271-CC (January 15, 2008). This is another in a line of decisions holding that the Court of Chancery may order the holding of a stockholders' meeting even if the company is in a bankruptcy proceeding. The automatic stay does not apply.
Court of Chancery Defines Illegal Vote Buying
Posted on February 03, 2008Portnoy v. Cryo-Cell International Inc., C.A. No. 3142-VCS (January 15, 2008). This is the definitive decision on when arrangements to secure a stockholder's vote are invalid. "Vote buying" has long been criticized without much thought. After all, the Delaware General Corporation Code specifically authorizes arrangements to lock up a stockholder's vote...
Court of Chancery Sets Fees for Supplemental Proxy Materials
Posted on February 03, 2008In re James River Group Inc. Shareholders Litigation, C.A. No. 3173-VCL ( January 8, 2008). Here, the court awarded $400,000 in fees in connection with the settlement of a class action when the relief obtained was a supplement to the proxy statement.While the company claimed it was always going to send the supplemental materials, the court noted that was contrary to the recital in the settlement agreement...
Court of Chancery Grants Advancement to an Employee
Posted on January 17, 2008Sassano v. CIBC World Markets Corp. C.A. No. 3066-VCL ( January 17, 2008). It is not widely recognized that Delaware law permits a corporation to grant advancement of attorney fees to employees who are not directors and may even be fairly minor employees...
Court of Chancery Upholds Agreement To Agree
Posted on January 16, 2008Pharmathene Inc. v. SIGA Technologies. Inc., C.A. No. 2627-VCP (January 16, 2008). Whether an agreement to agree may be enforced seems like an odd question. After all, if the parties really had an agreement then why not just say so and not use a term sheet or other vague type of "agreement to agree" to express their intent...
Superior Court Grants Motion to Amend Answer, Even Though Defendant Had Some Knowledge of New Fact Before Filing
Posted on January 14, 2008Delta Eta Corp. v. University of Delaware, 2007 WL 4578278 (Del. Super. Ct., Dec. 27, 2007). This decision addresses a party’s ability to amend its answer, under Rule 15(a), when the 20-day period to amend as a matter of right has expired. The litigation arose when the University of Delaware terminated a lease it entered into with a fraternity to maintain a chapter house and then took title to the property, triggering a requirement under the agreement that it pay the fraternity the fair market value of the remainder of its leasehold interest...
Superior Court: Employer Owes No Duty to Employee's Spouse
Posted on January 14, 2008In re: Asbestos Litig., 2007 WL 4571196 (Del. Super. Ct. Dec. 21, 2007). In this negligence action, a wife alleged that she was exposed to asbestos while laundering her husband’s work clothes. The employer moved for summary judgment, claiming it owed no duty to an employee’s spouse who had never set foot on company property and had only been injured as a result of take-home exposure...
Superior Court: Oral Contract Created By Contractor's Representations
Posted on January 14, 2008MAA Real Estate LLC v. Patel, C.A. No. 06C-02-249 (Del. Super. Ct. Dec. 7, 2007).In this breach of contract action, there was no written agreement, only an unsigned pricing sheet prepared by the contractor making the repairs. The court had to determine whether the parties nonetheless mutually assented to any of the terms on the sheet or otherwise entered into an oral contract...
Court of Chancery Requires Disclosure By Special Committee
Posted on January 02, 2008Ryan v. Gifford, C.A. No. 2213-CC (January 2, 2008). This is an interesting decision because it points out how to do almost everything wrong in using a special committee to investigate accusations of misconduct. The result is that any privilege from disclosure that the work of the special committee may have enjoyed was completely lost and all of its extensive efforts were ordered to be turned over to the plaintiffs in the underlying litigation...
Court of Chancery Explains Contract Interpretation Rules
Posted on December 21, 2007United Rentals Inc v. RAM Holdings Inc. C.A. No. 3360-CC (December 12 and 21, 2007). In these two decisions the Court of Chancery sets out how it will interpret a contract. Following the objective theory of contract interpretation, the court searches for the "common understanding" of the parties...
Court of Chancery Upholds Statute of Repose for Dissolved Corporations
Posted on December 20, 2007The Territory Of The Virgin Islands v. Goldman, Sachs & Co., C.A. No. 2505-VCS (December 20, 2007). This decision upholds the law that Section 278 of the Delaware General Corporation Law ("DGCL") acts as a statute of repose to bar the filing of all litigation against a Delaware corporation after 3 years from the date of its dissolution...
Court of Chancery Explains Scope of Arbitration Agreement
Posted on December 18, 2007Brown v. T-Ink, LLC ,C.A. No. 3190-VCP (December 18, 2007). Delaware courts have recently issued several decisions dealing with the scope of an agreement to arbitrate. This is yet another. The opinion is interesting for its explaination of the Delaware approach to determining whether it is for the arbitrator or the court to decide if an issue is subject to arbitration...
Superior Court: Equitable Counterclaim Does Not Equal Ticket to Chancery
Posted on December 13, 2007Rembrandt Technologies, LP v. Harris Corp., 2007 WL 4237752 (Del. Super. Nov. 30, 2007). This decision demonstrates the willingness of Delaware courts to uphold the plaintiff’s choice of forum (between the Superior Court and the Court of Chancery), despite an argument by the defendant that transferring courts would allow the hearing of all claims and thus promote judicial economy...
Court of Chancery Holds Board Meeting Is Void
Posted on December 13, 2007Fogel v. U.S. Energy Systems, Inc., C.A. No. 3271-CC (December 13, 2007). Directors often think that if they get together that is a real board of directors' meeting. Not so. As this decision holds, a board meeting is a formal event that must be preceded by the appropriate notice, be conducted by voting on the issues and otherwise be properly called and conducted...
Court of Chancery Dismisses Merger Claims
Posted on November 30, 2007Globis Partners LP v. Plumtree Software, Inc., C.A. No. 1577-VCP (November 30, 2007). This decision explains why some attacks on a merger fail for want of a basis to avoid the business judgment rule and for a failure to make proper disclosure claims...
Court of Chancery Upholds Jurisdiction Over Nonresident Attorney
Posted on November 27, 2007Sample v. Morgan, C.A. No. 1214-VCS (November 27, 2007). In this major decision, the Court of Chancery has upheld its jurisdiction over a non-Delaware attorney who is alleged to have aided and abetted a breach of fiduciary duty by directors. Given the breadth of this decision, it has major implications for counsel to Delaware corporations...
Supreme Court: When Standing is Closely Related to Merits, 12(b)(6) Applies, Not 12(b)(1)
Posted on November 26, 2007Appriva Shareholder Litig. Co., LLC v. EV3, Inc., -- A.2d --, 2007 WL 3208783 (Del. Nov. 1, 2007)Deciding whether a motion to dismiss based on lack of standing is considered under Rule 12(b)(6) or 12(b)(1) has implications and has divided some courts...
Superior Court Holds Date-of-Discovery Rule Does Not Toll Statute of Limitations in Legal Malpractice Action When Evidence Indicates Knowledge of Facts Relevant to Claim
Posted on November 26, 2007Boerger v. Heiman, 2007 WL 3378667 (Del. Super. Oct. 31, 2007)The three-year statute of limitations under 10 Del. C. § 8106, which begins to run at the time of the alleged breach in the case of a contract claim and at the time the injury occurs for a tort claim, may be tolled by, among other circumstances, the absence of observable factors that would place a layman on notice...
Court of Chancery Extends Books And Records Inspection
Posted on November 21, 2007Melzer v. CNET Networks, Inc., C.A. No. 3023-CC (November 21, 2007). The scope of inspection rights may be affected by when a stockholder first acquired her stock. If the inspection is to investigate alleged wrongdoing, the rationale for granting inspection is to permit the filing of a derivative suit if the inspection shows that it is warranted...
Court of Chancery Limits Jurisdiction Over Officers
Posted on November 21, 2007Ryan v. Gifford, C.A. No. 2213-CC (November 21, 2007). In 2003, Delaware amended its long arm statute to cover corporate officers who served in that capacity after January 1, 2004. Past decisions under the director section of this statute have focused on when a defendant is subject to it for acts committed before the date the statute deems the defendant's holding a corporate office is consent to jurisdiction by a Delaware court...
Court of Chancery Holds Advancement Lost Despite Conversion
Posted on November 20, 2007Bernstein v. Tractmanager Inc., C.A. No. 7263-VCL (November 20, 2007). This decision illustrates the perils in converting from an LLC to a corporate form without considering the consequences. Here, the LLC involved did not provide for mandatory advancement rights...
Supreme Court Upholds Preferred Stock Provision
Posted on November 15, 2007Hildreth v. Castle Dental Centers, Inc., Del. Sup. C.A. No. 195, 2007 (November 15, 2007). A tricky issue arises when a defective certificate of incorporation causes stock to be void. Here, the preferred stock was validly authorized but there was not enough common stock to fulfill the conversion rights of the preferred...
Superior Court: No Ambiguity, No Extrinsic Evidence, No Dice
Posted on November 09, 2007Dubuque v. Taylor, 2007 WL 3106451 (Del. Super. Oct. 1, 2007) This case demonstrates that a Delaware court will not consider extrinsic evidence of the parties’ intent at the time of entering an agreement if the terms of the document are unambiguous...
Update To Bear Stearns/Morgan Chase Litigation In Delaware
Posted on December 31, 1969Recent Update as at 4:00 p.m./03/31/08: Vice Chancellor Parsons of the Delaware Court of Chancery heard arguments this afternoon in connection with Defendants motion to dismiss or alternatively to stay the Delaware TRO action in favor of the first-filed New York action...
SEC General Counsel Brian G. Cartwright Addresses the Role of Foreign and Domestic States in Securities Regulation and General Corporation Law
Posted on December 31, 1969SEC General Counsel Brian Cartwright discussed the emergence of transnational businesses and the global securities market in a speech at Widener University School of Law on March 28, 2008. The speech, titled "The Role of the States (Foreign and Domestic)" (available here), focused on the implications the global securities market and the spread of free market economies around the world creates for federal securities regulation and states' regulation of internal corporate affairs...
Supreme Court Affirms PHLX Settlement
Posted on December 31, 1969In The Matter Of The Philadelphia Stock Exchange Inc., Del Sup., C.A. 613/615, 2007 (March 27, 2008). This comprehensive decision explains Delaware law on the settlement of a class action when the proceeds of a settlement will involve buyers, sellers, and holders of stock in a Delaware corporation...
Court of Chancery Upholds Proxy Power
Posted on December 31, 1969In Re IAC/Interactivecorp, C.A. 3486-VCL (Del. Ch. March 28, 2008) In this widely reported decision, the Court of Chancery applied well established principles of contract construction to determine when a proxy would be upheld. Once again, the Court rejected an attempt to modify the contract language to imply a duty of good faith and fair dealing, or a fiduciary duty that would override the rights given in the contract.
Court of Chancey Holds Only Compulsory Counterclaims Warrant Advancement
Posted on December 31, 1969Reinhard & Kreinberg v. The Dow Chemical Co., C.A. 3003-CC (Del. Ch. March 28, 2008)Corporate bylaws sometimes provide advancement rights in litigation filed by a director, but that is rare. However, when a director is sued, the question remains if he has advancement rights in that circumstance, and whether he may get those rights to cover a counterclaim in the absence of a bylaw right to do so when bringing litigation...
Court of Chancery Limits Advancement Rights Upon Bylaw Amendment
Posted on December 31, 1969Schoon v. Troy, C.A. 2362-VCL (Del. Ch. March 28, 2008) Directors who rely on advancement rights under a corporate bylaw need to be aware that those rights may be lost if the bylaw is amended. Delaware law, as this decision notes, permits elimination of advancement rights in a bylaw at least up to the moment those rights "vest" by the filling of a suit that entitled the director to advancement...
Court of Chancery Explains Bylaw on Proxy Solicitation
Posted on December 31, 1969JANA Master Fund, Inc.v. CNET Networks, Inc., C.A. 3447-CC (Del. Ch. March 13, 2008) This is a useful decision on the proper interpretation of a bylaw that governs stockholder proxy proposals in light of SEC Rule 14a-8. The Court held that the bylaw only applied to stockholder requests to have a proposal included in the company's proxy materials under rule 14a-8...
The Tulane Corporate Law Institute Gets Underway Today
Posted on December 31, 1969The annual Tulane Corporate Law Institute takes place today and tomorrow in New Orleans. The conference brings together the country's most prominent corporate law practitioners, judges, and bankers to discuss the important developments in the world of M&A and corporate law...
Day Two At The Tulane Corporate Law Institute Conference
Posted on December 31, 1969Today is the second and final day of the Tulane Corporate Law Institute conference.The New York Times DealBook is reporting live, with a look at the private equity market here and coverage of comments by Martin Lipton, Joseph Perella, and Chief Justice Steele here...
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Did I harass someone?
Oh, yes. This can be taken in as so many things, especially since you had testif...
I have worked for this employer for only three weeks. The employer makes up his own rules as to what he chooses to report for the purpose of property taxes. He tells me to "let them come after us". He defines Entertain
He arrogantly insists, "let them come after us." Well, if you are invo...
How can i sue for a straw purchase?
Anyone can co-sign. A straw purchase would be if you has someone buy the car for...
How to tell if I have been subject to gender discrimination in hiring practices?
You didn't apply for the job. so that's a tough one. Seemingly your Bo...
Is it legal for a company to overwork their employees?
Well, he could 1. Get a new job. Sister, I understand ya, if he's anything ...
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