Chancery Finds SEC’s Filing of an Enforcement Action Did Not Trigger Redemption Right
Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., C.A. No. 2021-0007-MTZ (Del. Ch. Mar. 19, 2021)
Plaintiff Tetragon Financial Group Limited is a shareholder of Ripple Labs, Inc., a blockchain company that uses a cryptocurrency called XRP. Tetragon had a right under a Stockholders’ Agreement to require Ripple to redeem its shares if the SEC or another government agency “determine[s] on an official basis” that XRP is a security “on a current and going forward basis.” Here, Tetragon sought a declaration that the SEC’s decisions to file an enforcement action in federal District Court, and issue a Wells Notice, each triggered the redemption right. More ›
ShareChancery Appoints Amicus Curaie to Provide Independent Guidance Regarding Unopposed Petition to Revive Defunct Corporation for Use as a Blank Check Entity
In re Forum Mobile, Inc., C.A. 2020-0346-JTL (Del. Ch. Mar. 18, 2021)
The Court of Chancery has the inherent authority to appoint an amicus curaie if the Court believes it would benefit from a more fulsome presentation of the issues. This case presents that situation: an unopposed petition seeking relief that, on its face, appears contrary to the Court’s prior decisions and to Delaware’s public policy. More ›
ShareChancery Confirms that the Implied Covenant Imposes a “Good Faith” Component to an Agreement to Negotiate
DG BF, LLC v. Ray, C.A. No. 2020-0459-MTZ (Del. Ch. Mar. 1, 2021)
The Operating Agreement for an LLC involved in the cannabis industry provided for a five-member board of managers, with one Independent Manager appointed by a process of negotiation between two other managers (the plaintiff in the action and one of the defendants). Under the process set forth in the Operating Agreement, either side could present various candidates until there was agreement, which was supposed to happen within a 180-day period. The parties could also mutually agree to extend the deadline. More ›
ShareChancery Finds Implied-in-Fact LLC Agreement
Robinson v. Darbeau, C.A. No: 2019-0853-KSJM (Del. Ch. Mar. 1, 2021)
As Robinson v. Darbeau demonstrates, Delaware law recognizes implied limited liability company agreements. Plaintiff operated a daycare as a sole proprietor and without any formally organized business entity. After Plaintiff began a personal relationship with Defendant, Defendant became involved in day-to-day activities at the daycare, invested in the business (including through the co-purchase of the property where the daycare was operated) and was held out publicly as the daycare’s co-director. Through the use of an online incorporator, and with Defendant’s assistance, Plaintiff filed a certificate of formation for a Delaware limited liability company. The certificate listed both parties as members (allegedly without Plaintiff’s knowledge) and further provided that management of the company was vested in the members. No written LLC agreement was ever executed. More ›
ShareChancery Holds Prior Rulings in Appraisal and Securities Litigation Do Not Bar New Columbia Pipeline Fiduciary Duty Action
In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (Del. Ch. Mar. 1, 2021)
Certain judicial doctrines, including collateral estoppel and stare decisis, promote efficiency and finality by barring the re-litigation of factual and legal issues. For these doctrines to apply, however, there must be overlap between the parties, the claims or the legal posture. This case demonstrates that, without such overlap, courts will permit subsequent claims even when the underlying transaction has already been the subject of significant prior litigation. More ›
Superior Court Finds Securities Lawsuits Do Not Fall within Relatedness Exclusion of Insurance Policy
This case arises from an insurance coverage dispute between an insured and multiple insurance providers in a policy tower for defense fees and settlement costs from two securities class action lawsuits. In the Complex Commercial Litigation Division of the Superior Court, the insurers argued that they were not obligated to reimburse losses arising from the two securities lawsuits because of, inter alia, an exclusion regarding the “relatedness” of Wrongful Acts. Under Delaware law, the exception to coverage because of the “relatedness” of Wrongful Acts only applies “where the two underlying claims are fundamentally identical.” The Court held that the exception did not apply in this case simply because the securities lawsuits involved the same wrongdoers and the same transaction, among other things. Instead, the fact that there were variations in the mens rea, motive, burdens of proof, the timing and other factors, suggested that the securities lawsuits did not involve the exact same subject. Accordingly, the Court found that the two claims were not “related” and the relatedness exclusion did not apply.
ShareSuperior Court Applies “Law Most Favorable” Choice of Law Provision and Finds Investment Fund’s Settlement of a Fraudulent Transfer Claim Was an Insurable Loss
The bankruptcy estate of Nine West accused investment firm Sycamore Partners of structuring transactions involving Nine West in such a manner as to constitute a fraudulent transfer, with too much debt burdening the entity after Sycamore Partners sold off certain prime assets. Sycamore Partners settled such claims for a payment of $120 million to the bankruptcy estate, and then sought coverage for the settlement from its carriers. More ›
ShareChancery Grants Inspection Demand Relying on a Short-Seller’s Report
Jacob v. Bloom Energy Corp., C.A. No. 2020-0023-JRS (Del. Ch. Feb. 25, 2021)
In a post-trial opinion in this books-and-records action pursuant to 8 Del. C. § 220, the Court of Chancery granted a stockholder’s demand to inspect the records of Bloom Energy Corporation (“Bloom”) for the purpose of investigating mismanagement and wrongdoing respecting Bloom’s alleged financial and other misstatements concerning the performance of its self-described clean, sustainable and green energy alternative. The inspection demand drew heavily from a thoroughly researched report published by a short seller, Hindenburg Research (the “Hindenburg Report”), which concluded that “Bloom’s technology is not sustainable, clean, green, or remotely profitable." The publication of the Hindenburg Report prompted Bloom to file a Form 8-K with the SEC responding to the report and in a separate filing Bloom eventually acknowledged that it had misstated its financials in some respects in prior reporting periods. More ›
ShareChancery Dismisses Derivative Breach of Contract Claim Against Directors for Alleged Violations of Certificate of Incorporation
Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021)
A corporate charter represents a contractual agreement between the corporation and its stockholders. In Lacey, the Court of Chancery addressed whether a breach of contract claim for damages based on an alleged violation of a provision in the certificate of incorporation could be brought derivatively against director defendants. More ›
ShareChancery Finds After Trial That $10 Billion Unit-for-Unit Merger Was “Fair and Reasonable” Under Partnership Agreement
Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Feb. 15, 2021)
This matter concerned limited partners’ challenge under the governing limited partnership agreement to an acquisition of the partnership by another entity controlled by the partnership’s ultimate owner. A member of a conflicts committee, which had approved the $10 billion unit-for-unit controlling unitholder merger, also served the board of another company ultimately controlled by the same owner, contrary to the terms of the partnership agreement. After considering this issue, the Court of Chancery nevertheless held after a five-day trial that the merger was “fair and reasonable to the Partnership” under a contractual safe harbor, and that the plaintiffs failed to prove damages. More ›
ShareChancery Court Strikes Down Anti-Activist Poison Pill as Unreasonably Broad
In a recent post-trial decision the Delaware Court of Chancery upheld a stockholder challenge to a “poison pill” rights plan adopted by The Williams Companies’ board of directors, declaring the plan unenforceable and issuing a mandatory injunction against its continued operation. See The Williams Companies Stockholder Litigation, C.A. 2020-0707-KSJM (Del. Ch. Feb.26, 2021). Following the Delaware Supreme Court’s 1985 decision in Moran v. Household International upholding a poison pill as a valid anti-takeover device provided it satisfies the Unocal intermediate review standard, public companies have employed this defensive measure successfully, not only to address takeover threats but also to protect valuable net operating loss assets and to respond to certain stockholder activism. In Williams, however, the court found that the defendants had failed to establish that particular unprecedented terms of the plan constituted a reasonable, proportionate response to the activist threat perceived by the board. More ›
ShareChancery Grants Access to Facebook Board Emails in Books and Records Action
In this opinion, the Court of Chancery confirms that it will grant access to emails in a books and records action where the corporation’s board minutes and other materials are insufficient for the plaintiff’s purposes. Here, a stockholder of Facebook, Inc. requested books and records to investigate Facebook’s $5 billion settlement with the Federal Trade Commission for the unauthorized sale of customer information to Cambridge Analytica and other data breaches. The plaintiff sought to investigate whether Facebook overpaid in its settlement to shield its chief executive Mark Zuckerberg from personal liability. More ›
ShareChancery Holds That a Deadlock Warranting Dissolution Can Be Genuine Even If the Circumstances Giving Rise to the Deadlock Were Contrived
Mehra v. Teller, C.A. No. 2019-0812-KSJM (Del. Ch. Jan. 29, 2021)
In a dispute over the validity of the dissolution of a limited liability company, the Court of Chancery held in a post-trial opinion that a deadlock between LLC managers was genuine and deserving of legal effect, even though the circumstances giving rise to the deadlock were contrived. More ›
ShareSuperior Court Addresses Scope of Privilege Waiver in Dispute Involving The American Bottling Company, Coke, and Bodyarmor
Delaware courts generally uphold the attorney-client privilege, including by recognizing waivers that are limited in scope. But they also police selective disclosures to ensure fairness using doctrines like the “partial waiver doctrine,” under which a partial disclosure of a privileged communication may waive privilege as to the entire communication, and the “at issue” exception, under which privilege may be waived by injecting a particular privileged communication or broader issue into the litigation. Applying these doctrines in The American Bottling Company decision, the Delaware Superior Court’s Complex Commercial Litigation Division defined the scope of a party’s tactical waiver broader than that party contended was appropriate. More ›
ShareChancery Sustains Claims Against CBS Fiduciaries Concerning CBS-Viacom Merger, While Questioning the Viability of “Holder” Claims Under Delaware Law
In re CBS Corp. S’holder Class & Deriv. Litig., C.A. No. 2020-0111-JRS (Del. Ch. Jan. 27, 2021)
This decision is one of several by the Delaware Court of Chancery arising out of efforts to merge CBS Corporation and Viacom by the companies’ controlling stockholder—National Amusements, Inc., controlled by Shari Redstone. Recently, in In re Viacom Inc. Stockholders Litigation, 2020 WL 7711128 (Del. Ch. Dec. 29, 2020), the Court upheld claims by the Viacom stockholders against Viacom fiduciaries arising out of the CBS-Viacom merger. This decision is the flipside of that same coin, with the Court upholding claims by the CBS stockholders against CBS fiduciaries, including special transaction committee members, arising out of the same merger. More ›
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