Chancery Applies Forum Non Conveniens Analysis to Grant Partial Stay of Dispute Between LLCs and Former Manager
AG Resource Holdings, LLC v. Thomas Badford Terral, C.A. No. 2020-0850-JRS (Feb. 10, 2021)
In AG Resource, the Court of Chancery was tasked with determining whether it or a Louisiana state court should resolve similar claims filed at nearly the same time in each forum. Affording neither suit first-filed status, the Court applied a forum non conveniens analysis using the Cryo-Maid factors and split the claims, finding that Louisiana had a greater interest in resolving claims relating to provisions in an employment agreement, but Delaware had a greater interest in resolving a claim implicating the internal affairs of a Delaware LLC. More ›
ShareChancery Allows McDonald’s to Pursue Claims Against Ex-CEO, Finding Separation Agreement’s Integration Clause Does Not Bar Them
McDonald’s Corp. v. Easterbrook, C.A. 2020-0658-JRS (Del. Ch. Feb. 2, 2021)
Delaware has a strong public policy against fraud. Consequently, parties who seek to bar extra-contractual fraud claims must expressly provide in their agreement that neither is relying upon the other party’s extra-contractual representations. As this case confirms, a standard integration clause, without clear anti-reliance language, is insufficient to bar such claims. More ›
ShareChancery Applies Unclean Hands Doctrine to Prevent a Trustee from Rescinding the Decanting of a Trust
In the Matter of: The Niki and Darren Irrevocable Trust and the N and D Delaware Irrevocable Trust, C.A. No. 2019-0302-SG (Del. Ch. Feb. 4, 2021)
Delaware’s decanting statute allows a trustee to “decant” a trust by “pouring” the corpus out into a new modified trust. But, to do so, a trustee must have been able to invade the trust principal under the original trust’s terms, and the second trust’s terms must be substantially the same in its treatment of beneficiaries. More ›
Chancery Sustains Claims Against Target’s CEO, Target’s Financial Advisor, and Acquirer for Allegedly Covertly Steering Merger Bidding Process
Presidio illustrates potential pitfalls for parties in the M&A process, including executives managing personal interests in potential post-transaction employment while negotiating a deal, financial advisors with future business interests in mind while controlling competitive offer information, and acquirers potentially aware of a bidding process being steered in their direction. More ›
ShareDelaware Supreme Court Concludes Out-of-Pocket Damages Are the Default Remedy for Fraudulent Misrepresentation Absent an Enforceable Agreement
LCT Capital, LLC v. NGL Energy Partners, LLP, App. Nos. 565,2019 & 568,2019 (Del. Jan. 28, 2021)
Delaware law recognizes both benefit-of-the-bargain damages and out-of-pocket damages as remedies for fraudulent misrepresentation, but the law was unsettled whether benefit-of-the-bargain damages were available absent an enforceable agreement. Here, the Delaware Supreme Court confirms that out-of-pocket damages are the default remedy in the absence of an agreement. More ›
ShareChancery Construes Notice Provisions Associated With Escrowed Funds Under an Asset Purchase Agreement
Delaware courts will apply the plain terms of an unambiguous asset purchase agreement (“APA”), including its provisions governing notices and the release of escrowed funds. More ›
ShareSuperior Court Applies Affiliate Privilege Doctrine To Dismiss Tortious Interference Claim Against Controller, While Sustaining Fraud Claims Against LLC Managers
In adjudicating a dispute over a scuttled deal in the music festival industry, the Delaware Superior Court applied the so-called affiliate privilege doctrine, which can immunize a controller from tort liability for its affiliates’ contractual breaches, and addressed the viability of fraud claims against individual managers of certain LLCs. More ›
ShareDelaware Corporate and Commercial Case Law Year in Review: 2020
This top ten list summarizes significant decisions of the Delaware Supreme Court and the Delaware Court of Chancery over the past calendar year. Our criteria for selection are that the decision either meaningfully changed Delaware law or provided clarity or guidance on issues relevant to corporate and commercial litigation in Delaware. We present the decisions in no particular order. The list does not include every significant decision, but provides practitioners with an array of decisions on varied issues likely to affect business transactions or business litigation. More ›
ShareParty Uniquely Escapes An Arbitration Provision, While The Court Reminds Us That Bootstrapped Fraud Claims Are Impermissible In Delaware
AluminumSource, LLC v. LLFlex, LLC, C.A. No: N18C-07-231-EMD CCLD (Del. Super. Jan. 21, 2021)
Delaware courts commonly enforce (and support) arbitration provisions, submitting disputes under the governing contract to a third-party neutral. Equally common is the dismissal by Delaware courts of fraud claims “bootstrapped” to a breach of contract based on allegations that a contracting party never intended to perform its obligations. This recent decision from the Superior Court’s Complex Commercial Litigation Division is the unique case where, on the first issue, an arbitration provision was found unenforceable due to impossibility of performance. On the second issue, this case confirms settled law that bootstrapped fraud claims are impermissible in Delaware. More ›
ShareDelaware Supreme Court Adopts Post-Merger Derivative Standing Framework From In re Primedia, Inc. Shareholders Litigation
Morris v. Spectra Energy Partners (DE) GP, LP, No. 489, 2019 (Del. Jan. 22, 2021)
In Delaware corporate law, “the standing inquiry has assumed special significance,” especially in the post-merger context. The Delaware Supreme Court in Morris v. Spectra Energy holds that a plaintiff has post-merger standing if she brings a claim disputing the fairness of a merger and satisfies the three-part framework set forth in In re Primedia, Inc. Shareholders Litigation, 67 A.3d 455 (Del. Ch. 2013), even if the underlying claim seems unlikely to succeed on the merits. More ›
ShareDelaware Choice of Law Provision in Stock Purchase Agreement Does Not Eliminate Claim for Fraud under California Securities Act
Swipe Acquisition Corp. v. Krauss, C.A. No. 2019-0509-PAF (Del. Ch. Jan. 28, 2021)
This decision concerned a motion to dismiss a claim for fraud under the California Securities Act, which the defendants argued was waived by a choice of law provision in the parties’ stock purchase agreement (“SPA”) indicating that “all claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement … shall be governed by, and enforced in accordance with, the internal laws of the State of Delaware, including its statutes of limitations.” More ›
ShareDirector to Attend Board Meeting Under False Pretenses to Meet Quorum Requirements Invalidated Board Action
Delaware courts will use their equitable powers to invalidate otherwise valid board actions tainted by inequitable deception. Where a director is “‘tricked or deceived into attending a board meeting … the general rule is that actions taken at such a meeting are void.’” Delaware law requires that directors be truthful and candid in their interactions with their fellow directors, and does not permit inequitable sandbagging by fellow board fiduciaries. In short, even if the board action is legally authorized under a company’s organizational documents, deceiving fellow directors to procure their attendance at a board meeting under false pretenses, may be grounds for invalidating board actions taken at that meeting under equitable principles. More ›
ShareChancery Dismisses Stockholder’s Claim that Directors Provided Materially-Deficient Notice of their Intent to Use Equity Bonus Plan to Reward Past Performance
Pascal v. Czerwinski, C.A. No. 2020-0320-SG (Del. Ch. Dec. 16, 2020)
This decision concerned a motion to dismiss a stockholder’s direct claim that Director-Defendants breached their duties by providing a materially-deficient proxy statement advocating adoption of an equity incentive plan (“EIP”) that ultimately allowed Defendants to award themselves bonuses. As a result of the alleged deficiencies, Plaintiffs sought invalidation of the entire EIP. More ›
Chancery Modifies Confidentiality Order to Permit Assertion of Plenary Claims in Appraisal Action
Harris v. Harris FRC Corp., C.A. No. 2019-0736-JTL (Del. Ch. Jan. 7, 2021)
Under Rule 5.1, the Court of Chancery may enter a confidentiality order upon a showing of good cause that such an order is necessary to protect against disclosure of sensitive, non-public information. But Rule 5.1 does not set an express standard for later modification of the order. In this case, the Court of Chancery clarified that the standard for modifying a confidentiality order is the same as for entering one: good cause shown, taking into account related factors including the parties’ reliance on the existing order and the potential prejudice from modification. More ›
Plaintiff’s Failure to Plead Demand Futility Leads to Dismissal of Caremark Claims Against MoneyGram Directors
Richardson v. Clark, C.A. No. 2019-1015-SG (Del. Ch. Dec. 31, 2020)
Under Court of Chancery Rule 23.1, a derivative plaintiff’s must make a demand on the corporation’s board of directors unless the plaintiff can plead particular facts to establish that demand was excused. Although demand may be excused where a majority of the board faces a substantial likelihood of personal liability, merely alleging wrongdoing by the corporation’s directors will not suffice. More ›