Chancery Rules Failure to Disclose “Intrinsic Value” Precludes Corwin Defense – But Does Not Necessarily Suggest a Breach of the Duty of Loyalty
In In re USG Corp. S’holder Litig., 2020 WL 5126671 (Del. Ch. Aug. 31, 2020), the Court of Chancery granted the director-defendants’ motions to dismiss post-closing money damages claims arising out of the sale of USG Corporation (“USG”) for less than what USG’s directors allegedly thought was its intrinsic value. Although the failure to disclose such “intrinsic value” prevented dismissal under Corwin v. KKR Financial Holdings, LLC, 125 A.3d 304 (Del. 2015), Vice Chancellor Sam Glasscock III held that, in the circumstances, that omission and the directors’ approval of the sale did not suffice to plead a breach of the directors’ fiduciary duty of loyalty. More ›
ShareChancery Dismisses Caremark Claims Against Metlife Board
In re Metlife Inc. Derivative Litigation, Consol. C.A. No. 2019-0452-SG (Del. Ch. Aug. 17, 2020)
Shareholders seeking relief for alleged harm to a Delaware corporation must comply with Delaware’s pre-suit demand requirement by either making a demand on the board of directors to take action respecting the potential claims, or initiating suit themselves and adequately pleading facts excusing pre-suit demand as futile. More ›
Delaware Supreme Court Affirms Decision Declining to Order Stockholder Meeting Under Section 211 of the DGCL
Spanakos v. Pate, C.A. No. 532, 2019 (Del. July 31, 2020)
The Court of Chancery may summarily order a stockholder meeting to be held to elect directors of a Delaware corporation, if one has not been held for more than thirteen months. 8 Del. C. § 211. The rule’s purpose is to ameliorate situations in which a Delaware corporation’s normal democratic functions are impaired, for example, if “by reason of death or resignation or other cause, a corporation should have no directors in office ….” 8 Del. C. § 223. The stockholder meeting to elect directors is a cornerstone of Delaware corporate law, and “stockholders’ entitlement to such a meeting is paramount.” Newcastle P’rs, L.P. v. Vesta Ins. Gp., Inc., 887 A.2d 975, 979 (Del. Ch. 2005). More ›
Chancery Denies Sellers’ Request for Dismissal, Finding That Fraud Claims Were Timely Filed and Properly Pled
Agspring Holdco, LLC v. NGP X US Holdings, L.P., C.A. No. 2019-0567-AGB (Del. Ch. July 30, 2020)
This opinion concerns a buyer’s attempt to plead fraud in connection the acquisition of a business. The Court denied in the main the defendants’ motion to dismiss the fraud claims brought in connection with private equity firm American Infrastructure Partners’ (the “Buyer”) $300 million acquisition of Agspring LLC (the “Company”), which was then almost entirely owned by NGP X US Holdings, LLP (“NGP”), another private equity firm. More ›
ShareCCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims
This case is a strong reminder that Delaware will enforce anti-reliance clauses to bar claims for fraud where sophisticated parties voluntarily agree to the anti-reliance clauses. Here, plaintiff Infomedia Group, Inc., d/b/a Carenet Health Services entered into an asset purchase agreement (the “Purchase Agreement”) with defendant Orange Health Solutions, Inc. (“Citra”). More ›
ShareChancery Determines Validity of LLC Ownership Following Fraud and Deceit in Cross-Border Control Dispute
Lynch v. Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. July 31, 2020)
Disputes over control of a Delaware limited liability company can turn on rigorous fact-finding efforts by the Court of Chancery where issues of witness credibility may be paramount. As this decision illustrates, the Court will not permit trickery or misrepresentations to prevail in a control dispute, nor will it apply the doctrine of unclean hands to permit an undeserved windfall or countenance a fraudulent scheme. More ›
Chancery Rejects Bid to Jettison USACafes and its Holding That, Absent Agreement to the Contrary, the Controllers of a Corporate General Partner Owe Fiduciary Duties
The Court of Chancery has concluded that in certain situations, equity will, by default, impose fiduciary duties upon a corporate relationship. This decision rejects on stare decisis grounds an attempt to overturn longstanding precedent in this area. More ›
ShareChancery Denies Books and Records Request From Indirect LLC Interest Holder That Assigned its Rights Prior to the Demand and the Action
SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. 2020-0064-JRS (Del. Ch. Jul. 24, 2020)
Describing the case as deja vu, the Court of Chancery dismissed Plaintiff’s second attempt to enforce alleged rights related to Defendant/Company. See SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. 2019-0791-JRS (Del. Ch. Mar. 18, 2020) (“SolarReserve I”). The Company was formed to develop a solar power plant in Nevada, but the plan never came to fruition. More ›
Chancery Dismisses Complaint Challenging Dilution for Lack of Standing and Failure to State a Claim
Hindlin v Gottwald, C.A. No. 2019-0586-JRS (Del. Ch. July 22, 2020)
The plaintiff, a minority investor (“Plaintiff”) in a Delaware limited liability company, Core Nutrition, LLC (the “Company”), brought an action for breach of fiduciary duties and certain provisions of the Company’s LLC agreement (the “LLC Agreement”). The defendants in the action were three individual members of the Company’s board of managers (“Defendants”). Defendants moved to dismiss Plaintiff’s complaint under, inter alia, Court of Chancery Rule 12(b)(6) for failure to state a claim, and 6 Del. C. §§ 18-1001–03 for lack of standing. More ›
Delaware Supreme Court Holds That Limited Partnership Agreement That Includes Certain Books and Records Language From Section 17-305 of Limited Partnership Act Does Not Automatically Incorporate Judicial Interpretations of Section 17-305
Murfrey v. WHC Ventures, LLC, App. No. 294, 2019 (Del. Supr. Jul. 13, 2020)
Drafters of alternative entity agreements frequently cite to, or quote, statutory language to describe the parties’ obligations. But, the Delaware Supreme Court has concluded that when drafters do so, the drafters should be explicit in whether they also intend to incorporate judicial interpretations of that language, too. Here, because the governing limited partnership agreements (the “Agreements”) did not include an express requirement limiting books and records rights to those “necessary and essential” to a proper purpose, the Supreme Court declined to imply one. More ›
Chancery Addresses Burdens for Valuation-Related Books-and-Records Inspections, While Finding Defendant’s Asserted Lack of Records Supported Mismanagement-Related Inspection
Woods v. Sahara Enterprises, Inc., C.A. No. 2020-0153-JTL (Del. Ch. July 22, 2020)
This decision concerning statutory inspection rights under Section 220 of the Delaware General Corporation Law clarifies the requirements of a proper valuation purpose, involves a unique twist concerning a mismanagement-investigation purpose, and provides a helpful summary on the potential scope of books-and-records inspections. More ›
The Court of Chancery Enforces Fee-Shifting Provision Against Unsuccessful Petitioner Who Also Had Waived its Appraisal Remedy in the Parties’ Stockholder Agreement
The Court of Chancery’s latest decision in the Manti Holdings, LLC, et al. v. Authentix Acquisition Company, Inc., C.A. No. 2017-0887-SG (Del. Ch. 8/11/20) stockholder appraisal litigation provides additional clarity about the ability of corporate constituents to modify by agreement the rights associated with the statutory appraisal remedy, 8 Del. C. § 262. In a previous decision in the case Vice Chancellor Glasscock denied a stockholder’s appraisal petition holding that an advance waiver of statutory appraisal rights in a stockholder agreement is permitted under Delaware law as long as the relevant contractual provisions are clear and unambiguous. In its latest decision, the Court ruled that a prevailing party fee-shifting provision in the stockholder agreement did not contravene Delaware law and was likewise enforceable. More ›
ShareChancery Denies Derivative Plaintiff’s Motion to Compel Work Product Prepared by Oracle’s Special Litigation Committee
In re Oracle Corp. Derivative Litig., C.A. No. 2017-0337-SG (Del. Ch. July 9, 2020)
After investigating certain potential derivative claims arising out of Oracle Corporation’s acquisition of NetSuite, Inc., and after trying unsuccessfully to settle those claims, Oracle’s Special Litigation Committee (“SLC”) agreed that permitting a derivative plaintiff to pursue those claims was in Oracle’s best interests. This opinion concerns the lead derivative plaintiff’s subsequent motion to compel, which sought the production of forty-two documents the SLC withheld on work product grounds. The documents at issue were the SLC’s counsel’s notes and memoranda of witness interviews, factual summaries prepared by the SLC’s counsel, counsel’s draft report to the SLC, and financial analyses and damages models prepared by or at the direction of the SLC’s counsel. The Court found that all forty-two documents were protected work product because they were created in anticipation of litigation in order to aid the SLC in connection with this action. In addition, the documents were afforded a higher degree of protection as opinion work product because they also reflected attorney thoughts and impressions. More ›
Chancery Rejects Implied Covenant Claim for Failure to Prove that, Had the Issue Been Negotiated, Both Parties Would Have Agreed
Roundpoint Mortgage Servicing Corp. v. Freedom Mortgage Corp., C.A. No. 2020-0161-SG (Del. Ch. July 22, 2020)
To establish an implied contractual obligation pursuant to the implied covenant of good faith and fair dealing, a party must prove that, even though the contract does not state the term at issue, the parties would have agreed to it had they thought to negotiate it at the time of contracting. Here, the Court of Chancery post-trial denied an acquirer’s implied covenant claim even though the result arguably resulted in unfairness from a financial point of view to the acquirer. As illustrated by this case, unfairness alone to one party does not necessarily prove that both parties would have agreed to the implied term had they thought to negotiate about it. More ›
Chancery Certifies Interlocutory Appeal for Determination of Impact of Remote Proceedings on a Party’s Due Process Rights
Forescout Tech., Inc. v. Ferrari Grp. Holdings, L.P., C.A. No. 2020-0385-SG (Del. Ch. July 14, 2020)
In the midst of this global pandemic, the Court of Chancery certified an interlocutory appeal to the Delaware Supreme Court to address two unique issues presented by COVID-19: (i) whether the Court could rightly decide to accept trial testimony remotely; and (ii) whether the Court had discretion to decline to compel a witness to travel to Delaware so that the witness may be cross-examined in-person without infringing upon the opposing party’s due process rights. More ›