Delaware Business Litigation Report

'Cornerstone' Decision Reinforces Del. Corporate Law Bedrock Principles

Delaware law has long provided that the decisions of disinterested and independent directors who receive no special benefit from a transaction ought not be the basis of personal liability in monetary damages. To subject directors who are independent of interested parties and who themselves receive no benefit in a transaction not otherwise shared with public stockholders would discourage quality individuals from serving on boards or committees of Delaware corporations and likely also reduce appropriate risk-taking. Nonetheless, the courts since two Delaware Supreme Court decisions in Emerald Partners v. Berlin, 726 A.2d 1215 (Del. 1999), in 1999 (Emerald I) and 2001, 787 A.2d 85 (Del. 2001) (Emerald II), often denied motions to dismiss brought by disinterested and independent directors if a plaintiff could plead facts sufficient to invoke the entire fairness standard of review. More ›

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Court Of Chancery Orders Dissolution Despite LLC Agreement Bar

Meyer Natural Foods LLC v. Duff, C.A. 9703-VCN (June 4, 2015)

This decision may answer the question of whether an LLC Agreement’s bar of dissolution without a member’s consent trumps the statutory remedy of court-ordered dissolution when the entity’s purpose cannot be achieved any longer. It concludes that dissolution is proper under the facts presented where the objecting member really had no good reason to object.

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Court Of Chancery Again Limits Covenant Claims

Akzo Nobel Coatings Inc. v. The Dow Chemical Company, C.A. No. 8666-VCP (June 5, 2015)

This is yet another decision declining to uphold a claim based on the covenant  to deal in good faith and fairly. More ›

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Court Of Chancery Explains Recent Fee Award Ranges

In Re Jefferies Group Inc. Shareholders Litigation, C.A. No. 8059-CB (June 5, 2015)

This is an important decision for several reasons. More ›

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R. Eric Hacker Joins Morris James LLP’s Real Estate and Business Litigation Practices

Morris James LLP is pleased to announce that R. Eric Hacker has joined the firm’s Georgetown office as an associate in its Real Estate and Business Litigation practice groups. His practice will focus on residential and commercial real estate, and commercial litigation. More ›

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Proxy Puts: Consider With Caution

Directors of a Delaware corporation that enters into a financing agreement with a lender may breach their fiduciary duties if the financing agreement contains a common provision allowing the lender to accelerate and demand full payment of the indebtedness upon a substantial change in the composition of the board of directors. Moreover, the lender may be liable for aiding and abetting the directors' breach of fiduciary duty. Vice Chancellor J. Travis Laster's transcript ruling in Pontiac General Employees Retirement Fund v. Healthways, C.A. No. 9789-VCL transcript (Del. Ch. Nov. 3, 2014), denied the motions of the defendant directors and the lender to dismiss claims based on similar facts and allowed the action to proceed. The ruling and accompanying reasoning severely constrict the permissible use of the so-called "proxy put" often contained in corporate financing agreements. More ›

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Court Of Chancery Defers To Arbitrator

In re Knowledge Crossing LLC, C.A.10383-VCG (May 29, 2015)

It is now established that a pending arbitration qualifies for purposes of applying Delaware’s law on when to stay a case in favor of a prior proceeding. This decision extends that law to enter a stay to let the arbitrator decide if he is going to deal with the issues in the later-filed Delaware case.

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Court Of Chancery Upholds Cash Calls To Eliminate Minority Owner

CanCan Development LLC v. Manno, C.A. 6429-VCL (May 27, 2015)

This is a great decision on how to get rid of a minority owner in an LLC when she is disruptive. More ›

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Court of Chancery Upholds Right To Secondary Offering

In Re Molycorp Inc. Shareholder Derivative Litigation, C.A. 7282-VCN  (May 27, 2015)

When investors bargain for the right to have their stock sold in a secondary offering after the company goes public, fiduciary duties normally do not operate to restrict that right. More ›

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Court Of Chancery Limits Conditional Advancement Contracts

Blankenship v. Alpha Appalachia Holdings Inc., C.A. 10610-CB (May 28, 2015)

Corporations continue to regret conferring broad advancement rights on their former directors. This is yet another example of an effort to get out of that obligation. More ›

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Court Of Chancery Confirms Jurisdiction Over Escrows

East Balt LLC v. East Balt US LLC, C.A. 10462-VCN (May 28, 2015)

There are often disputes over funds held in escrow under earn out or indemnification provisions in various deals. This decision confirms that the Court of Chancery will take jurisdiction over a suit seeking specific performance of the distribution provision of the escrow agreement. This seems particularly desirable because that Court has the most experience with why such escrows are put in place and has resolved many such disputes in the past.

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Court Of Chancery Explains The “Personal Claim” Exception To Advancement Rights

Mooney v. Echo Therapeutics Inc., C.A. 10054-VCP (May 28, 2015)

In the area of what claims are subject to the right to have fees advanced to a former officer or director, there is no more often disputed issue than whether the claim asserted arose out of the role as an officer or director or was instead a “personal” claim. This may be the definitive decision on how to decide that issue. More ›

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CorpCast Episode 5: The eDiscovery Big Picture

Many attorneys view eDiscovery as merely something they “have to do.”  On Episode 5, we speak to Ian McCauley, Morris James’ eDiscovery coordinator about jettisoning this and other misconceptions about eDiscovery practice.  Instead, Ian suggests that effective eDiscovery practice can be a valuable litigation tool, and that attorneys should focus on how eDiscovery can help, not hinder, their case.  We’ll talk to Ian about the role of an eDiscovery coordinator in a larger litigation group, the Delaware courts’ attitudes toward eDiscovery, and certain eDiscovery issues that often arise in corporate and commercial cases.  More ›

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How Collateral Estoppel Can Be Your Best Friend in Stockholder Litigation

Two recent decisions from the Delaware Court of Chancery have dusted off the venerable doctrine of collateral estoppel to dismiss stockholder claims. Of course, this issue is not new in Delaware. In 2013, the Delaware Supreme Court held the dismissal of a derivative action in a federal court in California for failure to plead demand futility was entitled to collateral estoppel effect in Delaware, in Pyott v. Louisiana Municipal Police Employees' Retirement System, 74 A.3d 612 (Del. 2013). These recent decisions show the power that the theory can have for corporations facing multiple lawsuits arising out of the same alleged wrongdoing. More ›

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Court Of Chancery Awards Major Fee

In re Activision Blizzard Inc. Stockholder Litigation, C.A. 8885-VCL (May 20, 2015, revised May 21, 2015)

This decision will be remembered for the very large fee it awarded to some very entrepreneurial lawyers who risked their all to win a big case. More ›

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