Court Of Chancery Explains Conspiracy Theory Of Jurisdiction
Posted In Jurisdiction
Virtus Capital L.P. v. Eastman Chemical Company, C.A. 9808-VCL (February 11, 2015)
This is a very useful decision because of its detailed explanation of the conspiracy theory of jurisdiction, which was first adopted in the famous Istituto Bancario case. As the decision makes clear, breaches of fiduciary duty claims are particularly suited for that theory and do not violate the corporate shield doctrine.
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Choice-of-Law Agreements and Public Policy Enforceability Exception
Authored By P. Clarkson Collins, Jr. This article was originally published in the Delaware Business Court Insider | February 11, 2015 By statute, Delaware has affirmed the ability of parties to agree to have their rights, remedies, liabilities, powers and duties governed by the law of Delaware. Title 6, Section 2708 of the Delaware Code recognizes that the parties' contractual choice-of-law provision is itself a "significant material and reasonable relationship with this state and shall be enforced whether or not there are other relationships with this state." A recent decision of the Delaware Court of Chancery reveals that important limitations remain, however, on the ability of parties to enforce Delaware choice-of-law provisions. More › ShareChancery Court Applies New Statutory Amendment Retroactively
Authored By Albert H. Manwaring, IV This article was originally published in the Delaware Business Court Insider | February 4, 2015 Before the newly enacted statutory amendment, 10 Delaware Code Section 8106(c), parties could shorten, but were not permitted to lengthen, an applicable limitations period by contract because an extension of the statute of limitations by agreement violated public policy. (See, e.g., Bonanza Restaurant v. Wink, C.A. No. S10C-10-018 RFS (Del. Super. Apr. 17, 2012), aff'd, 65 A.3d 616 (Del. 2013); and Shaw v. Aetna Life Insurance, 395 A.2d 384, 386-87 (Del. Super. 1978).) The Delaware General Assembly recently enacted 10 Delaware Code Section 8106(c), which was effective Aug. 1, 2014. Section 8106(c) now permits contracting parties to extend the three-year limitations period, applicable to most contract actions brought in Delaware, by agreement for up to 20 years from the time a cause of action accrues, in a written contract "involving at least $100,000." Section 8106(c) allows parties to define the time period in which suit may be brought in their contract by reference to traditional measures of time (e.g., months, days or years), but also provides flexibility for contracting parties to define such period of time "by reference to the occurrence of some other event or action, another document or agreement or another statutory period," or even "an indefinite period of time" up to 20 years from the time a cause of action accrues. More › ShareCourt Of Chancery Explains Interrelationship Of Complaint Theories
Posted In Breach of Contract
The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (January 29, 2105)
This decision explains how various liability theories in a complaint relate to one another so as not to be duplicative. For example, a breach of fiduciary duty claim will be dismissed when it relies on the same facts as a breach of contract claim. Moreover, a claim for violation of the duty to act in good faith and fairly may survive when it alleges a failure to uphold the reasonable expectations of the parties as to how a contract would operate.
Note, however, that it would be a mistake to think that you can plead a violation of the covenant to act fairly in a very contract-based case. In a decision one day after Renco, the Court dismissed a claim based on the covenant when the contract language spelled out how the contract was to be implemented in more detail, leaving no gap for the covenant to fill. See Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. 9522-CB (January 30, 2015).
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Court Of Chancery Limits Implied Covenant Claims
Posted In Breach of Contract
Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. 9522-CB (January 30, 2015)
When a contract spells out that its obligations are to be carried out in a "commercially reasonable best efforts" manner, it will be harder to argue there is any gap that the covenant of good faith and fair dealing may fill. That means the claim based on the implied covenant may be dismissed leaving the court to ponder what is "commercially reasonable." This decision needs to be read in conjunction with The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (January 29, 2015) upholding a similar claim.
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Court Of Chancery Explains Step-Transaction Theory
Posted In Breach of Contract
Ellis v. OTLP GP, LLC, C.A. 10495-VCN (January 30, 2015)
Not infrequently a plaintiff will argue that 2 transactions are so interrelated that his rights have been violated by structuring the deal to take 2 steps to accomplish it. An example is this case of a purchase of a controlling interest at a premium followed by a cash out merger at a discount. This is a hard road to travel and this decision explains what is needed to make the court consider 2 steps as if they were one. Briefly, one must be dependent on the other in such a way as to make the deal not possible unless both occurred.
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Court Of Chancery Explains New Statutory Authority To Correct Corporate Mistakes
In Re Numoda Corporation Shareholders Litigation, C.A. 9163-VCN (January 30, 2015) This is an important decision because it explains the effect of the new Sections 204-205 to the DGCL. Those provisions permit the correction of corporate actions that failed to comply with the requirements of the DGCL, such as having a board resolution before issuing stock. The decision holds that the Court's authority is limited to when some actual "action" has occurred, not just a "water cooler discussion" and there must be some real evidence to confirm that action was intended to have the consequences the plaintiff asks the Court to confirm. ShareCourt Of Chancery Adopts Merger Price In Appraisal Proceedings As Fair Value
Posted In Appraisal
In Re Appraisal Of Ancestry.com Inc., C.A. 8173-VCG (January 30, 2015)
After a complete analysis of the usual issues in an appraisal case involving a DCF valuation, the Court here concluded that the result was close enough to the actual price paid in the merger to warrant adoption of the merger price as fair value. The merger followed an extensive market shop and lengthy negotiations that gave the Court confidence the agreed-to value was fair.
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Court Of Chancery Explains Equitable Estoppel Jurisdiction
Posted In Jurisdiction
McWane Inc. v. Lanier, C.A. 9488-VCP (January 30, 2015)
This decision explains how a non-party to a contract with a Delaware forum selection clause may still be subject to the Court's jurisdiction under an equitable estoppel theory. Briefly, if you claim benefits under that contract, you may be barred from contesting its forum selection provision.
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Court Of Chancery Explains When Interest Is To Be Compounded
ReCor Medical Inc. v. Warnking, C.A. 7387-VCN (January 30, 2015) This decision orders compound interest on an attorney fee award and explains why, even if that is not always to be done. ShareCourt Of Chancery Rejects Application Of Delaware Law
Posted In Breach of Contract
Ascension Insurance Holdings LLC v. Underwood, C.A. 9897-VCG (January 28, 2015)
This is an important decision on choice of law. The Court held that the parties' choice of Delaware law to govern the terms of a noncompete agreement was unenforceable in the face of contrary public policy of California that limited such agreements. This result is arguably at odds with a Third Circuit decision that upheld the choice of Delaware law in a noncompete agreement despite the policy of Louisiana that limits such agreements - Coface Collections North America Inc. v Newton, 430 Fed. Appx. 162 (3rd Circ. June 6, 2011). As the decision points out, limitations on former employees' right to work for a competitor are subject to a wide variety of state laws. Hence, the drafter of such agreements will now need to carefully consider what law to choose to apply to the agreement and cannot just adopt Delaware as binding in every case.
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Court Of Chancery Denies Late Amendment To Complaint
Optimiscorp v. Waite, C.A. 8773-VCP (January 28, 2015) This decision is a primer on what not to do if you want to add claims to a complaint as the case develops. The lesson is to be sure that your discovery responses are both timely updated and sufficient to put the opposing side on notice and to move as early as possible to amend. ShareDistrict Court Interprets Limitations Savings Statute
Posted In Business Torts
Hartsel v. The Vanguard Group Inc., C.A. 13-1128-SLR (D. Del. January 26, 2015)
This is an interesting decision because it interprets the seldom-used Delaware Savings Statute [10 Del. C. Section 8118]. The court held that a derivative suit dismissed for failure to make a demand on the board is not saved from the expiration of the statute of limitations under the Savings Statute. Hence, a new suit that followed a demand of the board may be time barred.
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Negotiating Admitted Facts in Pretrial Stipulation
This article was originally published in the Determining admitted facts can be one of the more difficult aspects of preparing a pretrial stipulation. Parties often propose factual statements that are advantageous to their position, while resisting facts that may favor their opponents. There is also a tendency to take a cautious approach and require an opponent to prove all facts in support of their case at trial. This approach, however, likely is contrary to counsel's duty to litigate a matter "efficiently and effectively" and to "cooperate as officers of the court and not waste time on issues not legitimately in dispute," as in Itron v. Consert, (Del. Ch. Jan. 15, 2015). More ›
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