Posts from 2005

Court of Chancery Grants Motion to Amend Arguments in Brief On Eve of Oral Argument in Exchange for Payment of Attorneys' Fees

Lillis v. AT&T Corp., C.A. No. 717-N, 2005 WL 2149748 (Del. Ch. Aug. 23, 2005). Plaintiffs, former owners of options to purchase shares in AT&T Wireless Services, Inc. ("Wireless"), brought suit against Wireless and AT&T Corp., seeking compensation for the value of their options, which were canceled when Wireless merged with Cingular Wireless Corp. Plaintiffs were officers and directors of MediaOne Group, Inc., a broadband telecommunications company, which AT&T purchased. At MediaOne, plaintiffs were to receive stock options as part of their compensation under the 1994 Stock Plan. After AT&T acquired MediaOne, AT&T exchanged the MediaOne options for new options in AT&T and, subsequently, for options in Wireless. More › Share

Court of Chancery Finds Proper Purpose in Books and Records Case Where Beneficial Owners Demonstrate that CEO Received Excessive Compensation

Haywood v. Ambase Corp., C.A. No. 342-N, 2005 WL 2130614 (Del. Ch. Aug. 22, 2005). Plaintiffs Haywood and Cronin were beneficial owners of defendant AmBase Corporation's ("AmBase") common stock. Ambase was a publicly held Delaware corporation, and its primary purpose at the time was to pursue pending litigation against the United States government based on the impact of the Financial Institutions Reform, Recovery and Enforcement Act. Richard Bianco was the chairman and chief executive officer of AmBase. More › Share

In Appraisal Action, Court of Chancery Employs Discounted Cash Flow and Comparable Companies Methods To Value Shares Purchased by 98% Owner in Cash-Out Merger

Andaloro v. PFPC Worldwide, Inc., C.A. No. 20289, 2005 WL 2045640 (Del. Ch. Aug. 19, 2005). Andaloro v. PFPC Worldwide, Inc., C.A. No. 20336, 2005 WL 2045640 (Del. Ch. Aug. 19, 2005). This was a consolidated appraisal and equitable fiduciary duty action (the court did not address the fiduciary claim in this opinion). It arose out of a merger in which PFPC Worldwide, Inc. ("PFPC"), was acquired by its parent PFPC Holding Corp. ("Holding"), which held over 98% of PFPC's stock before the merger. (The merger was also approved by PFPC's ultimate parent and Holding's immediate parent, PNC Financial Services Group, Inc. ("PNC").) The merger resulted in the elimination of the minority shareholders' position in PFPC for $34.26 per share. More › Share

Superior Court Prevents AT&T From Voluntarily Dismissing the Majority of Defendants

AT&T Wireless Services, Inc. v. Federal Ins. Co., 2005 WL 2155695 (Del. Super. Ct. Aug. 18, 2005). The Plaintiff filed a notice of partial dismissal in an attempt to dismiss certain defendants. The defendants who were purportedly dismissed moved to quash the notice of dismissal. The court found that one defendant insurer could be dismissed because the entire action was being voluntarily dismissed. However, the court granted the motion to quash as to the other defendant because the dismissal only eliminated certain claims as opposed to the entire action. Plaintiff also sought leave of the court to dismiss a second group of defendants pursuant to Rule 41(a)(2). The court denied this motion. More › Share

Court of Chancery Dissolves LLC that is Deadlocked and was Arguably Formed as Part of Scheme to Deceive Investors

In re: Silver Leaf, LLC, C.A. No. 20611, 2005 WL 2045691 (Del. Ch. Aug. 18, 2005). Plaintiff and the defendants formed Silver Leaf, LLC ("Silver Leaf") to market a new vending machine that was to produce French fries. In connection with the formation of the entity, the parties signed a stock purchase agreement and a sales and marketing agreement with Tasty Fries, which owned the manufacturing rights to the vending machines. After the relationship between the parties deteriorated, Tasty Fries terminated the sales and marketing agreement over a dispute related to the stock purchase agreement. More › Share

Court of Chancery Holds that Purchasers of Small Business Failed to Prove that Sellers Defrauded Them

Homan v. Turoczy, C.A. No. 19220, 2005 WL 2000756 (Del. Ch. Aug. 12, 2005). Plaintiffs bought a small printing and copying business from defendants, who ran the business successfully for 19 years. However, plaintiffs were not so successful. A year after the sale they filed for bankruptcy, closed down the business, and liquidated the company's assets. In their complaint, plaintiffs alleged that the defendants and their agent fraudulently misrepresented the condition of the business and thus sought rescission of the sales agreement. The court held that by waiting over a year before suing, the plaintiffs forfeited any right to seek actual rescission. As a result, the court's opinion after trial only considered whether plaintiffs were entitled to an award of damages for fraud. More › Share

Court of Chancery Refuses to Dismiss Claims for Tortious Interference, Unfair Trade Practices, and Fraudulent Misrepresentation in Connection with Sale of Business

Griffin Corp. Services v. Jacobs, C.A. No. 396-N, 2005 WL 2000775 (Del. Ch. Aug. 11, 2005). Counterclaim plaintiffs Jacobs, Dobrzynski, Stewart, and Stewart Management Company ("SMC") asserted that Griffin Corporate Services ("Griffin") and other counterclaim defendants interfered with their existing contract and prospective business relationships and engaged in common law and statutory unfair trade practices. They also asserted that Griffin breached its confidentiality agreement with SMC and made misrepresentations to SMC. The counterclaim defendants moved to dismiss. More › Share

Federal Court Dismisses "Covered Class Action" Involving Covered Securities" Action That Did Not Trigger The Delaware Carve-Out Under SLUSA

Golub v. Hilb, Rogal & Hobbs Co., 379 F.Supp.2d 639 (D.Del. 2005). Ninety-Nine shareholders represented by members of Hobb Group, L.L.C., and Hobbs IRA Corporation ("Sellers") entered into an agreement with defendant to sell its outstanding membership interest units for $270,000,000. Sellers alleged that the defendant company had not disclosed information that it knew before the closing. The defendant company moved to dismiss the Complaint. The Court granted the motion because the Complaint did not fall into the Delaware carve-out and therefore required dismissal. More › Share

Superior Court Finds that Both Parties to a Contract Must Contractually State an Intention to Benefit a Third Party to Create a Third Party Beneficiary

Street Search Partners, L.P. v. Ricon Int'l, L.L.C., C.A. No. 04C-09-156 PLA, 2005 WL 1953094 (Del. Super. Ct. Aug. 1, 2005). The plaintiff brought a breach of contract action against two defendants on the theory that the plaintiff was a third party beneficiary to the contract between the defendants. One of the defendants moved to dismiss the suit for failure to state a claim. The court determined that one defendant subjectively intended for the plaintiff to benefit from the contract. However, the court determined that the other contracting party did not intend to benefit the plaintiff. Furthermore, there was no evidence from the contract that the parties intended for the plaintiff to be a beneficiary. Consequently, the court dismissed the plaintiff's claims that were based on it being a third party beneficiary to the contract. More › Share

Superior Court Refuses to Dismiss Delaware Action, But Stays Delaware Action in Favor of Michigan Action

Royal Indem. Co. v. General Motors Corp., C.A. No. 05C-01-223 RRC, 2005 WL 1952933 (Del. Super. Ct. July 26, 2005). Royal Indemnity Company ("Royal") sought a declaratory judgment to determine whether it had an obligation to General Motors ("GM") in relation to insurance purchased by GM over the course of several decades from Royal. GM filed a motion to dismiss on forum non conveniens grounds, and the Court denied the motion to dismiss. More › Share

Court of Chancery Dismisses Consumer's Fiduciary Duty Claim Against Online Brokerage, Stating that the Scope and Existence of any Duty is Governed by Their Contract

Weil v. Morgan Stanley DW Inc., 877 A.2d 1024 (Del. Ch. 2005). Plaintiff consumer brought an action on behalf of himself and others similarly situated alleging that defendant Morgan Stanley breached its fiduciary duties and that HarrisDirect, the buyer of its online brokerage business, aided and abetted in the breach. The two defendants moved to dismiss under Rule 12(b)(6) for failure to state a claim. More › Share

Court of Chancery Holds that Private Securities Litigation Reform Act and Securities Litigation Uniform Standards Act do not Preempt Books and Records Action

Romero v. Career Educ. Corp., C.A. No. 793-N, 2005 WL 1798042 (Del. Ch. July 19, 2005). Plaintiff shareholder brought an action against Career Education Corporation ("CEC"), a Delaware corporation, seeking to compel inspection of certain books and records. CEC moved to dismiss the complaint or to stay. More › Share

Court of Chancery Holds Fund to be Beneficial Owner Even When it Holds a Net Short Position or Purchases Shorted Shares from its Other Accounts

Deephaven Risk ARB Trading Ltd. v. UnitedGlobalCom, Inc., C.A. No. 379-N, 2005 WL 1713067 (Del. Ch. July 13, 2005). Plaintiff Deephaven Risk ARB Trading Ltd. ("Deephaven"), an investment fund, sought to compel inspection of defendant UnitedGlobalCom's ("UGC") books and records to investigate possible wrongdoing in connection with a rights offering. In response, UGC moved to dismiss the complaint, challenging Deephaven's status as a beneficial owner and the purpose for its demand. The court denied UGC's motion. More › Share

Federal Court Decides Start and End Dates Of Class Certification Are The Registration Statement Date And The Date Typicality Of Claims End

Shockley v. Adams Golf, Inc., No. Civ.A. 99-371-KAJ, 2005 WL 3654346 (D.Del. June 27, 2005). This is a securities class action. The background to this case is provided in In re Adams Golf, Inc. Securities Litigation, 176 F.Supp.2d 216, 219-22 (D.Del. 2001), aff'd in part, rev 'd in part, 381 F.3d 267, 270-72 (3d Cir. 2004). In the present opinion, the Court resolved two remaining issues related to class certification. Pursuant to oral arguments on plaintiff's motion for class certification on May 17, 2005, the Court granted the motion but reserved its decision as to both: the appropriate time period applicable for defining the class of securities holders bringing an action under Section 11 of the Securities Act of 1933, 15 U.S.C. § 77l(a)(2); and the "nature of a subclass with respect to any liability under section 12(a)(2)" of the Securities Act of 1933, "including the appropriate time period for defining the subclass." The Court held that July 10, 1998, the date when the Registration Statement became effective was the start date of the class. Similarly, October 22, 1998, signifying the last date when the class had typical claims was the end-date for the class. More › Share

Court of Chancery Grants Preliminary Injunction Against Majority Stockholder Seeking to Purchase Additional Shares for a Penny Each in an Attempt to Convert Some of its Debt to Equity

Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. July 11, 2005). Plaintiff Flight Options International, Inc. ("FOI") sought a preliminary injunction against defendant Flight Options LLC ("the Company"), a Delaware limited liability company. More › Share