Posts from 2005

Court of Chancery Slashes Fees to Plaintiffs' Counsel Where Complaint Was Filed on Negotiable Merger Proposal

In Re Cox Communications Inc. Shareholders Litigation, C.A. No. 613-N, 879 A.2d 604(Del. Ch. June 6, 2005) Vice Chancellor Strine ruled on a fee request in a case arising out of a proposal by the Cox Family to take Cox Communications private. The Family proposed a merger on fully negotiable terms with an opening bid of $32. The proposal was immediately followed by a flurry of class action lawsuits, as well as the formation of a special committee to review and evaluate the terms of the offer. The Family tentatively agreed with a special committee of independent directors to a price of $34.75 per share subject to approval by a majority of the minority stockholders and conditioned on settlement of the outstanding lawsuits, a final fairness opinion, and agreement on the terms of a final merger agreement. Counsel for the plaintiffs eventually agreed that the $34.75 price accepted by the special committee was fair, accepted the other terms of the transaction, and agreed to settle their claims. After settlement, the Cox family agreed not to oppose a request by plaintiffs' counsel for payment of attorneys' fees of up to $4.95 million. Certain Cox stockholders, however, did object to the fee request and the Court of Chancery heard their obections. The Court slashed a $4.95 million fee request to an award of $1.275 million and advised the plaintiff's bar to consider that award "generous." More › Share

Court of Chancery Permits 220 Action To Proceed Despite Likelihood that Documents Would Give Rise to Precluded Causes of Action

Amalgamated Bank v. UICI, C.A. No. 884-N, 2005 WL 1377432 (Del. Ch. June 2, 2005) Plaintiff Amalgamated Bank brought an action under 8 Del. C. § 220 to inspect the books and records of UICI, a corporation in which it was a shareholder. The Court of Chancery permitted Plaintiff's inquiry, despite the request encompassing documents likely only to reveal time-barred and other precluded causes of action. More › Share

Motion for Summary Judgment Granted Where Shareholders Ratified Internal Recapitalization

Rosser v. New Valley Corporation, et al., C.A. No. 17272-N, 2005 WL 1364624 (Del. Ch. May 27, 2005) Defendants filed a motion for summary judgment where Plaintiff alleged proposed internal recapitalization favored director shareholders. Plaintiff challenged the adequacy of the fairness opinion, the disclosures to shareholders and the sufficiency of the Proxy Statement because it failed to disclose separate valuations of New Valley's various assets and lines of business The Court of Chancery granted the Defendants' motion for summary judgment. More › Share

Court of Chancery Denies Motion For Stay Pending Appeal on Advancement of Attorneys' Fees

Tafeen v. Homestore, Inc., C.A. No. 023-N, 2005 WL 1314782(Del. Ch. May 26, 2005) The Court considered the motion of defendant Homestore for a stay pending appeal of the Court's rulings which ordered Homestore to pay director Tafeen's advancement fees and assessed the costs of the Special Master's services against Homestore. The Court denied the Motion. More › Share

Superior Court Grants Defendant's Motion to Dismiss and Finds that Clause in Construction Contract Required Arbitration

Tekmen & Co. v. Southern Builders, Inc., C.A. No. 04C-03-007 RFS, 2005 WL 1249035 (Del. Super. Ct. May 25, 2005). The defendant contracted to build a hotel on the plaintiff's property. Following completion of the structure, the defendant had to return on numerous occasions to repair leaks. Eventually, the plaintiff filed a complaint, arguing that it was entitled to compensatory and punitive damages for breach of contract, negligence, and breach of warranty. The defendant moved to dismiss, claiming that under the terms of the contract all disputes must first be submitted to the architect and any remaining claims must be heard in binding arbitration. The court granted the defendant's motion to dismiss. More › Share

Rejecting Defendant's Argument that Partnership had Merely Dissolved and Was "Winding Up," Superior Court Finds that Partnership had Terminated and that its Right of First Refusal on Property was Extinguished when It Terminated

Estate of Foraker v. Larrimore, C.A. No. 04C-03-041, 2005 WL 1953075 (Del. Super. Ct. May 25, 2005). The court was faced with the question of whether a partnership had terminated or whether it had merely dissolved and was still in the process of "winding up." The partnership had been granted a right of first refusal on a piece of property. Subsequently, the partners entered into an agreement terminating the business and dividing the debts and assets between the partners. When the owners of the property attempted to sell, one of the former partners desired to exercise the partnership's right of first refusal. The owner brought and action against the partner, and the court found that the partnership had was already terminated rather than being merely dissolved and in the process of "winding up." The court also found that the right of first refusal had terminated with the partnership. More › Share

Court of Chancery Stays Litigation in Favor of First-Filed Suit in Another Jurisdiction under McWane

W.C. McQuaide, Inc. v. Leland R. McQuaide, et al., C.A. No. 612-N, 2005 WL 1288523 (Del. Ch. May 24, 2005) Court considered a motion to dismiss or stay this action in favor of an earlier filed case in Pennsylvania. The Court concluded that the Pennsylvania Action was first-filed and that this case should be stayed pending resolution of that action. More › Share

Court of Chancery Found Written Consent To Be Valid to Appoint Directors

Raphael F. Nevins v. George Bryan, et al., C.A. No. 19975-NC, 885 A.2d 233(Del. Ch. May 17, 2005) This was an action under 8 Del. C. § 225 to determine the proper directors and members of the Center for the Advancement of Distance Education in Rural America ("CADERA" or the "Corporation"). The court found that the appointment of the Director Defendants was proper and adequate. More › Share

Federal Court Denies Motion To Remand Because Plaintiffs Demand For Coverage Met the Amount-In-Controversy Requirement

Eames v. Nationwide Mut. Ins. Co., No. CIV.A. 04-1324-KAJ, 2005 WL 1385130 (D.Del. Apr. 27, 2005). The plaintiffs filed a Motion to Remand a proposed class action involving insurance issues. The defendant removed the action from the Delaware Superior Court under 28 U.S.C. § 1441, diversity jurisdiction. The plaintiffs alleged that because the amount requirements under 28 U.S.C. § 1332 ($75,000) were not met, the action merited remand. The Court denied plaintiffs' motion. More › Share

Federal Court Awards Attorney Fees And Expenses Despite Lack Of Bad Faith In Eleven Month Discovery Delay

Tracinda Corp. v. Daimlerchrysler AG, No. Civ.A. 00-993-JJF, 2005 WL 927187 (D.Del. Apr. 20, 2005). This opinion relates to plaintiff's motion for sanctions for defendants' late production of documents in discovery. The matter was referred to a Special Master for a hearing in 2003. The Special Master found for the plaintiff who then filed the present motion for relief including: (1) witness Valade be barred from testifying about matters included in the delayed production unless his responses were required by the plaintiff's or the Court's questions; (2) that two witnesses be recalled to testify at trial; and (3) that the defendants be ordered to pay plaintiff's fees and costs incurred towards resolving the matters connected with the late production of the Valade documents. The Court denied plaintiff's request to bar Valade's testimony and permitted him to testify on all matters. It dismissed the second relief as moot because the parties had agreed to permit recall of the two witnesses. The Court however granted plaintiff's motion and awarded all costs and fees associated with the delayed production of the Valade notes. More › Share

Federal Court Dismisses Claim Of Personal Jurisdiction Because Website Listing Did Not Meet Due Process Requirement

Kalk v. Fairfield Language Technologies, No. Civ.A. 04-1486-JJF, 2005 WL 945715 (D.Del. Apr. 22, 2005). Pro se Plaintiff, a resident of Delaware, filed a Complaint against defendants' alleging tort claims. Defendants' filed a Motion to Dismiss the Complaint. The background to the suit involved violation of an alleged non-competition covenant by Plaintiff. Plaintiff alleged that subsequently, Defendants' caused the termination of his employment from Auralog, Inc., by sending a letter to them. Plaintiff filed this Complaint which alleged Tortious Interference with Contract and Conspiracy Against Rights. Plaintiff claimed that the court had subject matter jurisdiction under diversity of citizenship. However, Plaintiff failed to allege sufficient facts to demonstrate personal jurisdiction over the defendants'. Accordingly, the court granted the Motion to Dismiss for lack of personal jurisdiction because: (1)Defendant Fairfield Language Technologies et al was a Virginia incorporated entity with its principal place of business in that state; (2) its President and Chairman, Defendant Eugene Stoltzfus, resided and worked in Virginia; (3) Defendant Kathryn S. Fairfield, its General Counsel likewise was a resident and worked in Virginia; and (4) none of the Defendants' had "purposefully availed" business in Delaware. More › Share

Court of Chancery Dismisses Stockholders' Claims Because Claims were Derivative and Demand was Not Excused

In re J.P. Morgan Chase & Co. S'holder Litig., 2005 WL 1076069 (Del. Ch. April 29, 2005), aff'd, 2006 WL 585606 (Del. Mar. 8, 2006). J.P. Morgan Chase & Co. ("JPMC") and Bank One agreed to a business combination that was expected to create the second largest financial institution in the country. JMPC paid a premium over the market share price for Bank One, effectively making JPMC the acquirer and the Bank One the target. After the merger was completed, the stockholders of the acquirer sued its directors, alleging breaches of fiduciary duty with regard to the acquisition. Their claims stemmed from the allegation that the directors paid too much for the acquired bank. The defendants moved to dismiss the complaint on the basis that the claims were derivative, not direct, and that demand was not excused. The court granted defendants motion to dismiss. More › Share

Court of Chancery Finds that Substantial Litigation Expenses Not a Sufficient Material Adverse Effect to Rescind a Contract

Frontier Oil Corporation v. Holly Corporation, 2005 WL 1039027 (Del. Ch. April 29, 2005). Frontier Oil Corporation and Holly Corporation are petroleum refiners that sought to merge. In conducting its due diligence review of Frontier, Holly discovered that activist Erin Brockovich was planning to bring a toxic tort suit claiming that an oil rig that had been operating for decades on the campus of Beverly Hills High School caused the students to suffer from a disproportionately high incidence of cancer. This raised concerns for Holly because a subsidiary of Frontier had previously operated the Beverly Hills drilling facility. Although the terms of the merger agreement were modified to address the situation, including broadening the representation to apply to litigation that would reasonably be expected to have a material adverse effect ("MAE") on Frontier, the court found that substantial litigation costs were not a MAE and therefore the contract could not be rescinded. More › Share

Superior Court Dismisses Case Against Member of Limited Liability Company, Finding that Member Was Not Liable for the Actions of the Limited Liability Company

Thomas v. Hobbs, C.A. No. 04C-02-010 RFS, 2005 WL 1653947 (Del. Super. Ct. Apr. 27, 2005). The Plaintiff brought an action for breach of contract against the defendant limited liability company and against the sole member of that defendant limited liability company personally. The member moved for summary judgment, arguing that she could not be held personally liable for the actions of the defendant limited liability company. The court granted the defendant member's motion. More › Share

Federal Court Dismisses Fraud And All Securities Claims Against Defendants In DaimlerChrysler AG Merger

Tracinda Corp. v. DaimlerChrysler AG, 364 F.Supp.2d 362 (D.Del. 2005). Tracinda Corporation ("Tracinda"), a Nevada entity with its principal place of business in California and engaged in investing in companies and then Chrysler's largest shareholder, brought this action against defendants comprising DaimlerChrysler AG, Daimler-Benz AG ("Daimler"), Jurgen Schrempp and Manfred Gentz (collectively "Defendants") and citizens of Germany alleging: (1) violations of securities laws; (2) common law fraud; and (3) conspiracy in connection with the 1998 merger between Chrysler Corporation ("Chrysler") and Daimler-Benz AG ("Daimler-Benz"). After a thirteen day bench trial, the Court held that: (1) personal jurisdiction did not exist over the German corporation; (2) the German company and its CEO were subject to the proxy solicitation statute although the American manufacturer solicited proxies; (3) pre-merger oral statements of the CEO did not attract liability; and (4) the documents memorializing the merger did not misrepresent that it was a merger between equals. More › Share