Posts from 2006

Court of Chancery Limits Use of Demand for Records

Highland Select Equity Fund, L.P. v. Motient Corp., C.A. No. 2092-N, 2006 WL 1903129 (Del. Ch. July 6, 2006). In this case, the Court of Chancery dismissed a demand to inspect the records of a Delaware corporation because the demand for inspection was abusive. A demand to inspect corporate records must be based on a good reason and when the request is to inspect allegations of wrongdoing, those allegations must have some basis. While the Court here felt that part of the test for inspection had been met, the way the plaintiff went about its request cost it the litigation. More › Share

Court of Chancery Enforces Rights of Preferred Stock

Thoughtworks, Inc. v. SV Investment Partners, LLC, C.A. No. 1695-N, 2006 WL 1903127 (Del. Ch. June 30, 2006). It is often said that preferred stock has only the rights granted to it in the certificate of incorporation. This case illustrates that the Court of Chancery will not, however, hesitate to enforce those rights when the certificate of incorporation is clear. Here, the certificate stated that the preferred was entitled to be redeemed and to consent to an extension of the company line of credit. The Court enforced those rights. Share

President Nominates Former Morris James Partner to United States Court of Appeals for the Third Circuit

The partners and staff of Morris James congratulate our former partner, The Honorable Kent A. Jordan, who is currently serving on the U.S. District Court, District of Delaware, on his recent nomination by President George W. Bush to the United States Court of Appeals for the Third Circuit. For additional details, click here, to read a copy of the article which first appeared in The News Journal on Thursday, June 29, 2006. Share

Court of Chancery Holds Convertible Preferred is Still Equity

Harbinger Capital Partners Master Fund I, Ltd. v. Granite Broadcasting Corporation, C.A. No. 2205-N, 2006 WL 1875918 (Del. Ch. June 29, 2006). The Court of Chancery has held that convertible preferred stock, even with a mandatory redemption date, is still to be considered equity under the Delaware General Corporation Code. This remains true even if under the revised GAAP rules the preferred would be treated as debt. More › Share

Superior Court Grants Partial Judgment For Plaintiff on Claim For Unpaid Severance Payments

Casey v. Friends of the Capital Theater, Inc., C.A. No. 04C-03-022 JTV, 2006 WL _____ (Del. Super. Ct. June 21, 2006). Plaintiff sued former employer for breach of contract and wrongful discharge. The court ruled that plaintiff had resigned pursuant to a resignation agreement between the parties, which was binding upon both parties. The court also ruled, however, that the employer had failed to make severance payments required under that same agreement. After granting the employer a set off based on property that plaintiff took with him when he left and unemployment benefits plaintiff received, the court found that plaintiff was entitled to approximately $18,000. Share

Court of Chancery Awards Fees for Disclosures

Augenbaum v. Forman, C.A. No. 1569-N, 2006 WL 1716916 (Del. Ch. June 21, 2006). In this decision, the Court of Chancery awarded $225,000 in attorney fees for the additional disclosures that the plaintiff achieved as part of the settlement of litigation attacking a merger. Share

Court of Chancery Upholds Complaint Against AIG Entities

Teachers' Retirement System of Louisiana v. Aidinoff, C.A. No. 20106, 2006 WL 1725572 (Del. Ch. June 21, 2006). In this decision the Court of Chancery extensively discusses the legal theories under which the plainitff may seek a recovery from two of the entities alleged to have helped the AIG Chairman profit at the expense of AIG. In effect, the Court held that if as alleged these entities were set up to profit by doing what AIG might have done for itself, then their profits are subject to recovery under several theories such as the imposition of a constructive trust. The opinion is a good source of legal theory for recovery in such cases. Share

Court of Chancery Determines Criteria To Decide Inspection Rights

Wynnefield Partners Small Cap Value LP v. Niagara Corp., C.A. No. 1261, 2006 WL 1737862 (Del. Ch. June 19, 2006). This is Section 220 action where the principal issue is whether the plaintiff had satisfied the criteria to inspect records related to alleged wrongdoing. The Court of Chancery held that merely alleging that wrongdoing had occurred was not sufficient to warrant inspection of corporate records. However, in some areas the Court held that sufficient facts had been alleged to justify record insepction. More › Share

Court of Chancery Rejects Limit on Advancement Rights

Wendell Brown v. LiveOps, Inc., C.A. No. 1991-N, 2006 WL 1667652 (Del. Ch. June 12, 2006). In another rejection of artificial limits on the right to advancement, the Court of Chancery has rejected the argument that there is no right to advancement of legal fees to defend a suit that seeks recovery for post termination conduct. More › Share

Disney Ruling Affirmed

In Re The Walt Disney Company Derivative Litigation, William Brehm and Geraldine Brehm, et. al. v. Michael D. Eisner, et. al., No. 411, 2005 (Del. June 8, 2006). On June 8, 2006, the Delaware Supreme Court affirmed the Delaware Court of Chancery's decision issued by Chancellor William B. Chandler, III in August 2005 which stated that the directors of The Walt Disney Co. had not acted in bad faith when they awarded Michael S. Ovitz a $130 million severance package. According to the Supreme Court, the decisions made by the directors were "protected business judgments, made without any violations of fiduciary duty."

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Delaware Docket - The Newsletter of the Delaware Judiciary

Delaware Docket is published by the Administrative Office of the Courts. Several highlights from the Summer 2006 issue include: --Delaware's #1 Ranking for the Fifth Consecutive Year in a Row by the Harris Poll State Liability Systems Ranking Study by the United States Chamber of Commerce Institute for Legal Reform --Three Delaware Judges Were Among the 500 Leading Lawyers in America Chosen by Lawdragon --Delaware is Developing a New Case Management System for its Judicial Branch To read these and other articles concerning Delaware's Judiciary, click here. Share

Court of Chancery Upholds Drag Along Rights

Minnesota Invco of RSA #7, Inc. v. Midwest Wireless Holdings LLC, C.A. No. 1887-N, 2006 WL 1596675 (Del. Ch. June 7, 2006). In this case, the Court of Chancery was required to interpret complex agreements between the members of a Delaware limited liability company. The Court held that the defendant holding company had the right to "drag along" holders of a minority interest in an operating subsidiary of the holding company in connection with the sale of the holding company. More ›

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Superior Court Declines To Expand Economic-Loss Doctrine in Dismissing Negligent Mispresentation Claim

Millsboro Fire Company v. Construction Management Service, Inc., C.A. No. 05-06-137 MMJ, 2006 WL 1867705 (Del. Super. Ct. June 7, 2006). Plaintiff fire company sued its contractor on a significant renovation and improvement project, alleging numerous design and workmanship defects. The defendant contractor in turn filed a third-party complaint against several parties hired by plaintiff who were involved in the design and management of the project, alleging negligence, breach of contract, and negligent misrepresentation. The third-party defendants subsequently filed a motion for summary judgment, which was granted. More › Share

Court of Chancery Remedies Breach of LLC Agreement

Eureka VIII LLC v. Niagara Falls Holdings LLC C.A. No. 1203-N, 899 A.2d 95 (Del. Ch. June 6, 2006). This case illustrates the ability of the Court of Chancery to fashion a remedy that is non-traditional and fits the exact circumstances of the case before it. Here the remedy for the breach of a LLC agreement is to hold the breaching party, who is no longer a member in the LLC but only an assignee, with limited rights. More ›

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Court of Chancery Rejects Invalid Bylaw And Charter Provisions

Lions Gate Entertainment Corp.v. Image Entertainment Inc., C.A. No. 2011-N, 2006 WL 1668051 (Del. Ch. June 5, 2006). The Court of Chancery has again ruled that provisions in corporate bylaws or certificates of incorporation that violate the Delaware General Corporation Law are invalid. Thus, the Court struck down a bylaw provision that attempted to give the directors the power to amend the bylaws when that power was not conferred by the certificate of incorporation as required. The Court also voided a certificate of incorporation provision that tried to give the directors alone the right to amend the certificate. More › Share