Posts from 2010

Court Of Chancery Upholds Discretion Not To Invest

Related Westpac LLC v. JER Snowmass LLC, C.A. 5001-VCS (July 23, 2010)

For some reason probably rooted in human nature, parties to LLC agreements seem to think the agreement should provide that all the parties act "fairly" toward one another.  Of course, each party then defines what is "fair" by what they want to get out of the deal.  However, as this decision points out, when an agreement provides that a party has the discretion whether to advance additional funds or not, that is its choice to make.  Whether the choice is "fair" or not is irrelevant and the other parties to the agreement have no basis to complain about that decision.

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Court Of Chancery Holds Directors Subject to Contribution Claims

Hampshire Group Limited v. Kuttner, C.A. 3607-VCS (July 12, 2010)

This decision holds that the Unifrom Contribution Among Joint Tortfeasors Act applies to claims against directors. While at least 1 other court agreed with this point, this is the first Delaware decision on this issue.

This is important becaue it has serious implications to settlements with some but not all directors in derivative and class claims and as it may give leverage to former directors who are now on the outs.

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Court Of Chancery Explains Delaware Freeze Out Law

In Re CNX Corporation Shareholders Litigation, C.A. 5377-VCL (July 5, 2010)

Perhaps no area of Delaware corporate law is as confusing as that applicable when a company is taken private by a majority owner in a freeze out of the other shareholders.  This scholarly opinion explains that at least 3 different standards of review have been applied by the Court of Chancery in its review of such transactions.  As a result, the Court has certified its latest decision for appeal to the Delaware Supreme Court with a request that the law be clarified.

Until that clarification is issued, however, this is the definitive analysis of Delaware law in this area and deserves to be read, carefully.

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Court Of Chancery Awards Large Fee

Berger v Pubco Corp. ,C.A. 3414-CC (June 23, 2010)

This decision awards 26% of a large recovery to the prevailing attorneys.  If you are successful, then you will be well rewarded,  just as it should be.

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Court Of Chancery Enforces Settlement As Written

Cambridge North Point LLC v. Boston & Maine Corporation,  C.A. 3461-VCS (June 17, 2010)

This is another example of the Court of Chancery enforcing the contract the parties wrote despite one party's second thoughts. Saying that you did not read it does not help either.

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Chambers USA Names Nine Morris James Partners In Their 2010 Guide to Leading Business Lawyers

Morris James LLP is pleased to announce that nine of its partners have been ranked among the leading Delaware lawyers in the 2010 edition of Chambers USA:  America’s Leading Lawyers for Business - an increase of two rankings from last year.    In addition, four practice areas including Bankruptcy/Restructuring, Chancery, Intellectual Property and Employment Law were identified among the leading practices in Delaware.   The Morris James partners selected for inclusion in the 2010 edition are:

Bankruptcy/Restructuring

• Carl N. Kunz
• Stephen M. Miller

 Chancery

• Edward M. McNally
• Lewis H. Lazarus
• P. Clarkson Collins, Jr.

Intellectual Property

• Mary M. Matterer
• Richard K. Herrmann

Labor and Employment

• David H. Williams

Real Estate: Zoning/Land Use

• A. Kimberly Hoffman

Chambers & Partners is a highly respected and influential London-based research and publishing company that provides rankings of leading business lawyers and law firms throughout the world.  Rankings are based on technical legal ability, professional conduct, client service, commercial astuteness, diligence, commitment, and other qualities most valued by clients. 

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Court Of Chancery Sets Pleading Rule For Self Dealing Claim

Monroe County Employees' Retirement System v. Carlson, C.A. 4587-CC (June 7, 2010)

Because "self dealing" sounds so bad, sometimes a plaintiff thinks that all she needs to do is say those words in a complaint to state a claim.  Not so.  As this decision points out, self dealing may still be fair if the price is right.  Hence, to state a claim a complaint must state facts that show the deal was not fair.

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Court Of Chancery Sanctions Discovery Abuse

Monier Inc. v. Boral Lifetile, Inc., C.A. 3117-VCN (June 3, 2010)

When there is a failure to produce a relevant document in discovery,  the Court must decide what sanction to impose.  Here the Court declined to dismiss a case but awarded fees for the discoverey failure of a party.  The balancing of the failure and the penalty is interesting.

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Court Of Chancery Again Dismisses Late Books And Records Case

Baca v. Insight Enterprises. Inc., C.A. 5105-VCL (June 3, 2010)

Just as it did last month in the King case, the Court of Chancery has again dismissed a complaint for inspection of a company's books and records when that complaint was filed after a derivative suit was filed and is an effort to find a a basis to sustain the derivative case.

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Court Of Chancery Applies Delaware Law To Privilege Dispute

3Com Corporation v. Diamond II Holdings Inc., C.A. 3933-VCN ( May 31, 2010)

Delaware law governs privilege disputes in most cases in Delaware courts before it involves Delaware business disputes. This is an important point as Delaware law is more liberal than some states' law in upholding claims of privileged communication.

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Court Of Chancery Explains Duties Owed To Preferred Stockholders

Fletcher International LTD v. ION Geophysical Corp., C.A.  5109-VCP (May 28, 2010)

Preferred stockholders like to claim, in addition to the rights  they have to be "preferred" under the certificate of incorporation, that they also have the right to enforce fiduciary duties to them by the board.  Not so as this decision explains.  When the preferred stock's "contract" touches on a topic, such as the right to share in merger consideration, then that defines their rights and they cannot resort to fiduciary duty law to expand those rights.

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Court Of Chancery Explains Damage Calculations

Gentile v. Rossette, C.A. 20213-VCN (May 28, 2010)

The calculation of damages for the wrongful conversion of convertible stock is not easy.  This decision explains how.

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Super Lawyers® Names 7 Morris James Partners As Top Legal Counsel in Delaware

Super Lawyers® magazine has named 7 Morris James partners as top legal counsel in Delaware.  The multiphase selection process is handled by Law & Politics who evaluates each candidate on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis and include only 5 percent of the licensed attorneys in a state.

Morris James’ 2010 nominations include:

• David H. Williams - Employment & Labor, Government/Cities/Municipalities
• P. Clarkson Collins, Jr. - Business Litigation, Business/Corporate, Mergers & Acquisitions
• Richard Galperin - Personal Injury Defense: Medical Malpractice
• Lewis H. Lazarus - Business Litigation
• Edward M. McNally - Business Litigation, Business/Corporate
• James W. Semple - Business Litigation, General Litigation, Insurance Coverage
• Richard Herrmann – Intellectual Property Litigation
 

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Court of Chancery Explains Tender Offer/ Merger Review Standard

In Re CNX Gas Corporation Shareholders Litigation, C.A. 5377-VCL (May 25, 2010)

This is an important decision explaining the standard of review that the Court will apply in various circumstances involving a tender offer by a majority stockholder that is to be followed by a cash out merger.  Briefly, if the minority stockholders are effectively represented by a special committee with real bargaining power and the merger is subject to approval by disinterested stockholders, then the business judgment rule will apply and not entire fairness review.

Sometimes it is difficult to understand the Delaware corporate law. The law is constantly evolving. The evolution is often through long, closely reasoned opinions and there are a lot of those opinions to digest. This decision then is particularly helpful in doing the work of consolidating the past decisions into one unified approach.

It is also an interesting example of the depth of research and thinking that goes into the decisions of the Court of Chancery.  Actually, it is a little scary because it is hard to believe that we practitioners can ever get ahead of the Court .

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Court Of Chancery Upholds Right To Member List

Brown Investment Management L.P.  v.  Parkcentral Global L.P., C.A. 5248-VCL (May 24, 2010)

 A member of a LLC  or LP has the right to a list of its members even after it has gone bust.

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