About This Blog
Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Subscribe to Blog
JDSupra RSS
Join us on LinkedIn
Follow us on TwitterTopics
Top Posts
Top News
- February 19, 2021
- October 30, 2020
- April 1, 2024
Archives
Morris James Blogs
Showing 158 posts from 2013.
Court Of Chancery Outlines Custodian Immunity
Jepsco Ltd. v. B.F. Rich Co. Inc,. C.A. 7343-VCP (February 14, 2013)
The liability of a custodian or receiver for a dissolving corporation is not clear. Judicial immunity does protect him from many claims, but as this decision points out, not from all claims. The discussion of what claims are or are not barred by immunity is particularly helpful for anyone assuming the role of a custodian or receiver.
ShareCourt Of Chancery Permits Interlocutory Appeal In 220 Case
In Re Freeport-McMoRan Copper & Gold Inc. Derivative Litigation, C.A. 8145-VCN (February 14, 2013)
In recent years, the Delaware Supreme Court has stressed that it is desirable to file a books and records case before starting derivative litigation. But do you need to do that every time? In the unusual situation presented by this case, the Court of Chancery declined to hold up a derivative case to permit a books and records case to go first. In granting an immediate appeal, the Court recognized that the Supreme Court may want to clarify the law in this area.
ShareCourt Of Chancery Explains Class Representative Qualifications
New Jersey Carpenters Pension Fund v. infoGROUP, Inc., C.A. 5334-VCN (February 13, 2013)
This decision is a good review of the qualifications needed to serve as a class representative. Particularly noteworthy is its holding that merely voting in favor of the merger under attack is not an automatic disqualification. So too, the sale of the stock prior to the merger is not grounds for disqualifying a proposed class representative.
ShareCourt Of Chancery Denies Expedition Of Money Claim
Intrepid Investments LLC v. Selling Source LLC, C.A. 8261-VCN (February 8, 2013)
It is not always easy to have the Court of Chancey expedite your case just because you ask for an injunction. Here, the Court denied expedition because the plaintiff had waited 5 months to ask for it and because the plaintiff's claim was really just for damages.
ShareDistrict Court Awards Damages Despite Unenforceable Contract Term
Vici Racing LLC v. T-Mobile USA Inc., Case No. 10-835-SLR (D. Del. February 8, 2013)
This case involves a classic mistake. The contract contained a severability clause that required a court to enforce the contract even if one of its provisions was unenforceable. The Court held that the marketing commitment of key importance to the defendant was not enforceable. But, as a result of the severability clause, the Court enforced the contract in favor of the plaintiff and awarded it damages. Hence, using form contract terms is not a good idea.
ShareMaster In Chancery Upholds Arbitration Award
Contract Precludes Litigation -- Almost
Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | January 30, 2013
Delaware law has long permitted parties to a contract to limit remedies for a breach of that contract. But many attorneys believed that no matter what the contract said, a remedy for acting in bad faith still survived and permitted a suit to enforce that remedy. That is still true, but only barely. For, as a recent Court of Chancery decision shows, even a claim for acting in bad faith may be severely limited.
This legal result began by at least by 2002. In that year, the Delaware Supreme Court suggested in Gotham Partners v. Hallwood Realty Partners, 817 A. 2d 160 (Del. 2002), that perhaps the parties to a limited partnership might be able to contract away "traditional notions of fiduciary duties." The Delaware General Assembly readily agreed, by amending the Delaware Limited Partnership Act to expressly permit waivers of any fiduciary duties owed by a general partner to the limited partner investors. Only the duty to act in good faith could not be waived under the Limited Partnership Act or the Limited Liability Company Act. More ›
ShareCourt Of Chancery Explains Perils Of LLC Agreements
Zimmerman v. Crothall, C.A. 6001-VCP (January 31, 2013)
The Delaware Supreme Court has made it clear that investors in LLCs get what they bargained for in their LLC agreement, but not much more. That seems attractive to those who manage LLCs because they feel they can limit their liabilities to investors by the terms of the LLC agreement. Yet, management may be overstating the benefits of the LLC form, as this decision points out.
In this case, very sophisticated counsel advised on how to issue additional interests in the LLC to raise more capital. Unfortunately, and despite being the drafter of the LLC agreement, he got it wrong and failed to follow the terms of the agreement. This points out that LLC agreements are often so complicated that compliance with their terms is tricky. Each agreement is individually crafted, unlike in a corporation where the statute generally spells out in well understood terms what are the rights and obligations of the investors and managers. These errors have happened time after time. Hence, use of the LLC or LLP form needs to be with great caution.
ShareCourt Of Chancery Limits Claims In Section 220 Cases
The Ravenswood Investment Company LP v. Winmill & Co. Incorporated, C.A. 7048-VCN (January 31, 2013)
In a books and records action, may the plaintiff also add a count for breach of duty? This decision holds that he cannot do so. After all, a books and records action is meant to be summarily litigated. That fast track cannot be achieved if other claims must also be decided at the same time.
ShareCourt Of Chancery Limits Fees For Unsuccessful Claims
Dawson v. Pittco Capital Partnership, C.A. 3148-VCN (January 31, 2013)
This decision affirms the rule that attorney fees should be apportioned between those claims that succeeded and those that did not.
ShareCourt Of Chancery Explains Effect Of Disinterested Director Approval
In re BJ's Wholesale Club Shareholders Litigation, C.A. 6623-VCN (January 31, 2013)
When a majority of a board of directors is not personally benefiting from a transaction they approve, the business judgment rule applies. How do you overcome that BJR? A plaintiff may do so by showing an "extreme set of facts" sufficient to support the inference the board acted in bad faith. In trying to do so, however, it is not enough to allege the board "should have known" the deal stunk. Instead the plaintiff needs to allege facts that show the board actually knew that the deal was not in their company's best interests.
ShareCourt Of Chancery Explains Promissory Fraud
Boulden v. Albiorix Inc., C.A. 7051-VCN (January 31, 2013, rev. Feb. 7, 2013)
Plaintiffs often try to allege fraud by claiming that the defendant made a promise that he did not intend to keep. As this decision points out, that mere allegation is not good enough to state a claim. Rather, the complaint must allege facts that support the allegation the promise was made all the while with the intent to not keep it. For example, if the promisor lacked the means to keep his promise or had no reasonable expectation of getting the means to do so, then it might be said he lied when he said what he could not deliver.
This decision also has an excellent analysis of the conspiracy theory of jurisdiction.
ShareCourt Of Chancery Explains Contract Damages
Henkel Corporation v. Innovative Brands Holdings LLC, C.A. 3663-VCN (January 31, 2013)
When a buyer breaches a contract to buy a business, how are the seller's damages to be calculated? This is not as easy as it sounds. For if the seller finds a new buyer and demands damages equal to any dimunition in the sale price, the defaulting buyer will claim the duty to mitigate requires the loss be offset by any income earned prior to the later successful sale. How do you decide what that is? This decision carefully analyzes this issue. The short answer is it depends on the conduct of the parties after the breach.
ShareCourt Of Chancery Explains Corporate Opportunity Doctrine
In Re MobilActive Media LLC, C.A. 5725-VCP (January 25, 2013)
This is an essential decision for anyone dealing with the corporate opportunity doctrine. Under that doctrine, a fiduciary who takes an opportunity that might have been instead given to his corporation (or LLC or LLP) is liable for any gain made by him as a result. One prime defense to such a claim is that the entity lacked the means to develop the opportunity itself and thus suffered no real harm when it lost that opportunity. This decision significantly undercuts that defense.
ShareWhat's Behind the Chancery Court's New Rule 5.1
Authored by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider | January 23, 2013
On January 1, Court of Chancery Rule 5.1 became effective, replacing the now-deleted Rule 5(g). The adoption of Rule 5.1 represents a fundamental change to most aspects of the handling of confidential filings in the Court of Chancery. As with any rule, the drafters attempted to craft the rule to account for almost all situations, cognizant of the fact that application of the rule likely would reveal unintended consequences that would need to be addressed in the future. Until the court has sufficient information to determine whether any amendments are necessary, an understanding of the purpose behind certain of the changes in the handling of confidential filings may help bridge any unintended gaps. While the factors listed below are by no means exhaustive, the key tenets behind Rule 5.1 should provide some guidance in uncertain situations. More ›
Share
