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 169 posts from 2014.
Delaware Supreme Court Upholds Fee Shifting Bylaw
ATP Tour, Inc. v. Deutscher Tennis Bund, No. 534, 2013 (May 8, 2014)
This decision upholds a bylaw that requires the payment of attorneys' fees by a plaintiff stockholder or member in a non-stock corporation who sues a corporation or its directors and loses. The decision is limited to just the bare legal question presented and is careful to note that a bylaw adopted for an inequitable purpose may still be declared invalid. Nonetheless, it is not hard to predict that a host of similar bylaws will now be adopted by Delaware corporations. This decision is another in the line of decisions upholding bylaws that affect litigation, such as the forum selection bylaw also just upheld. How far this will go remains to be seen.
ShareCourt Of Chancery Explains Willie Gary
Riley v. Brocade Communications System Inc., C.A. 9486-VCN (May 6, 2014)
When a claim is subject to arbitration needs to be decided by either the court or the arbitrator, and the Willie Gary decision says who gets that honor. This decision explains how to apply Willie Gary.
ShareCourt Of Chancery Grants Discovery Of Arbitration Claim
New Continuum Holdings Corporation v. China/United Capital, LLC, C.A. 9589-VCN (May 6 2014)
This decision explains when a party may get discovery into the issue of whether a claim is subject to an arbitration clause.
ShareCourt Of Chancery Explains Relationship Of Pill Cases To Proxy Contests
Third Point LLC V. Ruprecht, C.A. 9469-VCP (May 2, 2014)
A poison pill may affect a proxy contest by limiting one side's ability to acquire stock to vote in its favor. But, as this important decision holds, the adoption of a pill is subject to the Unocal standard and not the more exacting Blasius "compelling justification" test. The opinion is also important for its exacting analysis of the justifications under Unocal to not waive a pill and to use a 2-level pill in the face of an imminent proxy contest.
ShareLessons for Controlling Stockholders in Squeeze-Out Mergers
Authored by Albert H. Manwaring, IV
This article was originally published in the Delaware Business Court Insider | April 30, 2014
In a comprehensive analysis of the standards of review, burdens of proof and potential damages implicated in a fiduciary-duty challenge to a squeeze-out merger, the Delaware Court of Chancery recently examined the harsh potential consequences for controlling shareholders who manipulate special board committees, the fairness opinions of their financial advisers, and proxy materials concerning the value of a company. More ›
ShareCourt Of Chancery Again Rejects Limits On Advancement Rights
Fillip v Centerstone Linen Services LLC, C.A. 8712-ML (May 1, 2014)
This is another case where a company tries to avoid its advancement obligation by arguing that the conduct in question did not arise out of the former officer's official duties, but instead arose under an employment or similar contract. That distinction just does not work and it did not work here. The decision is also interesting because it points out that advancement rights in an LLC are not limited by the statutory language of Section 145 of the DGCL dealing with actions in "defense."
ShareCourt Of Chancery Enforces Manager Rights In LLC
2009 Caiola Family Trust v. PWA LLC, C.A. 8028-VCP (April 30, 2014)
The language of an LLC agreement is all important in determining what it permits. This decision illustrates that point by holding that, under the LLC agreement involved, a 90% owner cannot remove the LLC manager. This seems counterintuitive. But that is the lesson of LLC law - you get what you agree to even if it is odd.
ShareCourt Of Chancery Retains Suit After Martinez Ruling
VTB Bank v. Navitron Projects Corp,. C.A. 8514-VCN (April 28, 2014)
After the Delaware Supreme Court's Martinez decision dismissing a case on forum grounds, some thought that Delaware might reject other cases as well. This decision limits Martinez's scope and makes it clear that Delaware entities will be subject to Delaware jurisdiction in the circumstances where the activities of the entity "implicates [the Court of Chancery's] fundamental and immutable responsibility to supervise the entities chartered and formed under Delaware law." While that mandate is clearly limited to some set of cases less than the universe of disputes a corporation may be subject to, what is covered remains to be seen.
ShareAre Noncompete Agreements Only a Click Away?
Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | April 16, 2014
Delaware continues to expand its enforcement of agreements not to compete with one's former employer. The latest step in this path to enforcement is the recognition that a noncompete and nonsolicitation agreement may be entered into by a mere click of the "accept" button on a computer screen. The Delaware Court of Chancery just upheld such agreements in Newell Rubbermaid v. Storm, Del. Ch. C.A. 9398-VCN (March 27, 2014). The decision has serious implications for employees who may wish to quit their present jobs to pursue careers at an employer's competitor. More ›
ShareCCLD Explains The Borrowing Statute And Duplicative Claim Preclusion
Furnari v. Wallpang Inc., C.A. 13C-04-287 JRJ CCLD (Del. Super. April 16, 2014)
Delaware has a statue that requires a court to "borrow" the statue of limitations of another jurisdiction when a plaintiff seeks to avoid a limitations problem elsewhere by suing in Delaware. This decision explains when that statute will apply. The decision is also helpful in explaining when duplicative claims cannot be brought. That usually is the case when a plaintiff tries to expand a breach of contract action into a tort claim, for example.
ShareCourt Of Chancery Again Explains Revlon-Bad Faith Analysis
Houseman v Sagerman, C.A. 8897-VCG (April 16, 2014)
This decision expands on the holdings of recent Court of Chancery decisions, one of which held directors not liable for breaches of their duty of care in a Revlon case and another that held an investment advisor liable for aiding and abetting the directors' breaches of duty. Thus, the Court explained that a typical exculpatory charter provision eliminates breaches of duty claims absent a "knowingly and completely failed" observance of a board's duty to get the best price for the sale of the company. Only such a complete failure is enough to state a breach of the duty of loyalty. Second, this decision limits the impact of the Rural Metro decision that held an investment advisor liable on an aiding and abetting claim. Rather, the degree of culpability must be much greater for such a claim to survive.
ShareCourt Of Chancery Explains Shared Causation In Fee Award
This decision explains how to calculate an attorney fee when there are 2 potential causes for a favorable settlement of a class action. The fee is divided based on the Court's views as to what is fair. A class member who hires its own attorney who is a cause of much of the recovery is not for that reason alone able to avoid a fee award to class counsel.
ShareGuidance on Use of Deposition Testimony in Motions to Dismiss
Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | April 9, 2014
The record upon which a court evaluates a motion to dismiss is often outcome-determinative. If based upon the well-pleaded allegations of a plaintiff's complaint, the court cannot determine that it is reasonably conceivable that the plaintiff may obtain a recovery, the court must dismiss the complaint. As a general matter, the plaintiff controls the record by virtue of how and what the plaintiff pleads. The Delaware Supreme Court has held, however, that the record fairly before the court on a motion to dismiss may include documents "integral to and incorporated into the complaint." The recent Court of Chancery decision in In re Gardner Denver Shareholders Litigation, Cons. C. A. No. 8505-VCN (Feb. 21, 2014), provides useful guidance concerning how the Court of Chancery will treat deposition transcripts where, as is happening more frequently, a plaintiff pursues but abandons a preliminary injunction after deposing several witnesses, and then amends the complaint by selectively quoting from the deposition record. More ›
ShareCourt Of Chancery Explains Standard of Review
Chen v. Howard-Anderson, C.A. 5878-VCL (March 8, 2014)
This is a critical decision to understanding the standard of review that the Court of Chancery will apply to a board's actions in selling its company. The decision makes 3 important points. First, the Court explains how and when the enhanced scrutiny standard of review applies and what that standard's "reasonableness" test means. The decision's explanation that the "rational basis" test of the business judgment rule standard differs from the "reasonableness" test of enhanced scrutiny is particularly helpful. Second, the decision explains when conduct that is wrong under a reasonable basis test is not so bad as to avoid exculpation under the director exculpation statute. This clarifies how far the prior law went in limiting exculpation when the conduct at issue showed an "utter failure" to follow one's duties. Third, the decision points out that if the board is aware that disclosure materials are inaccurate, then it may not be exculpated because the failure to correct the errors goes beyond a simple duty of care violation.
ShareCourt Of Chancery Issues Novel Injunction
Numoda Corporation v. Numoda Technologies Inc., C.A. 9163-VCN (March 27, 2014)
It is common in a Section 225 action seeking the determination of the composition of a company's board of directors for the court to issue a status quo order. Those orders stop the company from taking any actions out-of-the-ordinary course of business until the Court decides who is really in control. Here the Court issued a similar order pending a decision on whether the plaintiff was entitled to have stock issued to it to take control. This extends the use of status quo orders to a new realm.
Share
