Posts from 2018

Court Of Chancery Admits Post-Signing Evidence

In re Appraisal of Jarden Corporation, C.A. 12456-VCS (September 7, 2018)

Appraisal cases often must deal with whether to admit evidence that deals with post-merger events. The argument is that those events show whether the predictions of future earnings are accurate measures of value. This decision deals with post-signing evidence but is nonetheless instructive of the Court’s general willingness to give such evidence the weight it deserves all things considered.

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Court Of Chancery Explains Privilege Limits Involving Corporate Investigations

Akorn Inc. v. Fresemus Kabi A.G., C.A. 2018-0300-JTL (May 22, 2018) and Sandys v. Pincus, C.A. 9512-CB (July 2, 2018)

Corporate investigations present complicated issue surrounding what must later be produced in litigation. Context means everything in those disputes. Discovery into the decision by a SLC is much more limited than in other litigation, for example. But these two transcript rulings are useful for their insights into how the Court of Chancery handles disputes over discovery into the investigation process. More ›

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Court Of Chancery Interprets Contract Rights Under Commercially Rational Test

QC Holdings Inc. v. Allconnect Inc., C.A. 2017-0715-JTL (August 27, 2018)

This decision on a undisputed factual record interpreted a contractual right to put stock by rejecting one side’s argument as “commercially irrational.”  It also held that the valid exercise of the put made the holder a creditor of the company entitled to enforce the put against the surviving party of a merger.

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Court Of Chancery Interprets Preferred Stock Rights

Cedarview Opportunities Master Fund L.P. v. Spanish Broadcasting System Inc. C.A. 2017-0785-AGB (August 27, 2018)

How to interpret the provisions of preferred stock is often a difficult task. Any preference must be spelled out and any doubts resolved against preferring one class of stock over common stock. This decision holds that the preferred stock must show evidence it was intended to a preference at least when the authorization for that stock is ambiguous. The decision also affirms that stockholder rights to inspect records cannot be taken away by a certificate of incorporation.

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Are Post-Merger Facts Ever Relevant?

Appraisal litigation is unique under Delaware law. In almost every instance you can think of, once an event provides a right to recover damages (such as a fire caused by negligence), what happens later is relevant to determining the amount of damages. For example, the actual future earnings of a business is relevant to a claim for lost profits. But, that is not always so in an appraisal case. There the valuation of the company involved is determined as of “the point just before the merger transaction ‘on the date of the merger,’” see Merion Capital v. Lender Processing Services, (Del. Ch. Dec. 16, 2016). More ›

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Delaware Superior Court Narrows Jurisdiction In Mass Tort Litigation

In Re: TALC Product Liability Litigation, C.A. N17C-03-054 TAL (September 10, 2018)

This is an important decision that applies recent United States Supreme Court jurisdiction cases to a non-resident’s Delaware complaint. While the opinion carefully reviews a string of such cases ending with Bristol-Meyers Squibb Co. v. Superior Court of California that is worth reading, the bottom line is that it holds that a non-resident of Delaware cannot bring a tort claim against a non-Delaware entity unless she can show its actions in Delaware that directly lead to her injury. This may effectively end the past practice of filing mass tort litigation in the Delaware Superior Court on behalf of non-residents of Delaware, at least against non-Delaware entities.

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Delaware District Court Explains Tolling Based on Books and Records Inspection

Norman v. Elkin, C.A. No. 06-005-LPS (D. Del. Sept. 4, 2018)

Litigation seeking to inspect a corporation’s records under Section 220 of the DGCL might toll the statute of limitations for certain claims under the right circumstances.  There are important limits to this form of tolling.  For example, it is not automatic and will only apply to claims that are the subject of the inspection demand.  This decision does a good job of explaining these limits and the factors a court will consider in determining whether inspection-based tolling should apply.  It otherwise examines and applies the law on the statute of limitations and issues of inquiry notice.

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Court of Chancery Addresses Contractual Fiduciary Duties, Secondary Liability, and Banker Liability in the MLP Context

Mesirov v. Enbridge Energy Company, C.A. No. 11314-VCS (Del. Ch. Aug. 29, 2018)

This is the latest decision in a long-running saga in the master limited partnership (MLP) context involving Enbridge Energy.  The Court of Chancery had previously dismissed the complaint for failure to state a claim.  The Delaware Supreme Court reversed that dismissal while providing important guidance on properly construing contractual fiduciary duties in the MLP context.  The defendants moved to dismiss the amended complaint on remand.  This is the Court of Chancery’s decision granting in part and denying in part that motion.  More ›

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Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims

In re Appraisal of Columbia Pipeline Group, Inc., C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018)

It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the inevitable exchange of commercially-sensitive information during the discovery process.  Those orders spell out how such information may or may not be disclosed, including in court filings, while adopting the standards and procedures reflected in the Court of Chancery rule on the topic, Rule 5.1.  More ›

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Delaware Superior Court Explains When Expert Opinion Is Admissible

The State of Delaware v. Card Complaint LLC, C.A. N13C-06-289 PRW CCLD (August 29, 2018)

This is an excellent summary of the law governing the admissibility of an expert opinion. It is particularly useful in dealing with non-scientific opinions that are based on experience in an industry.

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Morris James Named a Top Work Place for Mid-sized Employers in Delaware Eleventh Consecutive Year

Morris James was named a top work place for mid-sized employers in Delaware for the eleventh consecutive year.  This year's top workplace honor makes Morris James the only law firm in Delaware to be consistently top-ranked in the mid-sized employers category for the past eleven years. More ›

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Court of Chancery Authorizes Use of Extrinsic Evidence to Construe Preferred Stock Rights

Cedarview Opportunities Master Fund LP v. Spanish Broadcasting System Inc., C.A. No. 2017-0785-AGB (Del. Ch. Aug. 27, 2018)

Stock preferences are in derogation of the common law and thus strictly construed.  Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated.  But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.

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Court Of Chancery Explains How To Interpret Interlocking LLC Agreements

Godden v. Franco, C.A. 2018-0504-VCL (August 21, 2018)

When multiple LLC agreements for several entities contain provisions that relate across the entities, deciding how to interpret those provisions is a potential problem. As this decision points out, the separate identities of the entities need to be respected. Nonetheless, when the LLC agreements create contract rights, those rights can be enforced, just as a stockholders’ agreement can be enforced to require action by the signatories to the agreement.

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Court Of Chancery Explains How To Set A TRO Bond

Applied Energetics Inc. v. Farley, C.A. 2018-0489-TMR (August 14, 2018)

A plaintiff who obtains a TRO must post a bond to cover any damages the defendant may suffer from the TRO. How to calculate the amount of that bond is often difficult. This decision does a good job of explaining how to make that calculation.

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Court of Chancery Enforces Redemption Rights and Addresses the Potential Effect of a Merger on Previously-Exercised Put Rights

QC Holdings Inc. v. Allconnect Inc., C.A. No. 2017-0715-JTL (Del. Ch. Aug. 28, 2018)

This decision is necessary reading for drafters of redemption rights.  It involves the interpretation of a redemption rights agreement granting a stockholder the right to force the company to buy back its shares and some interplay between those put rights and the DGCL in the event of a merger.  More ›

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