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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Morris James Blogs
Showing 180 posts from 2018.
Delaware Superior Court Defines “Including”
Contracts often use the word “including” as part of a definition of a term. But is that to limit or enlarge what that term means? This decision holds that “including” is a term of enlargement or extension when used that way and grants a partial summary judgment based on that interpretation.
ShareChancery Rejects Merger Price as Indicator of Fair Value in Appraisal Based on Flaws in Sales Process
Appraisal is a limited statutory remedy that provides a Delaware general corporation’s stockholders, who dissent to the sufficiency of the merger price, with the right to have the Delaware Court of Chancery determine the “fair value” of their shares, 8 Del. C. Section 262. In determining fair value, the court must consider all relevant factors. While a single or multiple factors may be considered in the valuation, the court’s determination of the relevant factors must be grounded in the evidentiary record and “accepted financial principles.” More ›
Supreme Court of Delaware, Applying New York Law, finds that Settlement Amounts were not Uninsurable Disgorgement Under D&O Policies
The Supreme Court of Delaware affirmed the Superior Court’s finding that under the relevant D&O policies at issue, the settlement amounts TIAA-CREF paid to class action plaintiffs did not represent uninsurable disgorgement. In doing so, the Supreme Court distinguished certain cases from New York relied upon by the insurance companies that held settlements represented uninsurable disgorgement. Unlike the cases cited by the defendants, the settlement amounts at issue in the underlying cases here did not represent the return of ill-gotten gains. After this decision, whether or not a claim will be treated as uninsurable disgorgement should be an important consideration by defendants when deciding whether to settle merger objection litigation with a payment to the class.
ShareDelaware Superior Court Applies The McWane Doctrine
Lincoln Benefit Life Company v. Wilmington Trust N.A., C.A. N18C-01-082 EMD CCLD (July 31, 2018)
This decision has an extensive discussion of when a Delaware court will stay a matter in favor of litigation in another forum. Its application of the McWane doctrine governing stays of second filed cases is particularly helpful. Under the circumstances of this case, a stay in favor of the foreign jurisdiction was warranted.
ShareDelaware Superior Court Explains When Fraud Claims May Survive An Integration Clause
Flowshare, LLC v. Georesults Inc., C.A. N17C-07-227 EMD CCLD (July 25, 2018)
This decision explains when a fraud claim survives a motion to dismiss that is based on the argument that an integration clause in a contract precludes reliance on extra contractual representations. The short answer is that the contract must specifically deny reliance on those statements before the fraud claim is precluded.
ShareConnolly and Noreika Confirmed to Delaware District Court
The United States Senate confirmed Colm F. Connolly and Maryellen Noreika as US District Judges for the District of Delaware. Connolly and Noreika will fill the two vacancies resulting from the retirements of Judges Sue L. Robinson and Gregory M. Sleet.
The confirmations, announced via the Senate's website (found here), restore the District Court to a full bench of judges. More ›
ShareCourt of Chancery Addresses Contract Formation
This drama arises from a dispute involving the Curran Theatre in San Francisco. The decision mostly deals with when alleged conversations are not enough to constitute an enforceable contract, exhaustively reviewing the applicable law. Basically, if you want to enforce a promise, reduce it to a writing including all essential terms. Contemporaneous evidence of a sufficiently detailed promise is a potential fallback, but conflicting testimony about vague terms is not. More ›
ShareCourt of Chancery Clarifies Nature of Dilution Claims in Charter-Liberty Broadband Equity Issuance and Allows Derivative Challenge to Proceed
Sciabacucchi v. Liberty Broadband Corporation, C.A. No. 11418-VCG (Del. Ch. July 26, 2018)
This is the second notable decision arising out of litigation involving Charter Communication’s equity issuance to its largest stockholder, Liberty Broadband, in connection with other transactions. More ›
ShareCourt of Chancery Addresses Scope and Effect of Anti-Reliance Clauses
Chyronhego Corporation v. Wight, C.A. No. 2017-0548-SG (Del. Ch. July 31, 2018)
One of the more often litigated questions in Delaware is whether an integration or anti-reliance clause in an agreement bars claims for fraud based on alleged misrepresentations outside of those in the contract itself. This decision harmonizes the extensive case law on that subject. It also is useful in deciding when the actual representations in the agreement are sufficient to support a claim of fraud.
ShareCourt of Chancery Outlines Proof Sufficient for Books and Records Inspection and Permits Inspection of Emails
Mudrick Capital Management LP v. Globalstar Inc., C.A. No. 2018-0351-TMR (Del. Ch. July 30, 2018)
This decision reflects a good example of how summary books and records actions often proceed in the Court of Chancery: the parties typically work to narrow the issues for trial; the defendant often moots less objectionable records requests, many times in the weeks or days leading to trial; and the plaintiff often narrows disputed requests shortly before trial. Here, the parties did all the above. The petitioner thereafter carefully marshaled its evidence and showed why it should be permitted to inspect emails and other materials that are sometimes off limits in books and records actions. As the Court put it regarding email inspection, the petitioner established that “(1) the produced documents do not allow it to adequately address the stated purposes, and (2) the produced documents also suggest that other documents exist, including emails, that address the crux of the stated purposes and are unavailable from another source.”
ShareCourt of Chancery Finds Deal Price, Not Pre-Merger Market Price, Is Fair Value in Appraisal
In re Appraisal of Solera Holdings Inc., C.A. No. 12080-CB (Del. Ch. July 30, 2018)
This appraisal decision can be added to long list of decisions finding the deal price is the “best evidence” of the subject company’s fair value. That list should continue to grow since the Delaware Supreme Court heavily endorsed applying market efficiency principles in appraisal actions twice over the past year, in Dell and DFC. Important to Court’s finding here was an adequate deal process. More ›
ShareSo You Think You Know Delaware Law?
We all sometimes believe we know more than what we really do understand. Despite scholarly warnings about that tendency, it continues to mislead us. Now that same error is threatening the legal profession.
In the spring 2018 edition of ABA’s Journal of the Section of Litigation, Robert E. Shapiro writes “What’s So Special About a New Jersey Lawyer, Anyway.” Shapiro argues that there is no need to consult with a lawyer admitted in a jurisdiction other than your own when advising on a transaction governed by that foreign jurisdiction’s law. He claims: “Time was that a Delaware specialist was necessary to tell you about Delaware law. Now you can educate yourself. All Delaware law is no more than a few mouse clicks away on the internet.” More ›
ShareDelaware District Court Stays Twitter Derivative Case Pending Securities Action
In re Twitter Inc. Shareholder Derivative Litigation, C.A. No. 18-62-VAC-MPT (D. Del. July 23, 2018)
Several Court of Chancery decisions discuss the appropriateness of staying a derivative action pending a related securities laws action. Doing so relieves a company from the tension of having to defend against allegations of wrongdoing carried out by its directors or officers while at the same time a stockholder is seeking to prove those same claims against its directors and officers on its behalf. A stay also has the advantage of allowing the existence and size of any damages to be firmly established. This is another decision to add to that line of authority.
ShareCourt of Chancery Explains When Market and Deal Price Are Not Fair Value In Appraisals
This is an important appraisal decision because it examines, post-Dell and DFC, when the market price and deal price of the stock being appraised may not represent fair value. That might occur when, as here, there is a lack of evidence supporting the market’s efficiency for the subject corporation and the deal has process flaws. In such a scenario, the traditional valuation methodology of a discounted cash flow analysis—a battle of the experts—is likely to control. The deal price, however, still has value as a reality check on this analysis. The decision also is noteworthy for the petitioner’s use of expert testimony to show the flaws in the post-announcement market check. More ›
ShareCourt of Chancery Explains MFW Requirements
Olenik v. Lodzinski, C.A. No. 2017-0414-JRS (Del. Ch. July 20, 2018)
Transactions between a Delaware company and its controlling stockholder usually are subject to rigorous entire fairness review. But, under the MFW decision, even a merger with a controller may gain the benefit of deferential business judgment review. The MFW requirements include that the controller must condition the procession of the transaction ab initio on approval by a special committee. More ›
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