Albert J. Carroll

Chancery Denies Claim Arising Out of Controller’s Announced Intention to Oppose a Transaction Unfavorable to His Interests

RCS Creditor Trust v. Schorsch et al., C.A. No: 2017-0178-SG (Del. Ch. Mar. 18, 2021)
Controlling shareholders of a Delaware corporation owe fiduciaries duties, but those duties do not require controllers to sacrifice contract rights or to vote altruistically. In the Court of Chancery’s recent decision in RCS Creditor Trust v. Schorsch et al., the Court affirmed this proposition, holding that where a special committee and its review process were otherwise independent, a controlling shareholder did not breach his fiduciary duties or improperly influence the committee by sharing how he planned to vote in connection with two proposed, competing transactions. More ›

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Chancery Enjoins Prosecution of Fraudulent Inducement and Declaratory Judgment Claims Based on Exclusive Delaware Forum Provision

SPay, Inc. v. Stack Media Inc. k/n/a JLC2011, Inc., et al., CA No. 2020-0540-JRS (Del. Ch. Mar. 23, 2021)
To obtain a preliminary anti-suit injunction, a movant must show (1) a reasonable likelihood of success on the merits, (2) irreparable harm absent an injunction, and (3) the balance of hardships tips in its favor. Although the Court of Chancery does not grant anti-suit injunctions lightly, it will do so when a party to a valid and absolutely clear forum selection clause attempts to litigate covered claims outside of the parties’ chosen forum. More ›

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Chancery Appoints Amicus Curaie to Provide Independent Guidance Regarding Unopposed Petition to Revive Defunct Corporation for Use as a Blank Check Entity

In re Forum Mobile, Inc., C.A. 2020-0346-JTL (Del. Ch. Mar. 18, 2021)

The Court of Chancery has the inherent authority to appoint an amicus curaie if the Court believes it would benefit from a more fulsome presentation of the issues. This case presents that situation: an unopposed petition seeking relief that, on its face, appears contrary to the Court’s prior decisions and to Delaware’s public policy. More ›

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Chancery Finds Implied-in-Fact LLC Agreement

Robinson v. Darbeau, C.A. No: 2019-0853-KSJM (Del. Ch. Mar. 1, 2021)

As Robinson v. Darbeau demonstrates, Delaware law recognizes implied limited liability company agreements. Plaintiff operated a daycare as a sole proprietor and without any formally organized business entity. After Plaintiff began a personal relationship with Defendant, Defendant became involved in day-to-day activities at the daycare, invested in the business (including through the co-purchase of the property where the daycare was operated) and was held out publicly as the daycare’s co-director. Through the use of an online incorporator, and with Defendant’s assistance, Plaintiff filed a certificate of formation for a Delaware limited liability company. The certificate listed both parties as members (allegedly without Plaintiff’s knowledge) and further provided that management of the company was vested in the members. No written LLC agreement was ever executed. More ›

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Superior Court Applies “Law Most Favorable” Choice of Law Provision and Finds Investment Fund’s Settlement of a Fraudulent Transfer Claim Was an Insurable Loss

Sycamore Partners Management, L.P. v. Endurance American Insurance Company, C.A. No. N18C-09-211 AML CCLD (Del. Super. Feb. 26, 2021)

The bankruptcy estate of Nine West accused investment firm Sycamore Partners of structuring transactions involving Nine West in such a manner as to constitute a fraudulent transfer, with too much debt burdening the entity after Sycamore Partners sold off certain prime assets. Sycamore Partners settled such claims for a payment of $120 million to the bankruptcy estate, and then sought coverage for the settlement from its carriers. More ›

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Chancery Grants Inspection Demand Relying on a Short-Seller’s Report

Jacob v. Bloom Energy Corp., C.A. No. 2020-0023-JRS (Del. Ch. Feb. 25, 2021)

In a post-trial opinion in this books-and-records action pursuant to 8 Del. C. § 220, the Court of Chancery granted a stockholder’s demand to inspect the records of Bloom Energy Corporation (“Bloom”) for the purpose of investigating mismanagement and wrongdoing respecting Bloom’s alleged financial and other misstatements concerning the performance of its self-described clean, sustainable and green energy alternative. The inspection demand drew heavily from a thoroughly researched report published by a short seller, Hindenburg Research (the “Hindenburg Report”), which concluded that “Bloom’s technology is not sustainable, clean, green, or remotely profitable." The publication of the Hindenburg Report prompted Bloom to file a Form 8-K with the SEC responding to the report and in a separate filing Bloom eventually acknowledged that it had misstated its financials in some respects in prior reporting periods. More ›

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Chancery Dismisses Derivative Breach of Contract Claim Against Directors for Alleged Violations of Certificate of Incorporation

Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021)

A corporate charter represents a contractual agreement between the corporation and its stockholders. In Lacey, the Court of Chancery addressed whether a breach of contract claim for damages based on an alleged violation of a provision in the certificate of incorporation could be brought derivatively against director defendants. More ›

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Superior Court Addresses Scope of Privilege Waiver in Dispute Involving The American Bottling Company, Coke, and Bodyarmor

The American Bottling Co. v. BA Sports Nutrition, LLC et. al, C.A. No: N19C-03-048-AML CCLD (Del. Super. Feb. 11, 2021)

Delaware courts generally uphold the attorney-client privilege, including by recognizing waivers that are limited in scope. But they also police selective disclosures to ensure fairness using doctrines like the “partial waiver doctrine,” under which a partial disclosure of a privileged communication may waive privilege as to the entire communication, and the “at issue” exception, under which privilege may be waived by injecting a particular privileged communication or broader issue into the litigation. Applying these doctrines in The American Bottling Company decision, the Delaware Superior Court’s Complex Commercial Litigation Division defined the scope of a party’s tactical waiver broader than that party contended was appropriate. More ›

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Chancery Sustains Claims Against CBS Fiduciaries Concerning CBS-Viacom Merger, While Questioning the Viability of “Holder” Claims Under Delaware Law

In re CBS Corp. S’holder Class & Deriv. Litig., C.A. No. 2020-0111-JRS (Del. Ch. Jan. 27, 2021)

This decision is one of several by the Delaware Court of Chancery arising out of efforts to merge CBS Corporation and Viacom by the companies’ controlling stockholder—National Amusements, Inc., controlled by Shari Redstone. Recently, in In re Viacom Inc. Stockholders Litigation, 2020 WL 7711128 (Del. Ch. Dec. 29, 2020), the Court upheld claims by the Viacom stockholders against Viacom fiduciaries arising out of the CBS-Viacom merger. This decision is the flipside of that same coin, with the Court upholding claims by the CBS stockholders against CBS fiduciaries, including special transaction committee members, arising out of the same merger. More ›

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Chancery Applies Forum Non Conveniens Analysis to Grant Partial Stay of Dispute Between LLCs and Former Manager

AG Resource Holdings, LLC v. Thomas Badford Terral, C.A. No. 2020-0850-JRS (Feb. 10, 2021)

In AG Resource, the Court of Chancery was tasked with determining whether it or a Louisiana state court should resolve similar claims filed at nearly the same time in each forum. Affording neither suit first-filed status, the Court applied a forum non conveniens analysis using the Cryo-Maid factors and split the claims, finding that Louisiana had a greater interest in resolving claims relating to provisions in an employment agreement, but Delaware had a greater interest in resolving a claim implicating the internal affairs of a Delaware LLC. More ›

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Chancery Allows McDonald’s to Pursue Claims Against Ex-CEO, Finding Separation Agreement’s Integration Clause Does Not Bar Them

McDonald’s Corp. v. Easterbrook, C.A. 2020-0658-JRS (Del. Ch. Feb. 2, 2021)

Delaware has a strong public policy against fraud. Consequently, parties who seek to bar extra-contractual fraud claims must expressly provide in their agreement that neither is relying upon the other party’s extra-contractual representations. As this case confirms, a standard integration clause, without clear anti-reliance language, is insufficient to bar such claims. More ›

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Chancery Applies Unclean Hands Doctrine to Prevent a Trustee from Rescinding the Decanting of a Trust

In the Matter of: The Niki and Darren Irrevocable Trust and the N and D Delaware Irrevocable Trust, C.A. No. 2019-0302-SG (Del. Ch. Feb. 4, 2021)

Delaware’s decanting statute allows a trustee to “decant” a trust by “pouring” the corpus out into a new modified trust. But, to do so, a trustee must have been able to invade the trust principal under the original trust’s terms, and the second trust’s terms must be substantially the same in its treatment of beneficiaries. More ›

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Chancery Sustains Claims Against Target’s CEO, Target’s Financial Advisor, and Acquirer for Allegedly Covertly Steering Merger Bidding Process

Firefighters’ Pension System of The City of Kansas City, Missouri Trust v. Presidio, Inc., C.A. No. 2019-0839-JTL (Del. Ch. Jan. 29, 2021)

Presidio illustrates potential pitfalls for parties in the M&A process, including executives managing personal interests in potential post-transaction employment while negotiating a deal, financial advisors with future business interests in mind while controlling competitive offer information, and acquirers potentially aware of a bidding process being steered in their direction. More ›

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Delaware Supreme Court Concludes Out-of-Pocket Damages Are the Default Remedy for Fraudulent Misrepresentation Absent an Enforceable Agreement

LCT Capital, LLC v. NGL Energy Partners, LLP, App. Nos. 565,2019 & 568,2019 (Del. Jan. 28, 2021)

Delaware law recognizes both benefit-of-the-bargain damages and out-of-pocket damages as remedies for fraudulent misrepresentation, but the law was unsettled whether benefit-of-the-bargain damages were available absent an enforceable agreement. Here, the Delaware Supreme Court confirms that out-of-pocket damages are the default remedy in the absence of an agreement. More ›

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Chancery Construes Notice Provisions Associated With Escrowed Funds Under an Asset Purchase Agreement

Schillinger Genetics, Inc. v. Benson Hill Seeds, Inc., C.A. No. 2020-0260-MTZ (Del. Ch. Feb. 1, 2021)

Delaware courts will apply the plain terms of an unambiguous asset purchase agreement (“APA”), including its provisions governing notices and the release of escrowed funds. More ›

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