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 546 posts by Albert J. Carroll.
Court Of Chancery Dismisses Post-Closing Claims Under Corwin
In re OM Group Inc. Stockholders Litigation, C.A. 11216-VCS (October 12, 2016)
Under the recent Corwin decision, a fully-informed vote by uncoerced and disinterested stockholders to approve a merger invokes the business judgment rule and effectively precludes almost any claim the merger was improper. This decision does a very good job of explaining when proxy disclosures are adequate to invoke Corwin. Here, the alleged disclosure violations concerned (i) information regarding a competing bid, (ii) potential conflicts involving one director, and (iii) the banker’s compensation and potential conflicts.
ShareCourt of Chancery Explains When Corporate Overpayment Claims Require Demand Futility
The issuance of additional stock in exchange for less than fair value typically is a harm falling on the company, and hence gives rise to a derivative claim. But, such a claim might be dual natured – partially direct and partially derivative – when a controlling stockholder has been benefited, or where the board is not independent. The question for dual-natured claims is whether they remain subject to the usual Rule 23.1 test for derivative claims: is pre-suit demand on the board excused? Here, Vice Chancellor Montgomery-Reeves adopts the view endorsed by Vice Chancellor Laster in In re El Paso Pipeline Partners, L.P. Derivative Litigation, 132 A.3d 67, 75, 105 (Del. Ch. 2015), and applies the Rule 23.1 test to dual-natured corporate overpayment claims. Had the issue been whether the claims were extinguished by a merger, then the Court would have focused on the direct nature of the claims for standing purposes.
ShareCourt Of Chancery Details Application of M&F Worldwide Criteria
In re Books-A-Million Inc. Stockholders Litigation, C.A. 11343-VCL (October 10, 2016)
A merger approved in accordance with the criteria set out in the M&F Worldwide decision is subject to the business judgment standard of review, and vulnerable to attack only if its terms are so extreme as to constitute waste. This decision does a good job of explaining how the M&F Worldwide criteria are to be applied to a given set of facts at the motion to dismiss stage.
ShareDelaware District Court Finds Duty to Defend Under Homeowner’s Insurance Policy
Liberty Ins. Corp. v. Korn, Civ. No. 15-332-LPS (D. Del. Sept. 27, 2016)
The backdrop to this decision is an interesting and unfortunate one involving a divorce, allegations of illegal obscene material possessed by the former husband, followed by a civil lawsuit between the former spouses after the former husband was acquitted. Under the facts of this case, the Court finds the homeowner insurance provider has a duty to defend the former wife given the allegations of intentional and negligent conduct in her providing a harddrive and statements to the authorities about her former husband, which allegedly led to his physical injury.
ShareDelaware District Court Finds That Controlling Stockholder Claim Falls Outside Of Forum Selection Bylaw
Anderson v. GTCR, LLC, C.A. No. 16-10-LPS (D. Del. Sept. 29, 2016)
Forum selection bylaws are a powerful tool for companies to avoid the burdens of multi-forum litigation. But those bylaws only cover the claims falling within their terms. Where, as here, the bylaw only covers fiduciary duty claims against officers and directors, the bylaw will not be enforced for a fiduciary duty claim against a controlling stockholder.
ShareDelaware District Court Examines An Officer’s Fiduciary Duties When Projecting Revenues
Palmer v. Reali, Civ. No. 15-994-SLR (D. Del. Sept. 29, 2016)
Revenue projections are an inexact science, but they should have some basis in fact. Where they are alleged to be without a basis in reality, and indeed contrary to reality, a court may, as here, find that an officer’s fiduciary duties are implicated.
ShareCourt Of Chancery Holds Revlon Does Not Apply In Dissolution
The Huff Energy Fund L.P. v. Gershen, C.A. 11116-VCS (September 29, 2016)
This decision holds that Revlon duties are not implicated by a decision to liquidate a company. Hence, the Court will not scrutinize whether the board sought to get the best possible deal for company assets. The decision is also helpful in reminding us that a stockholders’ agreement is not necessarily binding on the company’s board of directors who have not signed the agreement in their personal capacity.
ShareCourt Of Chancery Holds Release Is Binding On A Non-Signatory
Geier v. Mozido LLC, C.A. 10931-VCS (September 29, 2016)
It may surprise many of us to know that a party who does not sign a general release may still be bound by its terms. Yet, that is what this decision holds under this case’s facts, which involved New York law and a release signed by the non-signatory’s affiliates. When the release binds those for whom the releasing party is authorized to act, carve out for those other parties is needed to avoid this result.
ShareCourt Of Chancery Upholds Indemnification Rights Not Expressly Subject To Arbitration
Jiampietro v. The Goldman Sachs Group Inc., C.A. 12601-VCL (Transcript, August 11, 2016)
Many employment agreements require that any dispute be arbitrated. But when the dispute is over the employee’s right to indemnification under bylaws or statute, then the arbitration clause better expressly cover that claimed right or otherwise the non-contractual right remains for a court to decide.
ShareSuperior Court Interprets New Jurisdiction Statute
JCM Innovation Corp. v. FL Acquisition Holdings Inc., C.A. N15C-10-255-EMD-CCLD (September 30, 2016)
Delaware recently amended Section 111 of the DGCL to confer jurisdiction on the Court of Chancery over certain actions arising out of asset sales. The intent was not to divest Superior Court of jurisdiction when the dispute was not really over how to interpret a sale or merger agreement’s terms, an area of Chancery expertise, but more of a straightforward asset sale. This decision explains that distinction.
ShareCourt Of Chancery Awards Fee In Mootness Case
Frechter v. Cryo-Cell International Inc., C.A. 11915-VCG (October 7, 2016)
Now that disclosure-only settlements seem almost a thing of the past, so-called “mootness” fee awards or settlements may become more common. These occur when the corporation moots the claim by doing what the plaintiff says should be done, such as removing an invalid bylaw that tries to shift attorney fees. However, attorney fees for such cases may not be as large as some might expect. This decision shows how the fee applications will be considered, with particular stress on the benefit resulting from the litigation.
ShareCourt Of Chancery Explains When To Expedite Disclosure Claims
Nguyen v. Barrett, C.A. 11511-VCG (September 28, 2016)
This decision is helpful in clarifying that claims alleging disclosure violations in a proxy statement need to be pressed before a merger closes. After the merger, those claims are for damages and all the hurdles for such a claim, such as the director exculpation provisions in most charters, will usually defeat the claim absent bad faith.
ShareCourt of Chancery Explains When Contract Bars Tort Claims and Arbitration
Flores v. Strauss Water Ltd., C.A. 11141-VCS (September 22, 2016)
This is a great decision on when the provisions of a contract bar tort claims of fraud and tortious interference. Briefly, when the contract speaks to an issue (e.g., expressly permitting certain acts, or imposing no duty to act), a party may not assert a tort claim that would deny the other party the benefit of its bargain. Further, when the contract between two parties selects a judicial forum for dispute resolution, arbitration is not part of the deal even if provided in a collateral contract involving one of those parties, at least not where there are no grounds for binding the non-signatory to the arbitration clause.
Court Of Chancery Rejects Fee Application From Litigation Funder
Judy v. Preferred Communication Systems, Inc., C.A. 4662-VCL (September 19, 2016)
This is a decision worth reading because it so well tells an interesting story. But its legal significance may well be that it holds a litigation funding firm is not entitled to an attorney fee award at least when it does not have a written agreement with a plaintiff entitling it to fees. Hence, if you are going to fund litigation, get the deal in writing. Of course, the decision has other important holdings, all set out in a good review of existing law on when fees may be awarded absent a contract.
ShareCourt Of Chancery Denies Inspection When The Board Has An Obvious Defense To A Claim Of Wrongdoing
In general, the bar is low for exercising inspection rights to investigate claims of wrongdoing. Plaintiffs need provide only some evidence to suggest a credible basis from which the Court can infer possible mismanagement or wrongdoing. But as this decision holds, when there is an obvious defense to the claim, such as the board’s reliance on an audit firm for a complicated accounting issue, inspection may be denied.
Share