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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 546 posts by Albert J. Carroll.
Court Of Chancery Decides If Arbitration Required When Arbitration Clause Not In One Of Two Contracts
Align Strategic Partners LLC v. Moesser, C.A. No. 11240-VCN (February 26, 2016)
When only one of two related contracts has an arbitration clause, the Court can still require arbitration of a dispute under the contract lacking that clause. The question is whether the two contracts deal with the same subject matter and that is not as easy to decide as it may appear. For example, if the two contracts need to be read together to accomplish the parties’ intent, such as where one contract defines certain necessary terms while the other does not, then an arbitration clause in one contract may require arbitration of disputes that nominally arise under the other contract as well. While employing Illinois law, this decision helps guide how to determine if the relationship between the contracts warrants compelling arbitration.
ShareCourt Of Chancery Limits Attorney Charging Lien
Sutherland v. Sutherland, C.A. No 2399-VCN (February 26, 2016)
An “attorney charging lien” allows an attorney to recover compensation for his services from a fund recovered with his assistance. This decision limits the application of such liens to recoveries where the attorney has not already been paid for the work that led to that recovery. In other words, if you have already been paid for the work that generated a fund, you cannot lien that fund for other work that did not generate it, even if it occurred in the same litigation.
ShareCourt Of Chancery Applies Demand Analysis To Changed Board
Sandys v. Pincus, C.A. 9512-CB (February 29, 2016)
This is an interesting decision because it applies the demand rules in a derivative case to an odd situation — when some but not all of the board members have changed between when the challenged conduct occurred and when the complaint was filed. The Court held that the demand rules need to be applied to the board in place when the complaint was filed. The changes in the board’s composition made it necessary for the analysis to consider the relationships of new to old board members, particularly as to the independence of the new members. The decision also is a good source for the facts that determine independence. Such facts as common board memberships or how the stock exchange rules apply do not show a lack of independence in themselves.
ShareCourt of Chancery Explains Anti-Reliance Law
FdG Logistics LLC v. A&R Logistics Holdings Inc., C.A. 9706-CB (February 23, 2016)
Merger or company sale agreements frequently include clauses limiting what a buyer may rely upon after due diligence, particularly when there is some hold back of the merger or sale consideration that the buyer may seek to retain after the closing based on a misrepresentation claim. But as this careful decision explains, the elimination of reliance claims needs to be in a clause applying to the buyer, not just in a clause that tries to limit the representations from the seller. These clauses need very careful drafting and this decision explains how that should be done.
ShareCourt Of Chancery Calculates Mootness Benefit In Post-Trulia Decision
Louisiana Municipal Police Employees’ Retirement System v. Black, C.A. 9410-VCN (February 19, 2016)
This is an interesting decision for two reasons. First, the decision awards a mootness fee for disclosures and changes to deal protection measures in a merger gone bust. Thus, the opinion is useful precedent in the post-Trulia world, where mootness fee applications are one of the two optimal methods for adjudicating disclosure claims. More ›
ShareCourt of Chancery Approves Disclosure Settlement Post-Trulia and Finds Management Projections Plainly Material
In re BTU International, Inc. Stockholders Litigation, Consol. C.A. No. 10310-CB (Del. Ch. Feb. 18, 2016)(Transcript)
As detailed in a prior post (available here), the ruling in In re Trulia, Inc. Stockholders Litigation, 2016 WL 270821 (Del. Ch. Jan. 22, 2016) changed the legal landscape for so-called disclosure settlements. Among other things, Trulia holds that disclosures must be “plainly material” to support a disclosure settlement – meaning that it “should not be a close call that the supplemental information is material as that term is defined under Delaware law.” Exactly what disclosures fit into that category remained an open question. More ›
ShareCourt Of Chancery Explains Inspection Rights In An LLC
RED Capital Investment L.P. v. RED Partner LLC, C.A. 11575-VCN (February 11, 2016)
This is an interesting decision because it explains inspection rights in the LLC context under the two different standards set out in Section 18-305(a) and (b) of the LLC Act. As expected, it is better to seek inspection as a manager than as a member. Managers have similar “unfettered” access to company books and records as corporate directors, absent restrictions in the LLC agreement. Also notable, inspection rights may include the books and records of subsidiaries, under the right circumstances.
ShareCourt Of Chancery Explains Section 115
Bonanno v. VTB Holdings Inc., C.A. 10681-VCN (February 8, 2016)
Section 115 of the Delaware General Corporation Law addresses forum selection provisions in corporate charters or bylaws. This decision explains how a contract may also select a forum, how to interpret such a contract and how such contractual provisions may be incorporated into other contracts.
ShareCourt Of Chancery Explains When Disclosures Required Absent A Stockholder Vote
Doppelt v. Windstream Holdings Inc., C.A. 10629-VCN (February 5, 2016)
This is an interesting decision for two reasons. First, it explains when directors might have a duty to cause the company to make disclosures to the stockholders about transactions that do not require the stockholders’ vote. Briefly, when a transaction not requiring a stockholders vote is so related to a transaction requiring their vote that the two matters are tied together, then the stockholders are entitled to be fully informed about both matters. More ›
ShareCourt Of Chancery Imposes An “Incorporation Condition” On A Stockholder’s Books And Records Inspection
Amalgamated Bank v. Yahoo! Inc., C.A. 10774-VCL (February 2, 2016)
This is a precedent-setting decision in the books and records context. In it, the Court imposes an “Incorporation Condition” on the stockholder’s inspection. That is, a stockholder who establishes a credible basis to inspect corporate records for the purpose of investigating alleged wrongdoing must agree -- as a condition to the inspection -- that all the documents it inspects will be deemed incorporated by reference in any later-filed derivative complaint. More ›
ShareCourt Of Chancery Addresses M&A Discovery
Hamilton Partners L.P. v. Highland Capital Management L.P., C.A. 6547-VCN (February 2, 2016)
Discovery of financial information in M&A litigation, including appraisal actions, often involves two issues: (1) how far back before the transaction should there be discovery and (2) is post-transaction discovery permitted? This decision provides some guidance on both issues.
ShareCourt Of Chancery Explains Director Right To Information And What Communications Qualify As Corporate Books and Records
Chammas v. NavLink, Inc., C.A. 11265-VCN (February 1, 2016)
This is one of those scarce cases dealing with director access to a corporation’s books and records. After all, Delaware law provides directors with an almost unlimited right to a corporation’s records needed for them to exercise their fiduciary duties. Hence, these cases are rare. More ›
ShareCourt Of Chancery Explains Section 205 Jurisdiction
Knoll Capital Management LP v. Advaxis Inc., C.A. 11417-VCN (January 29, 2016)
Under the fairly new provisions of Section 205 of the DGCL, the Court may validate certain “defective corporate acts,” including “any act or transaction purportedly taken by or on behalf of the corporation that is … within the power of a corporation …, but is void or voidable due to a failure of authorization.” More ›
ShareCourt Of Chancery Dismisses Case For Failure To Pursue Records
Thermopylae Capital Partners LP v. Simbol, Inc., C.A. 10619-VCG (January 29, 2016)
The Court of Chancery expects a plaintiff to supply those facts necessary to state a claim in reasonable detail, particularly when those essential facts might be obtained by an inspection of an entity’s records. Here the Court dismissed a complaint for its failure to state those facts that would have been evident from a records inspection and when the absence of those facts made the complaint too difficult to understand.
ShareCourt Of Chancery Explains When A Fee Award Is Timely
Avaya Inc. v. Charter Communications Holding Company LLC, C.A. 10568-VCN (January 29, 2016)
Normally, the Court of Chancery does not favor fee applications before the litigation is completed. When, as here, the underlying instrument that provides for a fee award does permit such an application, the Court may grant it even when there is litigation between the same parties pending elsewhere.
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