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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 116 posts by Bryan Townsend.
Chancery Finds “Constellation” of Personal and Professional Relations Between Directors and Controlling Stockholder Excuses Demand
A stockholder plaintiff seeking to bring a derivative claim on behalf of a corporation must first demand authorization from the board of directors or allege why making such a demand would be futile due to the board’s assumed partiality under the alleged facts and circumstances. One way of establishing demand futility is alleging with particularity significant personal or professional ties to an interested party, like a conflicted controlling stockholder. BGC Partners illustrates the type and degree of relationships that may excuse the pre-suit demand requirement and overcome a motion to dismiss under Court of Chancery Rule 23.1. This is a developing area of Delaware law, arguably involving a heightened sensitivity to the significance of personal relationships. As BGC Partners observes, the Delaware Supreme Court has reversed Court of Chancery findings of director independence in the demand futility context three times in the past four years. More ›
ShareCourt of Chancery Finds Agreements Unenforceable for Lack of Assent, Dismisses Remaining Claims for Lack of Personal Jurisdiction
Eagle Force Holdings, LLC v. Campbell, C.A. No. 10803-VCMR (Del. Ch. Aug. 29, 2019).
Parties to a contract must provide evidence of an overt manifestation of assent for a contract to be enforceable under Delaware law. Upon remand from the Delaware Supreme Court, the Court of Chancery found such assent to be lacking and dismissed the remaining claims for lack of personal jurisdiction. More ›
ShareDelaware Supreme Court Clarifies: No Presumption of Confidentiality for Documents Produced Pursuant to a Books and Records Request
Tiger v. Boast Apparel, Inc., C.A. No. 23, 2019 (Del. Aug. 7, 2019).
The Delaware Supreme Court held that documents produced pursuant to a request for books and records under Section 220 of the Delaware General Corporation Law are not subject to a presumption of confidentiality. More ›
ShareCourt of Chancery Dissolves Limited Partnership Upon Finding General Partner Unable To Achieve Its Business Purpose
GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, C.A. No. 2018-0840-SG (Del. Ch. Aug. 7, 2019).
The equitable remedy of dissolution is extraordinary. Given the extraordinary record before it, and the abundance of evidence that the general partner could not operate the business, the Court granted plaintiffs’ petition for dissolution. More ›
ShareChancery Determines Appraisal “Fair Value” Below Merger Consideration, Questions Judicial Notice of Valuation Scholarship
In re Appraisal of Jarden Corp., Consol. C.A. No. 12456-VCS (Del. Ch. July 19, 2019).
This decision presents another cautionary tale for stockholders of a target public company who consider seeking statutory appraisal instead of accepting the merger consideration. More ›
ShareChancery Awards $3 Million in Attorneys’ Fees Following Invalidation of Charters’ Forum-Selection Provisions for Securities Act Claims
Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. Jul. 8, 2019).
In December 2018, the Court of Chancery held that forum-selection provisions in three corporate charters were ineffective. The provisions had required any claim under the Securities Act of 1933 to be filed in federal court (“Federal Forum Provisions”). The Court held them to be invalid, because federal securities claims were not “internal affairs” claims for which a Delaware corporation’s charter may choose a forum. Seven months later, the Court granted an application for an all-in award of attorneys’ fees and expenses in the amount of $3 million under the corporate benefit doctrine. Defendants had argued that the award should not exceed $364,723 plus expenses. Reasoning that “the plaintiff achieved a significant and substantive result by successfully invalidating the Federal Forum Provisions,” the Court turned to Delaware precedent to determine an appropriate fee for this kind of non-monetary relief. More ›
ShareDelaware Court of Chancery Orders Full Public Access to Confidential Filings Months After Settlement
Universal public access to court filings is the default and confidentiality is the exception. Rule 5.1 of the Court of Chancery provides for the filing of confidential information by litigants. In this decision, the Court makes clear that a violation of Rule 5.1 may result in the loss of confidential treatment. More ›
ShareChancery Sustains Claims Against Special Committee Members Concerning Stock Incentive Plan
Reith v. Lichtenstein, C.A. No. 2018-0277-MTZ (Del. Ch. June 28, 2019).
As Reith explains, directors may lose the protections of the business judgment rule and expose themselves to liability if they knowingly or deliberately fail to adhere to the terms of a stock incentive plan, such as by violating a clear and unambiguous provision. And, as Reith illustrates, Delaware courts may consider a company’s prior public disclosures about a plan’s terms in addressing that issue. More ›
ShareChancery Declines to Dismiss Derivative Claim Challenging Compensation of Goldman Sachs Directors
Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. May 31, 2019).
Recently, the Delaware Supreme Court held in In re Investors Bancorp, Inc. Stockholder Litigation, 177 A.3d 1208 (Del. 2017) that stockholder approval of director self-compensation plans will shift the standard of review from entire fairness to business judgment only where the stockholders approve a plan that does not involve future director discretion in setting the compensation amounts. In Stein, the Court of Chancery applies Investors Bancorp and declines to dismiss a disloyal compensation claim, notwithstanding that the terms of the challenged compensation plans sought to absolve the directors of self-dealing claims and even though the plaintiff attacked only the compensation amount, not the process by which it was determined. More ›
ShareDelaware Supreme Court Overturns Nominal Damages Award and Explains the “Efficient Breach” Theory
Leaf Invenergy Co. v. Invenergy Renewables LLC, No. 308, 2018 (Del. May 2, 2019).
Limited Delaware case law exists on the “efficient breach” theory. A new Delaware Supreme Court ruling examines that theory and confirms it is not a bar to recovery or an avenue for modifying damages calculations. Rather, efficient breach is the legal concept that a party might find an intentional breach to be economically advantageous if the breach’s benefits exceed the damages it might owe. Efficient breach aside, the task of Delaware courts is to interpret contracts to fulfill parties’ shared expectations at time of contracting. That is a concept the Supreme Court emphasized when reversing the Court of Chancery’s nominal damages award in this case. More ›
ShareDelaware Superior Court Ruling Provides Guidance for Pre-Trial Motion Practice and Trial Preparation
In re Bracket Holding Corp. Litig., Consol. C.A. No. N15C-02-233 WCC CCLD.
In this decision arising out of the Defendants’ Motions in Limine, the Superior Court’s Complex Commercial Litigation Division provides useful insight regarding pre-trial motion practice and trial preparation. By way of brief background, in 2013, plaintiff purchased a pharmaceutical services provider from defendants. The securities purchase agreement (SPA) included express representations and warranties related to financial statements. Over the course of several months after purchase, plaintiff discovered what it alleges were improper accounting practices that constituted fraud and that had caused it to overpay for the provider to the tune of $50 million. More ›
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