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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 380 posts by K. Tyler O'Connell.
Chancery Permits Service By Email Upon Singaporean Defendants
Skye Mineral Investors, LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. Jul. 15, 2021).
Delaware’s long-arm statute permits service of process on a foreign defendant by personal service, by mail with signed return receipt, by means authorized by the foreign jurisdiction where service is to occur, or “[a]s directed by a court.” 10 Del. C. § 3104(d). In this decision, the Court of Chancery confirms that each of the grounds is an independent basis for effecting service, and alternative methods of service are appropriate so long as they are “reasonably calculated to give actual notice.” More ›
Chancery Finds Equitable Defenses Bar LLC Dilution and Redomestication Claims, and Holds it Lacks Jurisdiction to Dissolve a Foreign Entity
In re Coinmint, LLC, C.A. No. 2019-0983-MTZ (Del. Ch. Aug. 12, 2021)
This decision illustrates that, in specific circumstances, the equitable defenses of waiver, acquiescence, and estoppel may preclude a party from challenging otherwise voidable actions. In addition, deciding an issue of first impression, the Court held that it lacks subject matter jurisdiction to equitably dissolve a non-Delaware business entity. More ›
Superior Court CCLD Dismisses Complaint Seeking Insurance Coverage for Appraisal Proceeding
Jarden, LLC v. ACE Am. Ins. Co., C.A. No. N20C-03-112 AML CCLD (Del. Super. July 30, 2021)
Director and corporate liability insurance coverage is determined by the specific language of the insurance policies. Last year, the Delaware Supreme Court held that an appraisal claim under 8 Del. C. § 262 was not a “securities claim” because it was not a claim for a “violation of law[,]” as required under that policy’s definition. See In re Solera Ins. Coverage Appeals, 240 A.3d 1121 (Del. 2020). This case addressed similar issues under somewhat different policy language. More ›
Superior Court’s Complex Commercial Litigation Division Reaffirms Delaware’s Public Policy Against Intra-Contractual Fraud
Aveanna Healthcare, LLC v. Epic/Freedom LLC, N20C-08-055 AML CCLD (July 29, 2021).
Under Delaware law, parties may agree contractually to disclaim reliance – and potential liability for fraud – based on false extra-contractual statements. Delaware public policy, however, does not allow a party to disclaim liability for fraudulent statements within the parties’ contract. In addition, an owner who knowingly causes a company to make misrepresentations may be personally liable for fraud, even though an agreement provides such representations are made by “the company.” More ›
Chancery Grants Special Litigation Committee’s Zapata Motion, Finds Committee Was Sufficiently Independent and Reasonable
Diep v. Sather, C.A. No. 12760-CM (Del. Ch. July 30, 2021)
Under Zapata, when analyzing a motion to dismiss by a special litigation committee, the court evaluates whether the committee was independent, acted in good faith, and had a reasonable basis for its conclusions. The court then applies its own independent business judgment to determine whether dismissal is in the best interest of the corporation. Here, the plaintiff challenged the independence of the special litigation committee and the reasonableness of its investigation and findings. More ›
Chancery Shifts Fees, Finds That Defendant’s Litigation Tactics in Books and Records Case Crossed The Line Between Aggressive Litigation And Glaringly Egregious Conduct
Pettry, et al. v. Gilead Sciences, Inc., C.A. Nos. 2020-0132-KSJM; 2020-0138-KSJM; 2020-0155-KSJM; 2020-0173-KSJM (Del. Ch. July 22, 2021).
Delaware follows the American Rule: all litigants pay their own attorneys’ fees, no matter the outcome of the litigation. In rare cases where a litigant’s conduct is “glaringly egregious,” Delaware courts will make an exception and shift fees. This is known as the “bad faith” exception. More ›
Chancery Confirms Operation of Savings Statute and Tortious Interference Framework in Dispute Involving Fiduciaries with Competing Creditor Interests
Skye Mineral Invs., LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. July 28, 2021)
Delaware’s savings statute—10 Del. C. § 8118(a)—protects claims from being time-barred where they were timely brought in an incorrect forum. Here, the Court of Chancery applied the savings statute in the context of claims alleging that, in a course of conduct dating back to 2013, majority LLC members managed the company to protect their affiliate’s status as a senior secured creditor and drive the company into bankruptcy, all to eliminate the minority members’ interests. More ›
Court of Chancery Denies Lead Plaintiff’s Application for Incentive Fee from Overall Fee Award
Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. July 12, 2021)
Delaware courts generally do not award special compensation to lead plaintiffs in class action litigation. Delaware courts typically limit awards to out-of-pocket costs and expenses, unless lead plaintiffs take on extra—essentially, exceptional—burdens in the litigation. Submitting a modest award request does not necessarily portend success that an applicant will receive an award. More ›
Chancery Awards Attorneys’ Fees for Monetary and Therapeutic Benefits from Goldman Sachs Director Compensation Settlement and Considers Objector’s Fee Request
Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. Jul. 12, 2021)
This decision concerns fee applications under the “corporate benefit” doctrine for benefits achieved in derivative litigation. More ›
Chancery Explains Pleading Standard and Sustains Unjust Enrichment Claim Related to Plaintiff’s Forfeiture of LLC Acquisition Rights
Angel v. Warrior Met Coal, Inc., C.A. No. 2019-0235-SG (Del. Ch. Jun. 30, 2021)
Under Delaware’s notice pleading standard, a plaintiff’s claim will survive a motion to dismiss if it is “reasonably conceivable” that the plaintiff might prevail. The Court here explained that test is whether a “claim’s success seems possible to a rational objective observer.” Notwithstanding this plaintiff-friendly standard, Delaware courts will dismiss a claim if a plaintiff fails to plead all necessary elements. More ›
Chancery Finds Breach of Fiduciary Duty Where Defendant Resorted to Extra-Contractual Self-Help
Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Post-trial Memorandum Opinion)
Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Letter Opinion)
Delaware law provides several remedies for a party who believes that a contractual breach has occurred. But extra-contractual self-help is usually not one. As this case demonstrates, the choice to seek direct retribution, rather than legal recourse, may constitute a breach of a director’s duty of loyalty. A related decision also considered and rejected the argument that formal board authorization was needed for a corporation to commence litigation. More ›
Section 225 Action Filed Eight Months After Removal Barred by Laches
Simple Global, Inc. v. Banasik, C.A. No. 2018-0809-PAF (Del. Ch. June 24, 2021)
Under Delaware law, a director or officer who disputes her removal as such may be subject to equitable defenses if she does not proceed promptly to contest it. Here, plaintiff Simple Global was owned by three stockholders, one of which, defendant Banasik, was removed as a director and officer by the others in June 2018. In November 2018, Simple Global sued Banasik for breach of fiduciary duty, to which Banasik responded in April 2019 by, among other things, filing a counterclaim under Section 225 of the DGCL asserting he was not properly removed as a director. More ›
Chancery Dismisses Conclusory Allegations of Gross Negligence and Disloyalty Against Oracle Officers and Directors Related to Alleged Controlled, Self-Dealing NetSuite Acquisition
In re Oracle Corp. Derv. Litig., C.A. No. 2017-0337-SG (Del. Ch. June 21, 2021)
While Delaware maintains a notice pleading standard, this decision reflects that conclusory allegations of breach of fiduciary duty leveled against officers and directors of a Delaware corporation may be found insufficient to state a claim. More ›
Superior Court Enforces $48 Million Liquidated Damages Provision
Smart Sand Inc. v. US Well Servs. LLC, C.A. No. N19C-01-144 PRW CCLD (Del. Super. June 11, 2021)
A liquidated damages provision is enforceable under Delaware law if: (1) damages are uncertain at the time of contracting; and (2) the liquidated damages are reasonable. Courts will examine the parties’ intent at the time of contracting in determining whether a liquidated damages provision is enforceable. More ›
Chancery Holds That Claim Based on Purposeful Tanking of Merger Agreement Earnout Is Breach of Contract Claim
Shareholder Representative Services LLC v. Albertson’s Companies, C.A. No. 2020-0710-JRS (Del. Ch. June 7, 2021)
Many merger agreements include earnout provisions under which the stockholders in the acquired company are entitled to additional consideration upon the occurrence of certain financial milestones. In this case, the Court of Chancery analyzed and considered the appropriate way to plead claims that the acquirer purposefully operated the company to miss earnout milestones. More ›