K. Tyler O'Connell

Chancery Rules Corporation Cannot Offset Wife’s Recoupment Against Husband’s Advancement Simply Because the Pair Signed a Single Undertaking

Perryman v. Stimwave Tech. Inc., C.A. 2020-0079-SG (Del. Ch. Apr. 15, 2021)
Section 145 of DGCL permits corporations to grant advancement rights to persons who may be entitled to indemnification so that they may fund covered litigation costs pending indemnification. As part of this right, the DGCL also requires these individuals to undertake to repay the corporation if the advanced expenses ultimately prove not to be indemnifiable. In this case, the Court clarifies that two individuals who are married and execute the same undertaking nonetheless retain their individual rights to advancement and separate obligations for repaying any non-indemnifiable expenses. More ›

Share

Court of Chancery Stays Action for Violation of Rule against Claim Splitting Pending Resolution of a Duplicative Federal Action

Goureau v. Lemonis, C.A. No. 2020-0486-MTZ (Del. Ch. Mar. 30, 2021)
Delaware follows the modern “transactional” view of claim splitting, which bars a plaintiff from bringing duplicative proceedings in different courts simultaneously based on different causes of action arising from the same transaction or from a common nucleus of operative facts. The rule against claim splitting is intended to avoid burdening defendants with the defense of duplicative suits in different courts, and to prevent a plaintiff from obtaining “two bites at the apple” or a potential double recovery. A plaintiff who violates this rule may face dismissal or a stay pending resolution of the duplicative action. More ›

Share

Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims

Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021)
Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized” pleading standard. This pleading challenge is compounded when a plaintiff attempts to bring a Caremark failure of oversight claim – “possibly the most difficult theory in corporate law.” Similarly, a plaintiff alleging false or misleading disclosures not made in connection with soliciting shareholder action faces the additional pleading challenge of demonstrating that those disclosures were knowing or deliberate. More ›

Share

Chancery Dismisses Unripe Contribution Claim but Finds That Corporate Director and Officer Adequately Pled Right to Indemnification Following Merger

Wunderlich v. B. Riley Fin., Inc. et al., C.A. No: 2020-0453-PAF (Del. Ch. Mar. 24, 2021)
Delaware corporations may provide indemnification rights to their directors and officers either through the corporation’s organizational documents or by separate agreements. This case concerned the survival and scope of these rights following a merger. More ›

Share

Chancery Lacks Jurisdiction to Grant Injunction While Superior Court Appeal Is Pending

Vama F.Z. Co. v. WS02, Inc., C.A. No. 2020-0141-JRS (Del. Ch. Mar. 29, 2021)
This case illustrates that the Court of Chancery lacks subject matter jurisdiction to issue an injunction pending appeal of another court’s rulings, and where the plaintiff has adequate remedies at law.  More ›

Share

Court of Chancery Harmonizes Operating Agreement Governance Provisions To Resolve LLC Control Dispute

Pearl City Elevator, Inc. v. Gieseke, C.A. No. 2020-0419-JRS (Del. Ch. Mar. 23, 2021)

Under Delaware law, limited liability company agreements are interpreted like other contracts; they are read as a whole in light of the commercial context, in a manner that gives effect to and harmonizes all of their terms. In this expedited control dispute, the Court of Chancery applied those canons to consider whether certain of the plaintiff’s purchases of units from other members complied with transfer restrictions. More ›

Share

Chancery Finds SEC’s Filing of an Enforcement Action Did Not Trigger Redemption Right

Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., C.A. No. 2021-0007-MTZ (Del. Ch. Mar. 19, 2021)

Plaintiff Tetragon Financial Group Limited is a shareholder of Ripple Labs, Inc., a blockchain company that uses a cryptocurrency called XRP. Tetragon had a right under a Stockholders’ Agreement to require Ripple to redeem its shares if the SEC or another government agency “determine[s] on an official basis” that XRP is a security “on a current and going forward basis.” Here, Tetragon sought a declaration that the SEC’s decisions to file an enforcement action in federal District Court, and issue a Wells Notice, each triggered the redemption right. More ›

Share

Chancery Confirms that the Implied Covenant Imposes a “Good Faith” Component to an Agreement to Negotiate

DG BF, LLC v. Ray, C.A. No. 2020-0459-MTZ (Del. Ch. Mar. 1, 2021)

The Operating Agreement for an LLC involved in the cannabis industry provided for a five-member board of managers, with one Independent Manager appointed by a process of negotiation between two other managers (the plaintiff in the action and one of the defendants). Under the process set forth in the Operating Agreement, either side could present various candidates until there was agreement, which was supposed to happen within a 180-day period. The parties could also mutually agree to extend the deadline. More ›

Share

Chancery Holds Prior Rulings in Appraisal and Securities Litigation Do Not Bar New Columbia Pipeline Fiduciary Duty Action

In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (Del. Ch. Mar. 1, 2021)
Certain judicial doctrines, including collateral estoppel and stare decisis, promote efficiency and finality by barring the re-litigation of factual and legal issues. For these doctrines to apply, however, there must be overlap between the parties, the claims or the legal posture. This case demonstrates that, without such overlap, courts will permit subsequent claims even when the underlying transaction has already been the subject of significant prior litigation. More ›

Share

Superior Court Finds Securities Lawsuits Do Not Fall within Relatedness Exclusion of Insurance Policy

Northrop Grumman Innovation Systems, Inc. v. Zurich American Insurance Company, C.A. No. N18C-09-210 (Del. Super. Ct. Feb. 2, 2021)

This case arises from an insurance coverage dispute between an insured and multiple insurance providers in a policy tower for defense fees and settlement costs from two securities class action lawsuits. In the Complex Commercial Litigation Division of the Superior Court, the insurers argued that they were not obligated to reimburse losses arising from the two securities lawsuits because of, inter alia, an exclusion regarding the “relatedness” of Wrongful Acts. Under Delaware law, the exception to coverage because of the “relatedness” of Wrongful Acts only applies “where the two underlying claims are fundamentally identical.” The Court held that the exception did not apply in this case simply because the securities lawsuits involved the same wrongdoers and the same transaction, among other things. Instead, the fact that there were variations in the mens rea, motive, burdens of proof, the timing and other factors, suggested that the securities lawsuits did not involve the exact same subject. Accordingly, the Court found that the two claims were not “related” and the relatedness exclusion did not apply.

Share

Chancery Finds After Trial That $10 Billion Unit-for-Unit Merger Was “Fair and Reasonable” Under Partnership Agreement

Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Feb. 15, 2021)

This matter concerned limited partners’ challenge under the governing limited partnership agreement to an acquisition of the partnership by another entity controlled by the partnership’s ultimate owner. A member of a conflicts committee, which had approved the $10 billion unit-for-unit controlling unitholder merger, also served the board of another company ultimately controlled by the same owner, contrary to the terms of the partnership agreement. After considering this issue, the Court of Chancery nevertheless held after a five-day trial that the merger was “fair and reasonable to the Partnership” under a contractual safe harbor, and that the plaintiffs failed to prove damages. More ›

Share

Chancery Grants Access to Facebook Board Emails in Books and Records Action

Employees’ Retirement System of Rhode Island v. Facebook, Inc., C.A. No. 2020-0085-JRS (Del. Ch. Feb. 10, 2021)

In this opinion, the Court of Chancery confirms that it will grant access to emails in a books and records action where the corporation’s board minutes and other materials are insufficient for the plaintiff’s purposes. Here, a stockholder of Facebook, Inc. requested books and records to investigate Facebook’s $5 billion settlement with the Federal Trade Commission for the unauthorized sale of customer information to Cambridge Analytica and other data breaches. The plaintiff sought to investigate whether Facebook overpaid in its settlement to shield its chief executive Mark Zuckerberg from personal liability.  More ›

Share

Chancery Holds That a Deadlock Warranting Dissolution Can Be Genuine Even If the Circumstances Giving Rise to the Deadlock Were Contrived

Mehra v. Teller, C.A. No. 2019-0812-KSJM (Del. Ch. Jan. 29, 2021)

In a dispute over the validity of the dissolution of a limited liability company, the Court of Chancery held in a post-trial opinion that a deadlock between LLC managers was genuine and deserving of legal effect, even though the circumstances giving rise to the deadlock were contrived. More ›

Share

Party Uniquely Escapes An Arbitration Provision, While The Court Reminds Us That Bootstrapped Fraud Claims Are Impermissible In Delaware

AluminumSource, LLC v. LLFlex, LLC, C.A. No: N18C-07-231-EMD CCLD (Del. Super. Jan. 21, 2021)

Delaware courts commonly enforce (and support) arbitration provisions, submitting disputes under the governing contract to a third-party neutral. Equally common is the dismissal by Delaware courts of fraud claims “bootstrapped” to a breach of contract based on allegations that a contracting party never intended to perform its obligations. This recent decision from the Superior Court’s Complex Commercial Litigation Division is the unique case where, on the first issue, an arbitration provision was found unenforceable due to impossibility of performance. On the second issue, this case confirms settled law that bootstrapped fraud claims are impermissible in Delaware. More ›

Share

Delaware Supreme Court Adopts Post-Merger Derivative Standing Framework From In re Primedia, Inc. Shareholders Litigation

Morris v. Spectra Energy Partners (DE) GP, LP, No. 489, 2019 (Del. Jan. 22, 2021)

In Delaware corporate law, “the standing inquiry has assumed special significance,” especially in the post-merger context. The Delaware Supreme Court in Morris v. Spectra Energy holds that a plaintiff has post-merger standing if she brings a claim disputing the fairness of a merger and satisfies the three-part framework set forth in In re Primedia, Inc. Shareholders Litigation, 67 A.3d 455 (Del. Ch. 2013), even if the underlying claim seems unlikely to succeed on the merits. More ›

Share