K. Tyler O'Connell

Chancery Denies Books and Records Request From Indirect LLC Interest Holder That Assigned its Rights Prior to the Demand and the Action

SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. 2020-0064-JRS (Del. Ch. Jul. 24, 2020)
Describing the case as deja vu, the Court of Chancery dismissed Plaintiff’s second attempt to enforce alleged rights related to Defendant/Company. See SolarReserve CSP Holdings, LLC v.  Tonopah Solar Energy, LLC, C.A. 2019-0791-JRS (Del.  Ch. Mar. 18, 2020) (“SolarReserve I”). The Company was formed to develop a solar power plant in Nevada, but the plan never came to fruition. More ›

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Chancery Dismisses Complaint Challenging Dilution for Lack of Standing and Failure to State a Claim

Hindlin v Gottwald, C.A. No. 2019-0586-JRS (Del. Ch. July 22, 2020)

The plaintiff, a minority investor (“Plaintiff”) in a Delaware limited liability company, Core Nutrition, LLC (the “Company”), brought an action for breach of fiduciary duties and certain provisions of the Company’s LLC agreement (the “LLC Agreement”). The defendants in the action were three individual members of the Company’s board of managers (“Defendants”). Defendants moved to dismiss Plaintiff’s complaint under, inter alia, Court of Chancery Rule 12(b)(6) for failure to state a claim, and 6 Del. C. §§ 18-1001–03 for lack of standing. More ›

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Delaware Supreme Court Holds That Limited Partnership Agreement That Includes Certain Books and Records Language From Section 17-305 of Limited Partnership Act Does Not Automatically Incorporate Judicial Interpretations of Section 17-305

Murfrey v. WHC Ventures, LLC, App. No. 294, 2019 (Del. Supr. Jul. 13, 2020)

Drafters of alternative entity agreements frequently cite to, or quote, statutory language to describe the parties’ obligations. But, the Delaware Supreme Court has concluded that when drafters do so, the drafters should be explicit in whether they also intend to incorporate judicial interpretations of that language, too. Here, because the governing limited partnership agreements (the “Agreements”) did not include an express requirement limiting books and records rights to those “necessary and essential” to a proper purpose, the Supreme Court declined to imply one. More ›

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Chancery Denies Derivative Plaintiff’s Motion to Compel Work Product Prepared by Oracle’s Special Litigation Committee

In re Oracle Corp. Derivative Litig., C.A. No. 2017-0337-SG (Del. Ch. July 9, 2020)

After investigating certain potential derivative claims arising out of Oracle Corporation’s acquisition of NetSuite, Inc., and after trying unsuccessfully to settle those claims, Oracle’s Special Litigation Committee (“SLC”) agreed that permitting a derivative plaintiff to pursue those claims was in Oracle’s best interests. This opinion concerns the lead derivative plaintiff’s subsequent motion to compel, which sought the production of forty-two documents the SLC withheld on work product grounds. The documents at issue were the SLC’s counsel’s notes and memoranda of witness interviews, factual summaries prepared by the SLC’s counsel, counsel’s draft report to the SLC, and financial analyses and damages models prepared by or at the direction of the SLC’s counsel. The Court found that all forty-two documents were protected work product because they were created in anticipation of litigation in order to aid the SLC in connection with this action. In addition, the documents were afforded a higher degree of protection as opinion work product because they also reflected attorney thoughts and impressions. More ›

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Chancery Rejects Implied Covenant Claim for Failure to Prove that, Had the Issue Been Negotiated, Both Parties Would Have Agreed

Roundpoint Mortgage Servicing Corp. v. Freedom Mortgage Corp., C.A. No. 2020-0161-SG (Del. Ch. July 22, 2020)

To establish an implied contractual obligation pursuant to the implied covenant of good faith and fair dealing, a party must prove that, even though the contract does not state the term at issue, the parties would have agreed to it had they thought to negotiate it at the time of contracting. Here, the Court of Chancery post-trial denied an acquirer’s implied covenant claim even though the result arguably resulted in unfairness from a financial point of view to the acquirer. As illustrated by this case, unfairness alone to one party does not necessarily prove that both parties would have agreed to the implied term had they thought to negotiate about it. More ›

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Chancery Certifies Interlocutory Appeal for Determination of Impact of Remote Proceedings on a Party’s Due Process Rights

Forescout Tech., Inc. v. Ferrari Grp. Holdings, L.P., C.A. No. 2020-0385-SG (Del. Ch. July 14, 2020)

In the midst of this global pandemic, the Court of Chancery certified an interlocutory appeal to the Delaware Supreme Court to address two unique issues presented by COVID-19: (i) whether the Court could rightly decide to accept trial testimony remotely; and (ii) whether the Court had discretion to decline to compel a witness to travel to Delaware so that the witness may be cross-examined in-person without infringing upon the opposing party’s due process rights. More ›

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Entire Fairness Standard Applies Where Controller Has Substantive Discussions with Minority Stockholders before Agreeing to MFW Protections

In re HomeFed Corporation Stockholder Litigation, C.A. 2019-0592-AGB (Del. Ch. July 13, 2020)
This case illustrates that the Court of Chancery will apply the entire fairness standard to review a squeeze-out merger by a controller, if the controller engages in substantive economic discussions before the company has enacted the procedural protections outlined in Kahn v. M & F Worldwide Corp, 88 A.3d 635 (Del. 2014) (“MFW”) that would permit business judgment review. In this case, Jefferies Financial Group Inc. (“Jefferies” or the “Controller”), which owned 70% of HomeFed Corporation (“HomeFed”), acquired the remaining shares of HomeFed in a share exchange in which each HomeFed minority shareholder received two Jefferies shares in exchange for one of its HomeFed shares (the “Transaction”). A HomeFed director originally proposed the 2:1 share exchange to Jefferies in September 2017, and Jefferies subsequently discussed the share exchange with HomeFed’s second largest shareholder Beck, Mack and Oliver, LLC (“BMO”). In December 2017, HomeFed’s board of directors (the “Board”) formed a special committee (the “Special Committee”) that had the exclusive power to evaluate and negotiate a potential transaction. When the parties were unable to agree to merger terms, the Special Committee “paused” its process in March 2018. Despite pausing the Special Committee, Jefferies continued to discuss a potential transaction with BMO for the next year.  More ›

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Delaware Supreme Court Affirms Use of Unaffected Market Price to Determine Public Corporation’s “Fair Value” in Appraisal Proceeding

Fir Tree Value Master Fund, L.P. v. Jarden Corp., No. 454, 2019 (Del. July 9, 2020)

Adding to its appraisal jurisprudence, the Supreme Court of Delaware recently affirmed the use of the unaffected trading price of a public corporation’s stock to determine its “fair value” in the circumstances presented, while clarifying that “it is not often that a corporation’s unaffected market price alone could support fair value.” More ›

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Chancery Orders Trial to Determine Meaning of Ambiguous Post-Closing Covenants in a Stock Purchase Agreement

Schneider Nat’l Carriers, Inc. v. Kuntz, C.A. No. 2017-0711-PAF (Del. Ch. July 16, 2020)

If parties to a contract offer reasonable but conflicting interpretations of ambiguous contractual language, the Court of Chancery may deny summary judgment and order trial for purposes of weighing conflicting extrinsic evidence and witness testimony to interpret the meaning of the contractual language. More ›

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Chancery Declines to Apply Status Quo Order to Prevent Sale of Litigant’s Personal Interest in Indirect Foreign Subsidiary of Delaware LLC

Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. June 22, 2020)

In this control dispute, the Delaware Court of Chancery denied a motion to amend a status quo order, finding that the proposed amendment would require the Court to enforce orders beyond its jurisdictional purview.  More ›

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Court Finds LLC Manager Consent Statute Authorizes Personal Jurisdiction for Tort Claims Related to the Company, Not Just Alleged Breaches of Managers’ Duties; However, Court Dismisses Investor Defendants with Insufficient Delaware Contacts

CLP Toxicology, Inc. v. Casla Bio Holdings LLC, C.A. 2018-0783-PRW (Del. Ch. Jun. 29, 2020) & NC18C-10-332 PRW CCLD (Del. Super. Jun. 29, 2020)

In both the corporation and LLC contexts, Delaware law employs consent statutes, which authorize personal jurisdiction over officers and directors of corporations and over managers (in name or in fact) of LLCs. Despite broad language in such statutes, courts traditionally interpreted the statutes to apply to only claims related to breaches of fiduciary or statutory duties. As demonstrated here, however, the modern trend is to interpret consent statutes to apply to a broader range of claims related to the entity. More ›

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Chancery Interprets Contractual Language Permitting Asset Sale

AM Gen. Holdings LLC v. The Renco Grp., Inc., C.A. No. 7639-VCS (Del. Ch. June 26, 2020)

Under fundamental contract interpretation principles, the Court of Chancery will interpret a contract to give effect to specific over general contract language, and to avoid interpretations that render contractual language as surplusage. More ›

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Chancery Dismisses Challenge to Top Executives’ Stock Awards in Disney-Fox Merger, Finds Plaintiff Lacks Standing to Pursue Derivative Claim

Brokerage Jamie Goldenberg Komen Rev TRU U/A 06/10/08 Jamie L Komen Trustee for the Benefit of Jamie Goldenberg Komen v. Breyer, C.A. No. 2018-0773-AGB (Del. Ch. June 26, 2020)

Following a merger that alters a stockholder’s ownership status, the stockholder may be able to challenge the entirety of the merger as a direct claim, but the stockholder will typically lack standing to challenge the individual aspects of the merger as derivative claims. The instant case, involving the Disney-Fox merger, shows the difficulties a stockholder faces in attempting to mount such a challenge. More ›

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Court of Chancery Dismisses Aiding and Abetting Claim Against NetSuite’s Fiduciaries for Role in Alleged Overpayment by Oracle

In re Oracle Corp. Derivative Litig, Consol. C.A. No. 2017-0337-SG (Del. Ch. June 22, 2020)

At the pleadings stage, a claim for aiding and abetting a breach of fiduciary duty requires that it is reasonably conceivable that the alleged aider and abettor knowingly provided substantial assistance in the breach of fiduciary duty. This decision reflects that substantial assistance in an alleged conspiracy of silence might not meet the reasonably conceivable standard if public statements and securities filings contain sufficient information about the underlying course of conduct. More ›

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Chancery Finds Party Waived Privilege When Documents Were Produced to FCC

In re Straight Path Communications Inc. Consol. S’holder Litig., C.A. No. 2017-0486-SG (Del. Ch. June 15, 2020)

Plaintiffs brought a Motion to Compel seeking thirty-one documents withheld by Defendant on attorney-client privilege grounds. The documents had previously been disclosed by Defendant to the Federal Communications Commission (“FCC”) in 2016 during an investigation related to the current litigation. Plaintiffs did not argue that the documents were not privileged at the time of creation, but rather that the privilege was waived when the Defendant provided those documents to the government. More ›

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