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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 Denies Books and Records Request Related to Disney’s Opposition to Florida Legislation Prohibiting LGBTQ+ Topics in Classrooms
Simeone v. The Walt Disney Company, C.A. No. 2022-1120-LWW (Del. Ch. June 27, 2023)
The Walt Disney Company opposed Florida legislation that limits instruction on sexual orientation and gender identity in Florida classrooms. The Governor of Florida responded by threatening the revocation of tax-favorable treatment for Disney. The plaintiff filed a books and records demand and then litigation, alleging that Disney's opposition to the legislation put at risk Disney's tax-favorable treatment and that Disney's directors and officers may have breached their fiduciary duties by putting their own beliefs ahead of their obligations to stockholders. More ›
Chancery Provides Additional Analysis of Primedia Claims in MFW Context
City of Dearborn Police and Fire Revised Retirement System (Chapter 23) et al. v. Brookfield Asset Management Inc., C.A. No. 2022-0097-KSJM (Del. Ch. June 21, 2023)
In a short letter decision, Chancellor McCormick supplemented an earlier decision with a more fulsome analysis of plaintiffs’ Primedia claim (a direct claim challenging a merger based on a board’s failure to obtain value for material derivative claims), which the Court had earlier decided was subject to dismissal under MFW. Under Primedia’s three-part test, to bring a derivative claim post-merger, the former stockholder must plead (1) a colorable underlying derivative claim, (2) that the value of the derivative claim was material in the context of the merger, and (3) “that the acquirer would not assert the underlying derivative claim and did not provide value for it.” Here, the Court held that Plaintiffs failed to establish Primedia’s second prong because their claims and calculations were “woefully underdeveloped[.]” Specifically, plaintiffs speculated the defendants could have been liable for the entire lost market capitalization in the years following the merger, but they could not explain how that measure of damages made sense. Other metrics, including comparing the deal price to the trading price at the time of the transaction, showed that the derivative claims were not material to the merger consideration.
Chancery Rejects “Largely Precatory” Proposed Derivative Settlement
Knight v. Miller, C.A. No. 2021-0581-LWW (Del. Ch. June 1, 2023)
Under Court of Chancery Rule 23.1(c), the Court must approve the settlement of any derivative litigation. This case provides a rare example of the Court rejecting a settlement after determining that the “give"—i.e., the substance of the settlement—did not justify the “get"— i.e., ending the litigation. More ›
Superior Court CCLD Declines to Award Costs for Special Master and Mediator, and Awards only Simple Interest on Judgment in Accord with Superior Court Default Rule
LCT Capital, LLC v. NGL Energy Partners LP, C.A. No. N15C-08-109 JJC CCLD (Del. Super. Ct. June 20, 2023)
Under Superior Court Rule 54, costs are allowed as a matter of course to the prevailing party. In this post-trial opinion, the Court denied costs associated with a special master fee and declined to include mediator fees but allowed costs relating to courtroom technology. The Court reasoned that the technology costs should be awarded because they were incidental and necessary to the trial. The Court found, however, that the fees related to the special master should not be awarded because those fees were similar to attorneys' fees. The Court also reasoned that the mediator's fees should not be awarded without a showing of abuse because mediator fees are typically split by the parties. More ›
Chancery Finds that Buyer Breached Purchase Agreement by Denying Sellers’ Rights to Participate in a Defense
LPPAS Representative, LLC v. ATH Holding Co. LLC, C.A. 2020-0241-KSJM / Shareholder Representative Services LLC v. ATH Holding Co. LLC, C.A. No. 2020-0443-KSJM (Del. Ch. May 2, 2023)
Delaware law recognizes parties’ ability to create a contractual right for an indemnifying party to participate in the defense of a claim. In this case, the Purchase Agreement provided the Sellers with such Participation Rights in connection with third-party claims that may give rise to Sellers’ indemnification obligations. The Court determined that the Buyer breached the Purchase Agreement by not allowing the Sellers to participate in the defense of investigations. More ›
Chancery Holds Unocal Claims for Injunctive Relief are not Subject to Corwin Cleansing
In re Edgio, Inc. Stockholder Litigation, C.A. No. 2022-0624-MTZ (Del. Ch. May 1, 2023)
Under Corwin, a fully informed, uncoerced vote of the disinterested stockholders can shift the standard of judicial review for certain transactions from heightened scrutiny to the business judgment rule. But there are some transactions that Corwin cannot cleanse. Here, at the motion to dismiss stage, the Court declined to apply the Corwin doctrine to a Unocal claim seeking to enjoin certain alleged defensive measures taken by the company's board. More ›
Chancery Orders Discovery Record Be Made Available to Stockholders in the Settlement Class
In re AMC Entertainment Hldgs., Inc. S’holder Litig., 2023-0215-MTZ (Del. Ch. May 20, 2023)
Under Delaware law, class members are entitled to access to the discovery record to assess the terms of a proposed class action settlement. In addition to confidentiality concerns, the size of a class and the scope of a discovery record present logistical challenges regarding access, particularly if class members are not represented by counsel. More ›
Chancery Prioritizes Efficiency in Ruling on Discovery Motions
Brown v. Matterport, Inc., 2021-0595-LWW (Del. Ch. Jun. 5, 2023)
The plaintiff sued alleging that the defendants had used lockup restrictions to improperly prevent him from selling shares. The Court of Chancery considered three discovery motions, and the ruling in all three instances focused on the efficiency of the discovery process. More ›
Chancery Denies Sellers’ Claim Against Buyers for Failure to Close, Finds That Sellers’ Award of “Phantom Equity” to Former Employee Breached Merger Agreement Representations
HControl Holdings LLC vs. Antin Infrastructure Partners S.A.S., C.A. 2023-0283-KSJM (Del. Ch. May 29, 2023)
In Delaware, buyers bear the burden of proving by a preponderance of the evidence their claims for breach of a merger agreement, and sellers bear the burden of proving that buyers could not exercise their termination rights because buyers were in breach of their own obligations. In this case, the Court finds for the Buyers and determines that they were entitled to terminate the deal because the Sellers breached representations in the Merger Agreement. More ›
Chancery Denies Plaintiff’s Request for Advancement and Indemnification Based on the Broad Release and Finds No Success on the Merits under DGCL Section 145(c)
Kokorich v. Momentus, Inc. C.A. 2022-0722-MTZ (Del. Ch. May 15, 2023)
Delaware law establishes mandatory indemnification rights under 8 Del. C. § 145(c) where a director or officer was "successful on the merits or otherwise" in the underlying proceedings. Sections 8 Del. C. § 145 (a) and (b) are enabling provisions that explain what additional rights a corporation can offer. In this case, the Court denies the Plaintiff's advancement and indemnification claims because he released such claims against the Company and did not achieve success on the merits. More ›
Chancery Orders Defendant to Pay Simple Prejudgment Interest and Reduces the Amount Because of Plaintiffs’ Delays
Ainslie v. Cantor Fitzgerald LP, C.A. No. 9436-VCZ (Del. Ch. Apr. 5, 2023)
Delaware law provides for the interest to be awarded under 6 Del. C. § 2301 in actions seeking compensatory damages, and the rate is fixed by the statute. The Court of Chancery has discretion, however, to adjust the rate and form of interest “as equity requires.” In this case, the Court awards Plaintiffs simple interest and reduces the amount because of the Plaintiffs’ inordinate delays in prosecuting the case. More ›
Director violated Revlon Duties by Tilting the Sales Process in favor of the Buyer
In re Mindbody Inc. Stockholder Litig., C.A. No. 2019-0442-KSJM (Del. Ch. Mar. 15, 2023)
Under Revlon, to demonstrate that they satisfied their fiduciary duties in connection with a sale of control, directors bear the burden of establishing both the reasonableness of their decision-making process and the reasonableness of their actions in light of the circumstances then present. As the Court reasoned in a prior opinion in this action (discussed here), "[t]he paradigmatic Revlon claim involves a conflicted fiduciary who is insufficiently checked by the board and who tilts the sale process toward his own personal interests in ways inconsistent with maximizing stockholder value." More ›
Supreme Court Affirms Chancery’s Interpretation of Word “And” in Option Agreements
Weinberg v. Waystar, Inc., No. 274, 2022 (Del. March 16, 2023)
The appellant was a former chief marketing officer of the appellee, a Delaware corporation. Soon after her termination, the appellant timely exercised her equity options and converted them to partnership units. The appellee thereafter exercised its call rights to repurchase the units. The appellant filed suit, arguing that the use of the word "and” in the options agreements meant that both of two conditions (termination of employment and breach of a restrictive covenant) had to be satisfied before the appellee could exercise its call rights. The Court of Chancery ruled in favor of the appellee, finding that "and” meant either of the two conditions would trigger the appellee's call rights. More ›
Chancery Holds Stockholders Can Assert Disclosure Claims on Behalf of Other Stockholders but Must Do So Through a Derivative Action
New Enterprise Associates 14, L.P. vs. Rich, C.A. No. 2022-0406-JTL (Del. Ch. March 9, 2023)
Delaware law establishes that directors owe a duty of disclosure which arises as "the application in a specific context of the board's fiduciary duties…." In this case, stockholders asserted various claims against the board, including an allegation that the company's directors breached a duty of disclosure to other stockholders, which injured the plaintiffs when those stockholders were misled into approving a dilutive stock offering. This decision finds that the stockholder-plaintiffs can assert such a cause of action but that the resulting claim is derivative. More ›
Chancery Grants Injunction Under the Delaware Deceptive Trade Practices Act
Next Level Ventures, LLC v. AVID USA Technologies LLC, C.A. No. 2022-0699-MTZ (Del. Ch. March 16, 2023)
The Delaware Deceptive Trade Practices Act (the "DDTPA”), 6 Del. C. § 2531, et seq., prohibits confusing or creating misunderstanding as to "the source, sponsorship, approval, or certification of goods or services" as well as to the products' “affiliation, connection, or association with, or certification by, another." In this case, the plaintiff asserted violations of the DDTPA in connection with the defendants' allegedly misleading statements. This decision grants the injunction against all defendants but narrows it to fit the specific allegations. More ›