Delaware Business Litigation Report

Court of Chancery Denies Motion For Expedited Preliminary Injunction Hearing For Lack of "Colorable Claim" Demonstrating Imminent Irreparable Harm

Madison Real Estate Immobbilien-Anlagegesellschaft Beschrankt Haftende KG v. GENO One Financial Place L.P. and GENO Auslandsimmobilien GmbH, No. Civ.A. No. 1928-N, 2006 WL 456779 (Del. Ch. Feb. 22, 2006). The plaintiff is a German entity organized under that country's laws, as is the second named German limited liability defendant. The latter party is also a general partner in the first defendant entity. The plaintiff was one of two bidders that made an unregulated tender offer for a part of the first-named defendant's Delaware limited partnership interest. Plaintiff filed a motion in the Court of Chancery for expedited injunction proceedings, seeking to enjoin the defendant's general partner from approving any transfer agreements related to the tender offers. The Court of Chancery required the plaintiff-applicant to demonstrate "good cause" for obtaining expedited hearings or expedited discovery . As the court explained, this entailed demonstration of a sufficiently "colorable claim" showing a "sufficient possibility of a threatened irreparable injury" to warrant its issue and justify the likely substantial public cost in permitting an expedited preliminary injunction proceeding. The court denied the expedited proceedings because there was no evidence submitted indicating any threat of imminent irreparable harm to plaintiff. Further, the Court observed that the plaintiff had not shown a sufficient "colorable claim" to justify imposing the public burden of an expedited hearing. Observing that although the target's general partner's fiduciary duties were implicated, the target-entity's Partnership Agreement's provisions permitted consent refusal to any partnership interest transfer, when the transfer would lend it a "publicly-traded" complexion under the Internal Revenue Code. Additionally, the court observed that other agreement provisions permitted refusal. The Court therefore denied the motion. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com Share