Posts tagged Articles

Dealing With Disputes Over the Reasonableness of Fees at the Advancement Stage

Authored by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider | March 21, 2012

Like many aspects of Delaware corporate law, the law of a corporate director or officer's entitlement to advancement is not black and white, but it is probably one of the more well established areas of law.

The contours of the law in this area have been addressed so often that members of the Delaware Court of Chancery have on occasion expressed frustration with corporations advancing defenses to mandatory advancement provisions that have little merit to them. (See, e.g., Barrett v. American Country Holdings Inc. a 2008 opinion in which the court wrote: "The accumulation of cases like this, where the stockholders get it coming and going because of the corporation's refusal to honor mandatory advancement contracts, is regrettable, and at some point, a case of sufficient dollar value will arise such that a board is sued for wasting the corporation's resources by putting up a clearly frivolous defense.") More ›

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Court Leaves it to Stockholders to Decide on El Paso Merger Transaction

Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | March 14, 2012

Chancellor Leo E. Strine Jr. has long had a high regard for the ability of stockholders to decide for themselves what is in their own best interests. A corollary of that is judicial restraint when stockholders on full information of flaws and conflicts of interests in a sales process have the opportunity to approve or reject a merger transaction with a substantial 47.8 percent control premium, albeit one likely not as robust as a well-run sales process may have generated. More ›

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Delaware Chancery Court Appoints Receiver for LLC

Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | March 7, 2012

The Delaware Court of Chancery recently took the largely unprecedented step of appointing a receiver for a Delaware limited liability company. While Jagodzinski v. Silicon Valley Innovation Co. LLC is a short opinion, it has large implications. Here are just a few, but first it is necessary to focus on its odd facts. More ›

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Chancery Court Allows Evidence in Appraisal Trial of Mandatory Redemption

Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | February 15, 2011

When a dissatisfied stockholder petitions the Court of Chancery for an appraisal of shares extinguished in a merger, the petitioner will have the burden of persuading the court of the fair value of those shares. When the holder owns preferred stock, valuation issues arise that do not pertain to the holders of common stock. That is because, unlike for common stockholders, preferred stockholders' rights, including to redemption and sometimes to valuation in the event of a merger, are spelled out contractually. More ›

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Court of Chancery Stays Tag-Along Litigation

Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | February 8, 2012

Litigation in multiple courts over the same basic claim continues to be a serious problem for corporate defendants. Indeed, some commentators argue the problem is getting worse. It is now almost certain that any merger or going-private transaction involving a publicly traded company will generate multiple suits. In fact, even the suits themselves now generate tag-along litigation. More ›

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Court of Chancery Comes Down Hard on Trading by Plaintiffs in Representative Litigation

Authored by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider | January 25, 2012

Defendants in class and derivative litigation often view the plaintiffs in those cases, especially the repeat players whose names are familiar to devoted readers of Court of Chancery opinions, as minor investors with little directly at stake in the litigation. Sometimes, however, the plaintiffs have significant equity stakes in the companies whose transactions they seek to enjoin. In those cases, the plaintiffs may be sharp investors who value the investment more than the principle at stake. What happens, then, to these investors when they see the chances at success in litigation passing them by? In any other circumstance, they might be inclined to trade out of their position or arbitrage the risk appropriately. When, however, these investors have chosen to be the plaintiff in a case seeking to halt the challenged transaction, the ability to act like an ordinary investor is severely restricted. More ›

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Morris James Welcomes Bryan Townsend as an Associate in its Corporate and Fiduciary Litigation Group

Mr. Townsend focuses his practice on litigation involving complex corporate, commercial and fiduciary matters. He clerked for Chancellor William B. Chandler III in the Delaware Court of Chancery from 2009-2010 after graduating from Yale Law School in 2009, where he served as Co-Editor-In-Chief for the Yale Journal on Regulation. Mr. Townsend earned an M.Phil. in Chinese Studies from the University of Cambridge in 2006 after attending Peking University (Beijing Daxue) in 2005, where he studied Chinese language, economics, and politics. He received three degrees from the University of Delaware: an Honors B.A. with Distinction in Philosophy and Biology in 2004, and an M.A. and Honors B.S. in Economics in 2003.

Mr. Townsend is a volunteer attorney for the Delaware Office of the Child Advocate, Delaware Volunteer Legal Services, and Widener Law School’s Veterans Law Clinic. He is a director on the board of the University of Delaware Alumni Association and served from 2004-2005 on the University’s Board of Trustees. Mr. Townsend is an ardent supporter of Special Olympics Delaware and is a volunteer Big Brother with Big Brothers Big Sisters of Delaware. For his commitment to leadership in the public service, Mr. Townsend was selected as a 2003 Harry S. Truman Scholar, one of seventy-six individuals nationwide to receive the honor. He is a member of the bars of Delaware (2010) and the United States District Court, District of Delaware (2011).

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Court of Chancery Circulates Draft Practice Guidelines

 Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | December 28, 2011

The Delaware Court of Chancery has long followed unwritten practices that knowledgeable attorneys follow. Recently, the court began circulating a draft "Guidelines to Help Practitioners Litigating in the Court of Chancery."

A product of consultation between the court and its rules committee, the guidelines are still a work in progress. They should not be cited to the court and do not set a standard of conduct or practice that the court requires be followed.

Yet a wise attorney will follow these established practices, if only to avoid unnecessary conflict with the court or appearing to be ignorant of its traditions. This is a brief summary of the 18 pages of guidelines. More ›

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Preferred Shareholder Must Look to Certificate of Incorporation to Prove Redemption Right, Supreme Court Reaffirms

Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | December 7, 2011

When is a holder of preferred shares of a Delaware corporation entitled to have the corporation redeem its investment? In SV Inv. Partners LLC v. ThoughtWorks Inc., Nov. 15, the Delaware Supreme Court reaffirmed that question is answered by reference to the terms of the certificate of incorporation that establish the rights of the preferred stockholder and to the proof at trial.

At issue was a clause in the company's charter that required the company to redeem the entire amount of outstanding preferred stock "out of any funds legally available therefore and which have not been designated by the board of directors as necessary to fund the working capital requirements" of the company. The Court of Chancery had concluded that "funds legally available" meant funds that could be disbursed for redemption without violating the Delaware General Corporation Law, specifically Section 160 of the DGCL, or common law. The Court of Chancery had rejected the plaintiff's definition of "legally available funds" as meaning the same as "surplus."  More ›

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State Courts Continue to Wrestle With Jurisdictional Conflicts

 Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | November 16, 2011

What happens when two courts in different states have the same case? Delaware courts, both state and federal, frequently face that question.

A Delaware entity may be sued in Delaware because that is its place of incorporation. Particularly in class action litigation, the Delaware entity may also be sued by a second plaintiff in another jurisdiction where that plaintiff resides, on the same claim brought in Delaware.

In just the last few weeks, the Delaware Court of Chancery and the federal District Court in Delaware have provided guidance of what they will do when faced with multijurisdictional litigation. More ›

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Out of Many Can Come One: Supreme Court Considers Transaction Aggregation Doctrines

Authored by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider | November 2, 2011

Recently, the Delaware Supreme Court issued an opinion resolving a dispute between an indenture trustee and the issuer of bonds pursuant to an indenture governed by New York law arising out of the issuer's business plan of divesting certain assets. While any example of the Supreme Court's analysis of a contractual provision is helpful to drafters of those contracts, it was the Supreme Court's emphasis on uniform interpretation of boilerplate provisions that makes this opinion noteworthy. More ›

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Delaware's Court of Chancery Prevents Parties From Escaping Their Chosen Forum by Artful Pleading

Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | October 26, 2011

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Why Alternative Entities May Not Protect Investors

Authored by  Edward M. McNally
Originally published in the  Delaware Business Court Insider  on October 19, 2011

In recent years, limited liability companies and limited partnerships have become the preferred form of entity for new businesses. In Delaware, for example, there are now more LLCs and LLPs formed each year than Delaware corporations. There are various reasons for this development, particularly the flexibility of management these alternative entities permit. More ›

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Traps for the Unwary -- The Potential Consequences of Agreements to Negotiate in Good Faith

Co-Authored by  Katherine J. Neikirk and Edward M. McNally Originally published in the  Delaware Business Court Insider l October 12, 2011 Agreements to negotiate in good faith can create issues for the unwary. The potential traps of such an agreement appear in the Court of Chancery's Sept. 22 decision in PharmAthene Inc. v. SIGA Technologies Inc. The PharmAthene case arose from a dispute between two companies over the development of a smallpox drug. Defendant SIGA Technologies Inc. was developing the drug, but ran into financial difficulties. Plaintiff PharmAthene Inc. and SIGA discussed collaborating to develop the drug. Because the parties had previously engaged in unsuccessful merger negotiations and SIGA felt PharmAthene backed out of a merger because of cold feet, SIGA insisted on working out a licensing agreement before engaging in more merger discussions. More › Share

Common Pleas Court's New 'Rocket Docket' May Offer Advantages in Business Litigation

Authored by  Edward M. McNally
Originally published in the  Delaware Business Court Insider l October 5, 2011

The Delaware Court of Common Pleas recently adopted new procedures that will make this often-overlooked court much more attractive to both businesses and lawyers.  Historically, the Court of Common Pleas has not been used to resolve many business disputes because its jurisdiction is limited to claims not exceeding $50,000. However, its new procedures will speed up litigation, cut down on litigation costs and provide some added benefits to law firms.

Called the "SPEED" docket - the name is an acronym for Special Election and Expedited Docket - it should be used more often for several good reasons. First, businesses often must deal with smaller disputes that may have serious implications. If a business does not act to enforce its rights in small matters because it wants to avoid litigation costs, it risks being known as a mark for the unscrupulous. Businesses need to stand up for their rights to preserve their reputations. The SPEED docket will help them do so because it will reduce litigation costs.

Second, law firms need to serve their business clients or those clients may go elsewhere. The firm that refuses to help a client with a dispute that "is too small for us to handle" risks another law firm taking its place. Often, law firms solved this problem by cutting their fees for small matters to please the client. But that means losing the value of the time spent on that matter and is hardly a good solution. Again, the SPEED docket will help cut the time needed to handle a small dispute, helping both the firm and its client.

Third, law firms need trials to train inexperienced associates how to try a case. That does not work well in the "big" case where there is too much at risk to let the inexperienced lawyer handle significant parts of the trial. The smaller cases handled by the Court of Common Pleas provide an opportunity to let a newer lawyer try a case with less risk of a significant loss to the client. Even apart from trying a case, the SPEED docket will teach lawyers how to manage their time. They will have little choice but to focus on getting the job done when the trial schedule does not permit procrastination. That is good training. More ›

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