Posts tagged Case Summaries

DuPont awarded partial summary judgment in insurance-civerage litigation relating to polybutylene piping

E.I. du Pont de Nemours & Company v. Allstate Insurance, Co., C.A. No. 99C-12-253 JTV, 2006 WL 2338045 (Del. Super. Ct. July 31, 2006). DuPont sued its excess insurance carriers for declaratory relief and damages in connection with a number of class-action lawsuits over the past 20 relating to polybutylene ("PB") piping. DuPont claimed that the defendant carriers were obligated under the terms of their respective policies to indemnify DuPont for liabilities arising from the sale of a product produced by DuPont and used by several other companies to make acetal fittings for polybutylene piping. As of this opinion, those liabilities totaled more than $235 million. Following discovery, the court granted DuPont's motion for summary judgment on several issues. More › Share

Court of Chancery Decides what Separate Claims are Arbitable

Nutzz.com, LLC v. Vertrue Inc., C.A. No. 1231-N, 2006 WL 2220971 (Del. Ch. July 25, 2006). The Court of Chancery has decided that some claims under a contract are subject to arbitration, but a claim for injunctive relief is not arbitable and may proceed in court. Such a "split decision" was the result of a carve out for injunction claims in the arbitration provision in the parties' contract. Accordingly, the Court had to decide the effect of the carve out while at the same time holding that other claims arising out of the contract dispute would go to arbitration. More › Share

Superior Court Permits "New" Defense

Daystar Construction Management, Inc. v. Mitchell, CA No. 04C-05-175-JRS, 2006 WL 2053649 (Del. Super. Ct. July 12, 2006). This decision upholds for the first time the defense to a contract claim that the plaintiff has acted in bad faith in the performance of the contract. It has long been recognized that all contracts include the obligation to act in good faith and to deal fairly. Exactly what that means is more difficult to state. In what it characterized as a case of first impression, this decision holds that the so-called covenant of fair dealing may be raised as a defense in a breach of contract case. Because this is an affirmative defense, the lack of fair dealing must be proved by the defendant. More › Share

Rule 23.1 Requirements Are Satisfied By Business Relationships

AIG Retirement Services, Inc. v. Barbizet, C.A. No. 974-N, 2006 WL 1980337 (Del. Ch. July 11, 2006). Business relationships between directors may sometimes make them unqualified to pass upon demands their company sue their fellow directors. This is such a case where the board members derived substantial benefits from their relationships with the potential target of litigation the plaintiff demanded be brought. Under those circumstances, the futility of making a demand under Rule 23.1 was easily established. Share

Homebuyers' Claims Against Builder Dismissed Based on Arbitration Clause

Zeleny v. Thompson Homes At Centreville, Inc. C.A. No. 05-12-224 SCD (Del. Super. Ct. July 10, 2006). Buyers of a newly constructed home sued the builder for breach of contract, breach of warranty, and negligence arising out of water leaks and other defects in their home. The court granted defendant's motion to dismiss on the ground that the parties' contract required the dispute to be submitted to binding arbitration. More › Share

Court of Chancery Clarifies Right To Buy Control

Abraham v. Emerson Radio Corp. C.A. No. 1845-N, 2006 WL 1879205 (Del. Ch. July 5, 2006). This decision makes it clear that a controlling stockholder may sell control without fear of liability for the actions of the buyer after the transaction closes, with few exceptions. While it has long been the rule that a stockholder may deal with its shares as it sees fit, case law recognized that a controlling stockholder has a fiduciary duty to its company and the minority owners by virtue of the controller's ability to control what the company does. How that duty applied in the sale of control context is the question addressed in this case. More › Share

Court of Chancery Limits Use of Demand for Records

Highland Select Equity Fund, L.P. v. Motient Corp., C.A. No. 2092-N, 2006 WL 1903129 (Del. Ch. July 6, 2006). In this case, the Court of Chancery dismissed a demand to inspect the records of a Delaware corporation because the demand for inspection was abusive. A demand to inspect corporate records must be based on a good reason and when the request is to inspect allegations of wrongdoing, those allegations must have some basis. While the Court here felt that part of the test for inspection had been met, the way the plaintiff went about its request cost it the litigation. More › Share

Court of Chancery Enforces Rights of Preferred Stock

Thoughtworks, Inc. v. SV Investment Partners, LLC, C.A. No. 1695-N, 2006 WL 1903127 (Del. Ch. June 30, 2006). It is often said that preferred stock has only the rights granted to it in the certificate of incorporation. This case illustrates that the Court of Chancery will not, however, hesitate to enforce those rights when the certificate of incorporation is clear. Here, the certificate stated that the preferred was entitled to be redeemed and to consent to an extension of the company line of credit. The Court enforced those rights. Share

Court of Chancery Holds Convertible Preferred is Still Equity

Harbinger Capital Partners Master Fund I, Ltd. v. Granite Broadcasting Corporation, C.A. No. 2205-N, 2006 WL 1875918 (Del. Ch. June 29, 2006). The Court of Chancery has held that convertible preferred stock, even with a mandatory redemption date, is still to be considered equity under the Delaware General Corporation Code. This remains true even if under the revised GAAP rules the preferred would be treated as debt. More › Share

Superior Court Grants Partial Judgment For Plaintiff on Claim For Unpaid Severance Payments

Casey v. Friends of the Capital Theater, Inc., C.A. No. 04C-03-022 JTV, 2006 WL _____ (Del. Super. Ct. June 21, 2006). Plaintiff sued former employer for breach of contract and wrongful discharge. The court ruled that plaintiff had resigned pursuant to a resignation agreement between the parties, which was binding upon both parties. The court also ruled, however, that the employer had failed to make severance payments required under that same agreement. After granting the employer a set off based on property that plaintiff took with him when he left and unemployment benefits plaintiff received, the court found that plaintiff was entitled to approximately $18,000. Share

Court of Chancery Awards Fees for Disclosures

Augenbaum v. Forman, C.A. No. 1569-N, 2006 WL 1716916 (Del. Ch. June 21, 2006). In this decision, the Court of Chancery awarded $225,000 in attorney fees for the additional disclosures that the plaintiff achieved as part of the settlement of litigation attacking a merger. Share

Court of Chancery Upholds Complaint Against AIG Entities

Teachers' Retirement System of Louisiana v. Aidinoff, C.A. No. 20106, 2006 WL 1725572 (Del. Ch. June 21, 2006). In this decision the Court of Chancery extensively discusses the legal theories under which the plainitff may seek a recovery from two of the entities alleged to have helped the AIG Chairman profit at the expense of AIG. In effect, the Court held that if as alleged these entities were set up to profit by doing what AIG might have done for itself, then their profits are subject to recovery under several theories such as the imposition of a constructive trust. The opinion is a good source of legal theory for recovery in such cases. Share

Court of Chancery Determines Criteria To Decide Inspection Rights

Wynnefield Partners Small Cap Value LP v. Niagara Corp., C.A. No. 1261, 2006 WL 1737862 (Del. Ch. June 19, 2006). This is Section 220 action where the principal issue is whether the plaintiff had satisfied the criteria to inspect records related to alleged wrongdoing. The Court of Chancery held that merely alleging that wrongdoing had occurred was not sufficient to warrant inspection of corporate records. However, in some areas the Court held that sufficient facts had been alleged to justify record insepction. More › Share

Court of Chancery Rejects Limit on Advancement Rights

Wendell Brown v. LiveOps, Inc., C.A. No. 1991-N, 2006 WL 1667652 (Del. Ch. June 12, 2006). In another rejection of artificial limits on the right to advancement, the Court of Chancery has rejected the argument that there is no right to advancement of legal fees to defend a suit that seeks recovery for post termination conduct. More › Share

Court of Chancery Upholds Drag Along Rights

Minnesota Invco of RSA #7, Inc. v. Midwest Wireless Holdings LLC, C.A. No. 1887-N, 2006 WL 1596675 (Del. Ch. June 7, 2006). In this case, the Court of Chancery was required to interpret complex agreements between the members of a Delaware limited liability company. The Court held that the defendant holding company had the right to "drag along" holders of a minority interest in an operating subsidiary of the holding company in connection with the sale of the holding company. More ›

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