Posts tagged Case Summaries

Superior Court Grants Summary Judgment to Insurers, Finding that Certain of AT & T's D & O Policies Do Not Cover Claims in Underlying Litigation

AT&T Corp. v. Clarendon America Ins. Co., C.A. No. 04C-11-167 (JRJ), 2006 WL 1382268 (Del. Super. Ct. April 25, 2006). This was an insurance coverage case involving Directors and Officers and Company ("D & O") liability policies purchased by plaintiff AT & T Corp. ("AT & T") and At Home Corp. ("At Home") from various primary and excess insurers. AT & T sought coverage, including indemnity, payment of defense fees, costs, and settlements or judgments, relating to several underlying shareholders suits brought against AT & T and certain officers and directors of AT & T and At Home. The defendants brought motions for partial summary judgment, alleging that AT & T's clams fell outside the scope of coverage under the D & O policies. Ultimately, the court granted the defendants' motions. More ›

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Court of Chancery Finds No Violation of an Enforceable Covenant Not To Compete

American Homepatient, Inc. v. Collier, C.A. No. 274-N, 2006 WL 1134170 (Del. Ch. Apr. 19, 2006). Plaintiff alleged that a former employee of plaintiff breached a confidentiality and non-compete agreement (the "Non-Compete"), that the former employee and his new employer both breached a related settlement agreement (the "Settlement" and collectively with the Non-Compete, the "Agreements"), and that the new employer tortiously interfered with the Non-Compete and prospective business relations. Plaintiff sought damages and injunctive relief. The court concluded that while the Agreements were enforceable, they were not breached by defendants and there was no tortious interference. More ›

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Court of Chancery Awards $4.8 Million, Plus Interest, to Minority Shareholders for Damages Suffered from Director Defendants' Breach of the Fiduciary Duty of Loyalty

Oliver v. Boston University, C.A. No. 16570-NC, 2006 WL 1064169 (Del. Ch. Apr. 14, 2006). Defendant Boston University ("BU") was the controlling shareholder of Seragen, a financially troubled biotechnology company. Plaintiffs, a group of former minority stockholders of Seragen's common stock, challenged certain transactions before Seragen was merged and the process by which the merger proceeds were divvied up. The plaintiffs contended that the BU defendants breached their fiduciary duties to Seragen's common shareholders by approving various financial transactions, which were not fair to the common shareholder as a matter of price and process. The Court of Chancery awarded damages in excess of $4.8 million plus interest for breaches of the fiduciary duty of loyalty. More ›

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Court of Chancery Imposes Class Certification with Hedge Fund as Class Representative

Regal Entertainment Group v. Amaranth LLC, C.A. No. 1226-N, 2006 WL 948257 (Del. Ch. Apr. 12, 2006). Plaintiff, Regal Entertainment Group, asked the Court of Chancery to grant its motion for certification of defendant class. Plaintiff is the issuer of a series of convertible notes under an indenture and defendant Amaranth is one of the largest holders of these notes. After a public dispute regarding Regal's method of calculating the number of shares of common stock upon conversion, Regal filed a lawsuit against Amaranth seeking a declaration that its calculation was correct. Amaranth counterclaimed that its calculation of conversion was correct. The only objection that Amaranth raised to the motion for certification was that its status as a hedge fund should relieve it of the obligation to serve as the representative of a defendant class. The court granted Regal's motion for class certification finding that Amaranth is well-positioned to represent the class as it seeks to advance an interpretation of the calculation provisions of the indenture contrary to Regal's, which affects all noteholders. More ›

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Delaware Supreme Court Grants Summary Judgment in Favor of Insurer Where Decedent's Worker's Compensation Carrier Could Not be Identified and Thus Could Not be Deemed an "Insolvent Insurer"

Delaware Insurance Guaranty Association v. Pickering, C.A. No. 04C-09-240 (MMJ), 2006 WL 1067317 (Del. Supr. April 10, 2006). Prior to death, decedent Logan sought worker's compensation benefits arising from injury caused by occupational exposure to asbestos while employed by H. C. Moore. When the employer's worker's compensation carrier could not be identified, the Delaware Industrial Accident Board (the "Board") ordered Delaware Insurance Guaranty Association ("DIGA") to appear and defend Logan's claim. DIGA moved for Summary Judgment. The Court entered judgment in favor of DIGA on the grounds that 18 Del. C. § 4204 authorized only the payment of valid covered claims existing prior to (or shortly after) an order of liquidation of an insolvent insurer.

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Court of Chancery Permits Derivative Action to Proceed Because Alleged Facts Created Reasonable Doubt that Directors were Disinterested and Independent

Feldman v. Cutaia, C.A. No. 1656-N, 2006 WL 920420 (Del. Ch. Apr. 5, 2006). This action involved a series of transactions in which the Telx defendant directors allegedly granted themselves a significant equity stake in the company for little or no consideration. Plaintiff alleged that these transactions significantly diluted his equity position. This action also involved a self tender-offer by the company for $5 million worth of its securities. Defendant argued that plaintiff did not make a demand on the Telx board before proceeding with the derivative action and that the complaint did not plead with particularity facts that created a reasonable doubt as to the ability of the Telx board to independently consider such a demand. The Court of Chancery denied the defendants' motion to dismiss and permitted the plaintiff to proceed with his derivative suit. More ›

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Court of Chancery Interprets Indemnification Provisions as Not Permitting Indemnification by Re-Organized Company While Permitting Indemnification by Pre-Organized Company

Levy v. Hayes Lemmerz International Inc., C.A. No. 1395-N, 2006 WL 985361 (Del. Ch. Apr. 5, 2006). The plaintiffs in this case sought indemnification for a settlement of claims against them for $27.5 million, paying $7.2 million out of their own pockets. The plaintiffs were former outside directors of a public company engaged in the automobile supply trade who were sued by both stockholders and bondholders of that company for various statutory violations and breaches of fiduciary duty when the company was forced to reveal that some of its financial statements contained materially misleading information. The corporation that the plaintiffs served ("Old Hayes") entered Chapter 11 bankruptcy and emerged as the operating subsidiary of a new entity ("New Hayes"). When the plaintiffs sought indemnification for the settlement under the old corporation's bylaws, their individual indemnification plans, and the bankruptcy reorganization plan, both Old Hayes and New Hayes refused. The Court of Chancery dismissed the plaintiffs' claims as to New Hayes, which the court found as a matter of law had no obligation to indemnify its predecessors' former directors and officers; however, the court denied the motion to dismiss as to the old company because the directors had a right to proceed with their claim for indemnification against Old Hayes. More ›

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Court of Chancery Awards Reliance Damages for Promissory Estoppel

Ramone v. Lang, C.A. No. 1592-N, 2006 WL 905347 (Del. Ch. Apr. 3, 2006). This case involved a dispute between two businessmen who hoped to work together on a project to open a swim and fitness center, but who failed to achieve this despite months of efforts and negotiations. Plaintiff and defendant intended to formalize their relationship in a written LLC agreement. Ultimately, defendant closed on the property for himself, frustrated by his inability to reach a final agreement with plaintiff. Plaintiff sued for breach of contract, breach of fiduciary duty, and promissory estoppel. The Court of Chancery found that there was no contract between the parties and that the parties were not partners, therefore defendant did not owe any fiduciary duties. The court did, however, find that plaintiff had a claim for promissory estoppel and awarded reliance damages. More ›

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District Court Denies Defendants' Motions to Dismiss Derivative Action for Failure to Comply with Demand Requirement and Lack of Subject Matter Jurisdiction and Denies Plaintiff's Motion for Summary Judgment.

Seinfeld v. Barrett, C.A. No. 05-298-JJF, 2006 WL 890909 (D. Del. Mar. 31, 2006). Plaintiff filed a derivative action against defendants, alleging that they violated Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14a-8 and breached their fiduciary duties under Delaware law by making false and misleading statements in connection with a proxy statement issued by the defendants in March 2005. Plaintiff moved for summary judgment, and defendants moved to dismiss for lack of subject matter jurisdiction and for failure to comply with Rule 23.1. More › Share

Superior Court Denies Defendant's Motion to Dismiss and Motion for a More Definite Statement in Breach of Contract Case

Spanish Tiles, Ltd. v. Hensey, C.A. No. 05C-07-025 RFS, 2005 WL 3981740 (Del. Super. Ct. March 30, 2006). Plaintiff Spantis Tiles, Ltd. D/b/a Terra Tile and Marble ("Terra Tiles") and Plaintiff Steel Buildings, Inc. d/b/a Northern Steel buildings, Inc. ("NSB") brought an action against Kurt and Ken Hensey (the "Henseys") for breach of contract, tortious interference with contracts and prospective contracts, violation of the Deceptive Trade Practices Act, common law fraud, unlawful practice and defamation. The defendant moved to dismiss for failure to state a claim and moved for a more definite statement. The court denied both motions. More › Share

Court of Chancery Awards Attorneys' Fees Only for Work Devoted to Meritorious Claims

In re Triarc Companies, Inc. S'holders Litig., C.A. No. 16700, 2006 WL 903338 (Del. Ch. Mar. 29, 2006). After the voluntary dismissal of a class action, plaintiffs petitioned the Court of Chancery for attorneys' fees and expenses. The court found that plaintiffs' counsel was entitled to fees for the preparation of the amended complaint and litigation efforts undertaken before the action that caused the voluntary dismissal. Plaintiffs' counsel was not entitled to fees for their work in connection with the original complaint nor for their work performed after the claims in the amended complaint were mooted. More ›

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Court of Chancery Dismisses Complaint Because a Creditor Erroneously Asserted Derivative Claims as Direct in the Hope of Escaping Bankruptcy Court Jurisdiction

Big Lot Stores, Inc. v. Bain Capital Fund VII, LLC, C.A. No. 1081-N, 2006 WL 846121 (Del. Ch. Mar. 28, 2006). In 2000, in a sponsored management buyout, a corporation sold a subsidiary business that operated a chain of toy stores (KB Toys) in exchange for $257.1 million in cash and a $45 million note due in 2010. In 2002, the new owners refinanced the business and distributed approximately $120 million to the buyout sponsor, affiliates, two officers and directors of the subsidiary that invested in the buyout, and others. In 2004, the KB Toys filed for Chapter 11 bankruptcy. Plaintiff Big Lots, Inc, an unsecured creditor and holder of the $45 million note, brought this action asserting direct claims of breach of fiduciary duties, fraud, and civil conspiracy. The plaintiff sought recovery for the amount due on the note and restitution for alleged unjust enrichment. The Court of Chancery dismissed the complaint namely because the claims were derivative in nature, not direct, and thus belong to the bankruptcy estate. More ›

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Superior Court Enters Judgment in Favor of Defendant on Grounds that Defendant did not Breach Contract Where Plaintiff Waived Express and Implied Warranty that Material was Fit for Intended Use.

Freudenberg Spunweb Company v. Fibervisions L.P., C.A. No. 04C-03-073 (FSS), 2006 WL 1064173 (Del. Super. Ct. Mar. 27, 2006) Plaintiff sued Defendant for breach of contract claiming raw materials provided by Defendant to Plaintiff's customers were defective. Defendant agreed to provide polypropylene staple fiber for Plaintiff's state-of-the-art factory, but the raw materials routinely clogged the machinery. Plaintiff sought more than $10 million in damages. More › Share

Superior Court Denied Defendant's Motion to Dismiss for Failure to Join Indispensable Parties and Improperly Joined Claims

Sonitrol Corp. v. Signature Flight Support Corp., C.A. No. 05C-07-302, 2006 WL 1134775 (Del. Super. March 24, 2006) Signature entered into multiple contracts with Sonitrol pursuant to which Sonitrol would install electronic security equipment and provide security services at various locations. Signature accepted the services and equipment, but failed to pay approximately $491,523.59 for certain equipment and services. More › Share

District Court Enjoins Plaintiff from Initiating Third-Party Proceedings Against Defendants and from Pursuing Global Settlement Strategy in Pending Asbestos Cases

Flowserve Corp. v. Burns Int'l Servs. Corp., C.A. No. 04-1294-JJF, 2006 WL 739886 (D. Del. Mar. 22, 2006). Plaintiff filed a complaint seeking a declaratory judgment of its right to indemnification in asbestos litigation under the terms of a stock purchase agreement executed by its predecessor-in-interest, which had acquired a subsidiary of Borg-Warner Corp. ("BWC"). Defendant Burns International Services Corp. ("Burns"), which had purchased BWC's insurance assets at a liquidation sale, filed a counterclaim alleging that its indemnification obligations to plaintiff only arose out of a later letter agreement, and that once BWC's insurance was exhausted, plaintiff had to pay the costs of defending and resolving the asbestos claims. During the pendency of the instant case, plaintiff informed Burns that (i) it had terminated the counsel chosen by Burns to defend the asbestos claims; (ii) it was choosing its own counsel; and (iii) it was directing its new counsel to file third-party complaints against defendants and to pursue global settlements in the underlying asbestos cases (together, the "threatened actions"). Burns then sought a temporary restraining order and preliminary injunction to enjoin plaintiffs from taking the threatened actions. More ›

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