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Fiduciary Duty.
By Morris James LLP on December 23, 2005
Crescent/Mach I Partnership, L.P. v. Turner, C.A. No. 17455-NC, 2005 WL 3618279 (Del. Ch. Dec. 23, 2005).
Former stockholders who were cashed out in connection with merger sued the corporation's former controlling stockholder and the acquirer for breach of fiduciary duty and aiding and abetting breach of fiduciary duty, respectively. Plaintiffs complained of numerous side deals, allegedly negotiated by the controlling stockholder. Plaintiffs also complained that the controlling stockholder breached his fiduciary duty by supplying growth projections that he knew to be unduly pessimistic and inconsistent with management's view. Defendants moved for summary judgment, which the court granted in part and denied in part.
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By Morris James LLP on December 20, 2005
Unisuper v. News Corp., C.A. No. 1699-N, 2005 WL 3529317 (Del. Ch. Dec. 20, 2005).
In the context of converting from an Australian corporation to a Delaware corporation, News Corp.'s board adopted a policy that if a shareholder rights plan was adopted following reincorporation, the plan would have a one-year sunset clause unless shareholder approval was obtained for an extension. The policy also provided that if shareholder approval was not obtained, the company would not adopt a successor shareholder rights plan having substantially the same terms and conditions. Several weeks later, News Corp.'s board adopted a poison pill in response to a specific third-party takeover threat. One year later, the board extended the poison pill without a shareholder vote, in contravention of its prior policy.
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By Morris James LLP on December 14, 2005
Laties v. Wise, C.A. No. 1280-N, 2005 WL 3501709 (Del. Ch. Dec. 14, 2005).
In 2001, Defendant corporate executive received bonuses and other compensation near $9 million as CEO, due in some part to the corporation's reported profits that year. Several years later, after that executive's departure, the corporation restated its 2001 performance from a $93 million profit to a $447 million loss. Plaintiff brought a derivative claim against executive for unjust enrichment, and against the present directors of the corporation for breach of fiduciary duty and waste. Defendants moved to dismiss under Court of Chancery Rule 23.1.
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By Morris James LLP on December 13, 2005
Kaufman v. Computer Associates International, Inc., C.A. No. 699-N, 2005 WL 3470589 (Del. Ch. Dec. 13, 2005).
A beneficial stockholder filed a books-and-records action pursuant to
8 Del.C. §220 seeking documents relating to the corporation's decision to settle certain derivative and federal class action litigation in a manner that allegedly benefited the individual wrongdoers at the corporation's expense. A special litigation committee acting on behalf of the corporation moved to stay this action until it completed its investigation on this issue, which had become the subject of new derivative litigation in New York brought by different plaintiffs.
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By Morris James LLP on December 8, 2005
Benihana of Tokyo, Inc. v. Benihana, Inc., C.A. No. 550-N, 2005 WL 3753046 (Del. Ch. Dec. 8, 2005). Stockholder sought rescission of an agreement to issue $20 million of preferred stock to a third-party holding company. Plaintiff alleged that the transaction violated 8 Del. C. - 151 and corporation's certificate of incorporation by granting the holding company shares with preemptive rights and was therefore void as ultra vires. Plaintiff also alleged that a majority of the corporation's directors breached their fiduciary duties in approving the transaction and that the transaction had an improper primary purpose to dilute Plaintiff's interest in the corporation and entrench certain director defendants. Plaintiff further alleged that the acquirer aided and abetted the director defendants in their actions. More ›
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By Morris James LLP on November 23, 2005
Dweck v. Nassar, C.A. No. 1353-N, 2005 WL 3272363 (Del. Ch. Nov. 23, 2005). Plaintiff alleged that she and Defendant orally agreed as co-founders that corporation would have a four-member board of directors and that each party would appoint two directors. Plaintiff alleged that this agreement was later reduced to written drafts but never finalized or signed. Plaintiff further alleged that Defendant, who owned 52.5% of the corporation's outstanding stock, breached this agreement and his fiduciary duties when he terminated Plaintiff as CEO and President, installed his unqualified nephew in her stead, and added a fifth member to the board. Plaintiff also sought appointment of custodian under 8 Del.C. -226, suggesting that the company's board, when properly constituted with two directors per side, would be deadlocked. Defendant moved for partial judgment on the pleadings. More ›
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By Morris James LLP on November 23, 2005
Rapoport v. The Litigation Trust of MDIP Inc., C.A. No. 1035-N, 2005 WL 3277911 (Del. Ch. Nov. 23, 2005).
Former directors moved to dismiss breach of fiduciary duty action brought against them by bankruptcy liquidation trust in Delaware District Court for lack of subject-matter jurisdiction. That same day, the former directors filed a parallel action in the Court of Chancery seeking a declaration that they did not breach their fiduciary duties in connection with the conduct challenged in the District Court action. Four months later, the directors' motion to dismiss was granted. The following day, the trust re-filed its breach of fiduciary duty action in Ohio state court. The directors moved to enjoin the trust from prosecuting the Ohio action. The trust cross-moved to stay or dismiss the Chancery action. The court denied both parties' motions.
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By Morris James LLP on November 23, 2005
Orloff v. Shulman, C.A. No. 852-N, 2005 WL 3272355 (Del. Ch. Nov. 23, 2005).
Dissident shareholder group filed individual and derivative complaint alleging that director defendants violated their fiduciary duties and committed waste by mismanaging and misappropriating corporate assets and by disseminating misleading information to the corporation's minority shareholders. Complaint further alleged that Defendants self-interestedly adopted an advancement bylaw and exculpatory charter provision. Defendants moved to dismiss based on res judicata, laches, lack of standing, forum non conveniens, failure to state a claim, and failure to plead facts excusing demand under Court of Chancery Rule 23.1.
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By Morris James LLP on November 21, 2005
Gentile v. Rossette, C.A. No. 20213-NC, 2005 WL 2810683 (Del. Ch. Oct. 20, 2005).
Plaintiffs, former shareholders of SinglePoint Financial, Inc. which merged into a subsidiary of Cofiniti, Inc., alleged that two former directors of SinglePoint breached their fiduciary duties in connection with the issuance of a large number of shares to one of the defendants and the merger. Defendants moved for summary judgment.
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By Morris James LLP on November 4, 2005
In re LNR Propert Corp. Shareholders Litigation, C.A. No. 674-N, 2005 WL 3418631 (Del. Ch. Nov. 4, 2005, rev'd Dec. 14, 2005).
Former shareholders filed fiduciary class action in connection with a cash-out merger, naming corporation and former directors as defendants. The complaint alleged that the corporation's controlling shareholder negotiated to sell the company to a third-party investment firm in all-cash deal. The complaint further alleged that, as part of the transaction, the controlling shareholder and other members of company management agreed to invest approximately $184 million to acquire a 25% equity stake in the surviving entity. Defendants moved to dismiss for failure to state a claim.
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By Morris James LLP on October 14, 2005
Blackmore Partners, L.P. v. Link Energy LLC, C.A. No. 454-N, 2005 WL 2709639 (Del. Ch. Oct. 14, 2005).
Plaintiff Blackmore Partners L.P. instituted cause of action against Defendant Link Energy LLC and its directors, alleging breaches of fiduciary duty in connection with the sale of Link's assets for a price likely to leave zero value to Link's equity investors. Defendants moved for summary judgment.
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By Morris James LLP on October 6, 2005
Zimmerman v. Braddock, C.A. No. 18473-NC, 2005 WL 2266566 (Del. Ch. Sept. 8, 2005).
Plaintiff, a shareholder of priceline.com, Inc., moved for leave to amend his derivative complaint against directors of Priceline based upon three defendants' alleged insider trading and misappropriation of confidential information. Defendants argued amendment would be futile.
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By Morris James LLP on October 5, 2005
Ruggerio v. Poppiti, C.A. No. 18961, 2005 WL 2622716 (Del. Ch. Oct. 5, 2005).
Plaintiff, who was limited partner of partnership and sole stockholder of corporation controlled by Defendants, alleged that Defendants failed to report or account to him regarding his ownership interest in the entities, breached their fiduciary duties and commingled assets. Defendants counterclaimed for money loaned by limited partnership to corporation.
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By Morris James LLP on September 20, 2005
Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. Sept. 20, 2005).
Plaintiff sought preliminary injunction against consummation of Purchase Agreement pending arbitration of its substantive disputes with Defendant.
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By Morris James LLP on July 25, 2005
Weil v. Morgan Stanley DW Inc., 877 A.2d 1024 (Del. Ch. 2005).
Plaintiff consumer brought an action on behalf of himself and others similarly situated alleging that defendant Morgan Stanley breached its fiduciary duties and that HarrisDirect, the buyer of its online brokerage business, aided and abetted in the breach. The two defendants moved to dismiss under Rule 12(b)(6) for failure to state a claim.
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