Delaware Business Litigation Report

Court Of Chancery Resolves 2 Significant Indemnification Issues

Creel v. Ecolab Inc., C.A. 12917-VCMR (October 31, 2018)

This decision resolves indemnification issues that regularly arise. First, when there are two possible indemnitors and one pays up, may the indemnitee still seek indemnification from the second indemnitor?  It depends on when the obligation to indemnify arose. If the indemnitor who actually paid up only assumed that duty after the underlying claim arose that led to the expense to be paid, then that indemnitor is a volunteer and its indemnitee may seek payment from the other indemnitor. Note that this decision does not foreclose suit by the actual indemnitor for equitable contribution. More ›

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U.S.News - Best Lawyers® Recognizes Morris James LLP Among Best Law Firms

The 2019 U.S. News – Best Lawyers® annual guide of the “Best Law Firms" recognizes Morris James as a "Best Law Firm" in the national category of Litigation-Mergers & Acquisitions as well as 25 additional categories for their Delaware practices. More ›

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Court Of Chancery Provides Guidance On Reconciling Public Policy Exception To Noncompete Agreements

Cabela’s LLC v. Wellman, C.A. 2018-0607-TMR (October 26, 2018)

Delaware law broadly enforces noncompete agreements. However, it will not do so when the public policy of a state with greater contacts to the parties prohibits that enforcement. As this decision explains, how to decide what exactly that competing public policy is may not be easy to do given the exceptions to that policy that frequently exist. Here the Court carefully examines the public policy of Nebraska and finds it permits enforcement of noncompete agreements when to do so will prevent unfair competition. More ›

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Court Of Chancery Dismisses Complaint Alleging Aiding and Abetting Claim

Tilden v. Cunningham, C.A. 2017-0837-JRS (October 26, 2018)

This is an interesting decision for many reasons. It includes a comprehensive analysis of when demand on a board is not excused, when ignoring a forum selection clause constitutes prejudice sufficient to invoke a laches defense and why a named plaintiff cannot also be the attorney on the complaint. Perhaps its more lasting impact will be its holding that when directors are exculpated by a 102(b)(7) defense there cannot be an aiding and abetting claim against a third party who facilitated the actions alleged to be a breach of fiduciary duty.

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Court Of Chancery Explains When To Stay A Case In Favor Of Foreign Litigation

Lexington Services Ltd. v. US Patent No. 8019807 Delegate LLC, C.A. 2018-0157-TMR (October 26, 2018)

This decision explains when to stay a Delaware litigation in favor of litigation in a foreign country. As it notes, when the law of that other country is not well explained to the Court with respect to the enforcement of a forum selection clause, it will apply Delaware law to decide that issue.

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Delaware Superior Court Explains When Implied Covenants Triggered

The GWO Litigation Trust v. Sprint Solutions Inc., C.A. N17C-06-356 PRW CCLD (October 25, 2018)

While every contract has an implied covenant requiring the parties to act fairly and in good faith, it is not always easy to know how that applies in a given case. This decision is a good example of how the court will approach that issue. It finds that the contract impliedly limited the right of a party to compete with an entity it had formed with another party to exploit a business opportunity.

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Court Of Chancery Clarifies Set Off Rights Under Acquisition Agreement

Post Holdings Inc. v. NPE Seller Rep LLC, C.A. 2017-0772-AGB (October 29, 2018)

Acquisition agreements frequently contain escrows to cover any claims for breach of the warranties in the agreements or other post-closing claims. But that does not mean that a buyer may set off an unliquidated claim against its post-deal payment obligations under the agreement. As this decision holds, to have that set off ability, the agreement must permit it as a matter of right.

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Delaware Today Recognizes 38 Morris James Attorneys in its Top Lawyer Issue

Morris James Takes the Lead in Delaware Today Top Lawyers Survey

Morris James LLP is pleased to announce that the lawyers listed below were recognized as Top Lawyers by their peers in a survey of Delaware attorneys conducted by Delaware Today magazine. Morris James had more top lawyers and top vote-getters than any other law firm in Delaware. Thirty-eight attorneys were named in 20 practice areas. More ›

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Delaware District Court Applies Delaware Demand Standards

Butorin v. Blount, C.A. No. 15-283-LPS (D. Del. September 30, 2018)

In this decision, the Delaware Federal District Court applied the Delaware tests for deciding if demand is excused by the facts alleged in a derivative complaint. In dismissing the complaint, the Court held that simply pleading the Board should have known of business problems is not enough to excuse demand. The decision also notes several other defects in the complaint.

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Court Of Chancery Upholds Waiver Of Appraisal

Manti Holdings LLC v. Authentrix Acquisition Co.,  C.A. 2017-0887-SG (October 1, 2018)

This decision upholds a contractual waiver of appraisal rights entered into at the time the investment was made. That is not new. However, what is important is the focus on the type of transactions that triggered the waiver, with a merger doing so but a stock sale not waiving the right to be carried along. Thus, the terms of the deal once again are critical.

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Court Of Chancery Limits Non-Compete Agreement

Badger Holding LLC v. Kirsch, C.A. 2017-0147-SG (October 1, 2018)

As this decision points out, if a non-compete agreement conditions its enforcement on the employer’s performance of its end of the bargain, then a failure to do so renders the non-compete unenforceable.

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Court Of Chancery Provides Definitive Explanation Of A Material Adverse Effect Clause

Akorn Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300-JTL (October 1, 2018)

Merger agreements often permit the buyer to terminate items when a material adverse effect occurs. This 247 page opinion provides what may be the definitive analysis of such terms as “material adverse effect,” “reasonable best efforts” and “all actions necessary” that are often found in merger agreements. It is also a great source of the key reference materials that the Court of Chancery is increasingly turning to in interpreting what such terms mean in the real world. For example, it teaches that a MAE clause is focused on the target company’s own performance as different from the industry that it belongs to and explains the degree and length of a downturn needed to find an MAE. More ›

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Are Directors Liable for Unforeseen Calamities?

The answer to the question posed in the title to this article may seem devious to you. After all, the answer must be “no” if we want anyone to serve on a corporate board of directors. Yet this question continues to pop up as discussed in the recent decision of the Delaware Court of Chancery in Marchand v. Barnhill, C.A. No. 2017-0586-JRS (Sept. 27, 2018). More ›

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Court Of Chancery Again Holds Deal Price Establishes Fair Value

In Re PLX Technology Inc. Stockholders Litigation, C.A. 9880-VCL (October 16, 2018)

This massive decision is a primer on Delaware director fiduciary duty. It covers just about all the important issues, with an enormous amount of citations and explanation. It is particularly helpful in showing how directors must meet their disclosure obligations, both to their other directors and to stockholders. It is, of course, very much a product of its unique facts. More ›

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Court Of Chancery Declines To Approve Derivative Settlement

Stein v. Blankfein, C.A. 2017-0354-SG (October 23, 2018)

This is the rare decision that declines to approve the settlement of a derivative suit. The Court rejected the settlement because the proposed terms required the corporation, as a nominal defendant, to release breach of fiduciary duty claims against the director defendants in return for which those directors would agree to make disclosures already required by law. The Court viewed that agreeing to do what you had to do anyway as providing no real consideration for the release of the claims. This result illustrates the scrutiny the Court of Chancery applies to such settlements that affect corporate and stockholder rights.

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