Delaware Business Litigation Report

Court of Chancery Addresses Contractual Fiduciary Duties, Secondary Liability, and Banker Liability in the MLP Context

Mesirov v. Enbridge Energy Company, C.A. No. 11314-VCS (Del. Ch. Aug. 29, 2018)

This is the latest decision in a long-running saga in the master limited partnership (MLP) context involving Enbridge Energy.  The Court of Chancery had previously dismissed the complaint for failure to state a claim.  The Delaware Supreme Court reversed that dismissal while providing important guidance on properly construing contractual fiduciary duties in the MLP context.  The defendants moved to dismiss the amended complaint on remand.  This is the Court of Chancery’s decision granting in part and denying in part that motion.  More ›

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Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims

In re Appraisal of Columbia Pipeline Group, Inc., C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018)

It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the inevitable exchange of commercially-sensitive information during the discovery process.  Those orders spell out how such information may or may not be disclosed, including in court filings, while adopting the standards and procedures reflected in the Court of Chancery rule on the topic, Rule 5.1.  More ›

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Delaware Superior Court Explains When Expert Opinion Is Admissible

The State of Delaware v. Card Complaint LLC, C.A. N13C-06-289 PRW CCLD (August 29, 2018)

This is an excellent summary of the law governing the admissibility of an expert opinion. It is particularly useful in dealing with non-scientific opinions that are based on experience in an industry.

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Morris James Named a Top Work Place for Mid-sized Employers in Delaware Eleventh Consecutive Year

Morris James was named a top work place for mid-sized employers in Delaware for the eleventh consecutive year.  This year's top workplace honor makes Morris James the only law firm in Delaware to be consistently top-ranked in the mid-sized employers category for the past eleven years. More ›

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Court of Chancery Authorizes Use of Extrinsic Evidence to Construe Preferred Stock Rights

Cedarview Opportunities Master Fund LP v. Spanish Broadcasting System Inc., C.A. No. 2017-0785-AGB (Del. Ch. Aug. 27, 2018)

Stock preferences are in derogation of the common law and thus strictly construed.  Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated.  But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.

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Court Of Chancery Explains How To Interpret Interlocking LLC Agreements

Godden v. Franco, C.A. 2018-0504-VCL (August 21, 2018)

When multiple LLC agreements for several entities contain provisions that relate across the entities, deciding how to interpret those provisions is a potential problem. As this decision points out, the separate identities of the entities need to be respected. Nonetheless, when the LLC agreements create contract rights, those rights can be enforced, just as a stockholders’ agreement can be enforced to require action by the signatories to the agreement.

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Court Of Chancery Explains How To Set A TRO Bond

Applied Energetics Inc. v. Farley, C.A. 2018-0489-TMR (August 14, 2018)

A plaintiff who obtains a TRO must post a bond to cover any damages the defendant may suffer from the TRO. How to calculate the amount of that bond is often difficult. This decision does a good job of explaining how to make that calculation.

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Court of Chancery Enforces Redemption Rights and Addresses the Potential Effect of a Merger on Previously-Exercised Put Rights

QC Holdings Inc. v. Allconnect Inc., C.A. No. 2017-0715-JTL (Del. Ch. Aug. 28, 2018)

This decision is necessary reading for drafters of redemption rights.  It involves the interpretation of a redemption rights agreement granting a stockholder the right to force the company to buy back its shares and some interplay between those put rights and the DGCL in the event of a merger.  More ›

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Superior Court CCLD explains “Wrongful” Conduct in Tortious Interference Claim

KT4 Partners LLC v. Palantir Technologies Inc., C.A. No. 17C-12-212 EMD CCLD (August 22, 2018)

A claim for tortious interference with a contractual relationship must include an allegation that the conduct complained about was itself wrongful. This decision explains what is such “wrongful” conduct and concludes that the use of confidential information to contact a party to a contract to dissuade it from going forward is such wrongful conduct.

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Jason C. Jowers Named Fellow of Litigation Counsel of America

Jason C. Jowers has been selected as a Fellow of the Litigation Counsel of America. Mr. Jowers is the Vice Chair of the Corporate and Commercial Litigation Group at Morris James.  A 2000 graduate of the Rhodes College, Jason received his Juris Doctor degree from The George Washington University School of Law in 2003.  Mr. Jowers' practice focuses on corporate, alternative entity, and commercial litigation. He primarily represents members and managers of LLCs, officers and directors of corporations, and companies in high-stakes litigation in the Delaware Court of Chancery, Delaware Superior Court, Delaware Supreme Court, and United States District Court for the District of Delaware. Additionally, Jason handles arbitrations governed by the AAA Commercial Arbitration Rules, including cases governed by the Procedures for Large, Complex Commercial Disputes. He has led litigation teams in disputes involving mergers and acquisitions, corporate and LLC control issues, judicial dissolution, and complex commercial arrangements. More ›

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Court of Chancery Addresses Discovery Obligations Regarding Text Messages

In re Appraisal of Kate Spade Company, C.A. No. 2017-0714-AGB (Del. Ch. June 21, 2018)

The duty to collect and produce non-privileged relevant information extends beyond email to text messages and other forms of electronic communications. Standard practice in Delaware involves at least inquiring of custodians the extent to which they used text messages to engage in substantive communications on potentially relevant topics and to collect text message data when they answer affirmatively, absent an agreement to contrary between the parties. This bench ruling addresses that practice and reflects the Chancellor’s view that text messages often may be a critical source of information.

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Chancery Awards Fair Value of Member Interest to Expelled Member of Del. LLC

Delaware statutes enabling formation of unincorporated entities like limited liability companies (LLCs) and limited partnerships afford freedom for owners to structure business relationships as they see fit. This freedom carries with it the responsibility  to accurately and completely describe the parties’ rights and duties. It also means that when disputes arise among owners or managers, a Delaware court will resolve the dispute through application of principles of contract interpretation. Moreover, if the parties in their foundational agreement do not address an issue, the court will apply default rules under the applicable business entity statute. The recent case of Domain Associates LLC v. Shah, C.A. No. 12921-VCL (Aug. 13, 2018), well illustrates these principles—the court applied default rules under the Limited Liability Company Act to hold that an expelled member of a Delaware LLC was entitled to the fair value of his interest and not simply to the value of his capital account. More ›

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Court of Chancery Validates Cure of Defective Corporate Acts Affecting Herman Miller’s Acquisition of DWR

Charles Almond Trustee v. Glenhill Advisors LLC, C.A. No. 10477-CB (Del. Ch. Aug. 17, 2018)

Sections 204 and 205 of the DGCL permit corporations to cure and validate defective corporate acts under the right circumstances. This is another decision explaining when the Court will validate an attempted cure under Section 204. The opinion explains, among other things, that there is no set time limit to seek validation of a cure under Section 205. It further explains what sort of defective acts may be addressed in Section 205 proceedings. More ›

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Court of Chancery Enforces Agreement to Use Independent Auditor

Enterprise Holdings Inc. v. Rolen Stockholder Representative LLC, C.A. No. 2017-0422-AGB (Del. Ch. June 27, 2018)

Merger agreements sometimes provide for post-merger purchase price adjustments to be made by an independent accounting firm. This is another decision, in the form of a bench ruling, where the Court of Chancery readily enforces such an agreement, albeit with some guidance to the accountant on what issues are for the accountant to decide and what issues must remain for the Court.

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Delaware Superior Court Explains Impact Of European Data Rules On Forum Motion

Ethica Corporate Finance S.r.L. v. Dana Incorporated, C.A. No. N17C-10-145 EMD CCLD (August 16, 2018)

Under the Cryo-Maid decision, a forum non conveniens motion must consider the impact on a defendant forced to litigate in Delaware when discovery is needed in a foreign land.  Here the Court considered the impact of the recent amendments to the Italian Data Protection Code on discovery and found that it did not impose an undue hardship under the facts present in this case. This may become more important as those European laws on privacy protection start to be considered for their effect on litigation outside of the EU.

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