About This Blog
Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Subscribe to Blog
JDSupra RSS
Join us on LinkedIn
Follow us on TwitterTopics
Top Posts
Top News
- February 19, 2021
- October 30, 2020
- April 1, 2024
Archives
Morris James Blogs
Company's Position Taken in Bankruptcy Voids Noncompete Obligations
The Delaware Court of Chancery's decision in Hipcricket v. mGage, C.A. No. 11135-CB, (Del. Ch. July 15, 2016), highlights the importance of coordinating the positions taken in different legal proceedings. The plaintiff in Hipcricket appeared to have a binding and enforceable noncompete agreement prohibiting its former vice president of sales (the defendant) from engaging in any post-employment solicitation of the plaintiff's customers and employees. That defendant breached the agreement shortly after leaving his employment with the plaintiff seemed clear. The plaintiff proved at trial that the defendant joined one of the plaintiff's competitors and "immediately" began soliciting the plaintiff's largest clients, including certain of his former accounts. Despite this showing, the plaintiff did not prevail on its breach of contract claim. Instead, the court found that the plaintiff had materially breached the agreement by rejecting, in its Chapter 11 bankruptcy proceeding, the defendant's claim for unpaid commissions and other amounts plainly due under the agreement. The court ruled that the plaintiff could not "'have its cake and eat it too'" by enforcing an agreement it had materially breached through the position it took in bankruptcy court. More ›
ShareCourt Of Chancery Denies Inspection When The Board Has An Obvious Defense To A Claim Of Wrongdoing
In general, the bar is low for exercising inspection rights to investigate claims of wrongdoing. Plaintiffs need provide only some evidence to suggest a credible basis from which the Court can infer possible mismanagement or wrongdoing. But as this decision holds, when there is an obvious defense to the claim, such as the board’s reliance on an audit firm for a complicated accounting issue, inspection may be denied.
ShareCourt Of Chancery Explains When Prior Dismissal Does Not Preclude Another Derivative Case
In Re Duke Energy Corp. Derivative Litigation, C.A. 7705-VCG (Del. Ch. Aug. 31, 2016)
This is an important decision because it explains when a prior dismissal of a derivative complaint does not preclude a second complaint alleging a wrong close to that alleged in the dismissed case. More ›
ShareCourt Of Chancery Again Explains Scope Of The Corwin Doctrine
Larkin v Shah, C.A. 10918-VCS (August 25, 2016)
This is one of two recent Court of Chancery decisions explaining that the Corwin case really does mean that there is an “irrebuttable business judgment rule” that bars challenges to a merger approved by a majority of the fully-informed, disinterested and uncoerced stockholders, in the absence of the deal involving a controlling stockholder who suffers from a conflict in the merger. More ›
ShareCourt of Chancery Denies Director Full Inspection Rights
Bizzari v. Suburban Waste Services Inc., C. A. No. 10709-JL (Del. Ch. Aug. 30, 2016)
This is an almost unprecedented decision to limit the inspection rights of a corporate director. Directors generally have “essentially unfettered” access to the corporate records to fulfill their fiduciary roles. Here, given the director’s improper motive to use the records to compete with or harm the corporation, the result is entirely justified under the bizarre set of facts.
ShareAdvancement Rights of Present and Future Officers Under LLC Agreement
Advancement and indemnification rights are vital in attracting the best and brightest individuals to serve as managers of Delaware entities. Those rights are meant to provide managers of Delaware entities comfort when accepting positions that often lead to being named in litigation. In the limited liability company context, a manager's advancement and indemnification rights are often derived from the entity's operating agreement. And seeing as Delaware courts strive to enforce the express terms of an agreement, advancement and indemnification provisions must be drafted with precision. As discussed below, contractual limitations and qualifications on advancement and indemnification rights will be interpreted in a way that gives meaning to all terms in the agreement. More ›
ShareCourt Of Chancery Explains Inspection Rights For A Statutory Trust
This is the first decision examining the right to inspect the records of a Delaware Statutory Trust. Applying settled law from decisions in the LLP and LLC context regarding whether to read statutory and contractual inspection rights as separate and independent, the Court held that a contractual right to inspection is not subject to the conditions in the trust statute (Section 3819) unless the Trust language says so. The Court also held that defending against the inspection on the grounds of an improper purpose requires proof of probable harm to the trust if the Court allowed the inspection.
ShareBest Lawyers® 2017 Recognizes 19 Morris James Attorneys
Nineteen Morris James attorneys in twenty-six practice areas were selected by their peers for inclusion in The Best Lawyers in America 2017 edition. Morris James also has been recognized in four new practice areas, Personal Injury Litigation – Defendants, Arbitration, Corporate Governance Law and Mediation. The Best Lawyers® list is based on an extensive survey involving detailed evaluations of leading lawyers by their peers. More ›
ShareThree Morris James Attorneys Named “Lawyer of the Year” by Best Lawyers®
Morris James LLP is pleased to announce that three of its partners were named Best Lawyers® 2017 “Lawyer of the Year” in their respective practices. The attorneys so recognized were Lewis H. Lazarus for Corporate Law Governance, Edward M. McNally for Litigation - Real Estate, and former partner and now Vice Chancellor Joseph R. Slights III for Mediation. More ›
ShareCourt of Chancery Explains Tolling Law In Fiduciary Duty Case
AM General Holdings LLC v. The Renco Group, C.A. 7639-VCS (August 22, 2016)
In addition to explaining the seldom-used doctrines of mutual, running accounts and continuing wrongs as exceptions to the running of the statute of limitations, this decision is important for its review of when a claim of breach of duty may be tolled. A plaintiff cannot simply stand by without using means available to her to monitor her investment and then claim her case was tolled. While it is still possible to show a claim was inherently unknowable or that the plaintiff justifiably relied on a fiduciary to not seek information, the more sophisticated the plaintiff the less those exceptions to the running of the statute of limitations will apply.
ShareCourt: Derivative Claims Allowed to Be Asserted as Part of Merger Attack
It is well-settled under Delaware law that in a merger a stockholder loses standing to assert a purely derivative claim. That claim passes instead to the acquiring company. As an asset of a Delaware company, derivative claims should be valued in a merger transaction. Directors of a selling company, however, who fail to value derivative claims and who also bargain for their extinguishment following the merger are at risk of being found to have breached their fiduciary duty.
The Court of Chancery's recent decision in In re Riverstone National Stockholder Litigation, C.A. No. 9796-VCG (Del. Ch. July 28), instructs that a complaint asserting that directors, who faced personal liability on known derivative claims, both attributed no value to the derivative claims and bargained in a merger transaction that the buyer would not assert them, is sufficient to avoid dismissal based on the general rule of post-merger loss of standing, if the stockholder pleads the claims as part of a direct attack on the merger. More ›
ShareCourt Of Chancery Dismisses Merger Litigation Under The Corwin Doctrine
City of Miami General Employees and Sanitation Employees Retirement Trust v. Comstock, C.A. 9980-CB (August 24, 2016), affirmed March 23, 2017
This decision applies the Corwin doctrine to dismiss a suit attacking a merger that received stockholder approval. It explains that approval by a fully-informed, uncoerced majority of disinterested and independent stockholders invokes the business judgment rule standard of review – leaving waste as the only grounds to attack the transaction. Interestingly, the decision still examined whether the plaintiffs had alleged a basis for entire fairness review. Here, those allegations concerned whether a majority of the directors were either self-interested in the transaction or were manipulated by improper conduct.
ShareCourt Of Chancery Determines Fee In A Transitory Property Case
Baker v. Sadiq, C.A. 9464-VCL (August 16, 2016)
When a derivative suit is settled in connection with a merger that cashed out minority stockholders, it makes sense to have the settlement proceeds go to those stockholders in proportion to their ownership. Thus, if they owed 10% of the stock and the majority owner is the party funding a settlement, the former stockholders get 10% of a settlement. How then is the attorney fee award for creating that benefit to be calculated? This decision holds that the fee should be based on just the amount of the actual benefit received by the former stockholders.
ShareCourt Of Chancery Determines When Right To Advancement Vested In An LLC Agreement
Harrison v. Quivus System LLC, C.A. 12084-VCMR (August 5, 2016) (transcript )
This decision provides an excellent review of when the right to advancement under an LLC agreement vests so as to not be lost by the later discharge of the officer involved. Basically, when advancement is provided for upon becoming a covered person, the later discharge and suit against that person does not cause her to lose the right to have her fees advanced. Importantly, in the LLC context – where the LLC Act defers to the parties’ choices in contracting – ultimately, the contractual language will control in any given case.
ShareCourt Of Chancery Enjoins Improper Suit in Another Forum
Stratcap Investments Inc. v. Mears, C.A. 12548-CB (July 11, 2016)
This transcript ruling shows that the Court is not sympathetic to parties who make up excuses for violating the forum selection provisions of their contract.
Share
