Delaware Business Litigation Report

Superior Court Explains When Officer Is Liable For Tort

Yavar Rzayev LLC v. Roffman, Del. Super. C.A. S14L-12-035 MJB (August 31, 2015)

This decision explains well when a corporate officer may be personally liable for a business tort under the “personal  participation doctrine.”  Mere knowledge of wrongdoing is not enough, but active participation is also not required before an officer who encourages or  directs wrongful conduct may be held personally responsible.

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How Courts Can Address Litigation Misconduct Using Ethical Rules

Attempting to fit a summary of the entirety of the Delaware Court of Chancery's recent 214-page opinion in OptimisCorp v. Waite, C.A. No. 8773-VCP (Del. Ch. Aug. 26, 2015), within the editorial restrictions of this publication would be an exercise in futility. Certain aspects of the opinion can be treated in this space, like the court's analysis of litigation misconduct, which included allegations of witness tampering and bribing. Allegations of this type are rare in Delaware. What the conduct was and whether it merited a remedy is not as important as the court's analysis in formulating the relevant standard, its search for precedent to provide it guidance and the ultimate remedy awarded. More ›

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Court of Chancery Explains Notice Required Before Directors Act

Optmiscorp v. Waite, C.A. 8733-VCP ( August 26, 2015)

This decision concerns a soap opera with bizarre facts and alleged witness tampering that hopefully will never be repeated. It does have a good discussion on what notice the board of directors must give to a controller before taking action to oust him as CEO. None is the answer.

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Court Of Chancery Explains “By Reason Of The Fact” Test

Lieberman v. Electrolytic Ozone Inc., C.A. 10152-VCN ( August 31, 2015)

Former directors are entitled to advancement when they are sued “by reason of the fact” that they acted as directors in committing allegedly bad conduct. That test can be hard to apply. However, as this case makes clear, when the underlying acts occurred post-termination, it is hard to claim that advancement is warranted.

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Court Of Chancery Grants Stay Of Derivative Case

In Re Duke Energy Corporation Coal Ash Derivative Litigation,  C.A. 9682- VCN (August 31, 2015)

A stay of derivative litigation is hard to get even when there is another case pending elsewhere. But when, as here, the other litigation may expose the company to significant liability, a stay of the derivative action against the directors is easier to win in order to avoid the problems of simultaneously litigating both proceedings.

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Court Of Chancery Outlines Discovery In Books and Records Case

Chammas v. NavLink Inc., C.A. 11265-VCN (August 27, 2015)

What discovery is permitted in a books and records case has two dimensions. More ›

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Court Of Chancery Explains Unfair Dealing Law In Cash-Out Case

In re Dole Food Co. Inc. Stockholder Litigation, C.A. 8703-VCL (August 27, 2015)

Aside from the very large damage award, this decision should be noted for its thorough analysis of the duties of a controlling stockholder and his aides in the way they act to carry out a going private transaction. More ›

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Best Lawyers® 2016 Recognizes 21 Morris James Attorneys

Twenty-one Morris James attorneys in twenty-six practice areas were selected by their peers for inclusion in The Best Lawyers in America 2016 edition. Additionally, three of those attorneys were named “Lawyer of the Year” for their respective practices, including Richard Galperin for Personal Injury Litigation – Defendants, Gretchen S. Knight for Family Law, and Mark D. Olson for Tax Law.  More ›

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Non-Appearing Appraisal Claimants' Right to Settle Claims Affirmed

The Delaware Court of Chancery recently addressed the right of individual dissenting shareholders to settle their appraisal demands. It upheld the ability of a surviving corporation in a merger to settle individual appraisal demands of certain non-appearing former stockholders, while a formal appraisal action was pending, on terms that may not be available to the petitioner and others who sought appraisal and over the objection of the appraisal petitioner, in Mannix v. PlasmaNet, C.A. No. 10502-CB (Del. Ch. July 21, 2015). It has long been the law of Delaware that a defendant in a class action, before a class is certified, may communicate with and settle claims of certain non-appearing putative class members, without the participation or approval of class counsel. Once a class is certified, however, the character of the action changes; communication with absent class members and settlement of their individual claims generally becomes subject to court regulation and the participation of class counsel. Although an appraisal action has many attributes of a certified class action, and notwithstanding the objections of the appraisal petitioner and his counsel, Chancellor Andre G. Bouchard in Mannix ruled that neither the text of Delaware's appraisal statute, 8 Del. C. Section 262, nor the principles underlying the traditional line of demarcation in class actions, prevented the court from concluding that settlement of individual appraisal demands was just. More ›

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Court Of Chancery Explains Scope Of Fiduciary Duty Waiver

In Re Kinder Morgan Inc. Corporate Reorganization Litigation,  C.A. 10093-VCL (August 20, 2015)

This is a great explanation of the scope of the waiver of a general partner or other fiduciary’s duties under the terms of an LP agreement. More ›

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Court Of Chancery Upholds Stockholder Consents

Kerbawy v. McDonnell , C.A. 10769-VCP (August 18, 2015)

Given the sanctity of the stockholder vote in Delaware law, it would be surprising if the Court of Chancery would ever reverse such a vote or the use of stockholder consents to take corporate action. More ›

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Not All Unauthorized Computer Conduct May Violate Delaware Statute

The plaintiff in Base Optics v. Liu (Del. Ch. May 29, 2015) asserted numerous claims against its former director and part owner arising from a series of agreements related to the operation of the company. In addition to claims for breach of contract and business torts, Base Optics Inc. alleged that defendant Yaping Liu committed computer-related offenses under Title 11, Sections 932-935 of the Delaware Code. Base Optics alleged Liu changed the passwords to certain email accounts, signed in and read certain emails and used her control of certain email accounts to forward emails and attachments to a different email account in her name. Although Liu admitted to engaging in this conduct, she argued it did not constitute a computer-related offense under the express provisions of the statute. Of the four computer-related offenses alleged, the court only considered and found a violation of Section 934, which prohibits the "interruption of computer services." More ›

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Appraisal Claims Dismissed Due to Custodial Banks' Technical Acts

Despite being a court of equity, there are certain instances where the Delaware Court of Chancery demands "strict compliance" with procedural provisions irrespective of the potential for an inequitable outcome. For example, stockholders are required to strictly comply with the provisions of Section 220 of the Delaware General Corporation Law when seeking books and records from a Delaware corporation; see Central Laborers Pension Fund v. News Corp., 45 A.3d 139, 145 (Del. 2012). Stockholders seeking appraisal of their shares pursuant to Section 262 of the DGCL are similarly required to strictly comply with the procedural provisions of the code. Where the form and manner mandated by Delaware law is not satisfied, the Court of Chancery will dismiss a stockholder's request for appraisal. What makes the case discussed herein more interesting is that the stockholder does not need to be directly responsible for the procedural failure in order for the court to dismiss the appraisal action. More ›

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Court Of Chancery Explains Apportionment In Advancement Case

Holley v. Nipro Diagnostics Inc.,  C.A. 9679-VCP (August 14, 2915)

Not infrequently, a former director may seek to have his attorney fees advanced in two pending matters, only one of which is covered by a corporation’s advancement obligations. An example would be an SEC action coupled with a separate criminal case.  More ›

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Court Of Chancery Confirms Limitations For Indemnification Claim

Branin v. Stein Roe Investment Council LLC, C.A. 8481-VCN (July 31, 2015)

This decision confirms that the statute of limitations on a claim for indemnification does not begin to run until the underlying litigation is concluded. Indeed, equitable tolling may also extend the time when a suit may be filed.

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