Delaware Business Litigation Report

Delaware Superior Court Explains Fraudulent Inducement Claims

ITW Global Investments Inc. v. American International Partners Capital Fund IV, L.P., C.A. No. 14C-10-236 JRJ (June 24, 2015)

This decision explains several important aspects of Delaware law. First, a claim for fraud cannot overlap with a breach of contract claim or it will be dismissed. More ›

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Delaware Superior Court Addressed Limitations On Damages Clause

Delphi Petroleum  v. Magellan Terminals Holdings L.P., C.A. No. 12C-02-302 FWW ( June 23, 2015)

This decision explains when a limitations on damages clause may not be
enforceable, such as when the claim is for fraud. As the Court noted, bad faith
conduct may also be outside the protection of such a clause.

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Chancery Court Upholds Indicted Ex-Director's Advancement Rights

Advancement provides corporate officials with immediate interim relief from the personal out-of-pocket financial burden of paying the significant ongoing expenses inevitably involved with defending investigations and legal proceedings. Delaware corporate policy favors indemnification and advancement as an important means of attracting qualified individuals to serve in corporate capacities. The recent decision of Chancellor Andre G. Bouchard in Blankenship v. Alpha Appalachia Holdings f/k/a Massey Energy, C.A. No. 10610-CB (Del. Ch. May 28, 2015), reaffirms these important policies and provides a clear exposition from Delaware's new chancellor of the difficulty of successfully challenging typical mandatory advancement provisions. In Blankenship, the court upheld against multiple attacks a former corporate official's ongoing right to advancement following his indictment on criminal charges. This indictment arose out of an explosion in a coal mine that killed 29 miners during a time when the plaintiff was CEO of the mining company and charged the plaintiff with willful violations of mine safety standards and false statements to the government. More ›

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Delaware Student Data Privacy Protection Act Awaits Governor’s Signature

With the continuing push for more prolific and creative use of technology in Kindergarten through 12^th grade classrooms, student data has become more valuable, and the protection of that data of greater concern.  In the face of the perceived need for greater protection of student data, the Delaware General Assembly, on June 25, 2015, approved SS1 for SB 79 (the “Student Data Privacy Protection Act” or “SDPPA”).  Expressly modeled on California’s Student Online Personal Information Privacy Act, the SDPPA is designed to prohibit educational technology service providers from selling student data, using student data to engage in targeted advertising to students and their families, or creating student profiles for non-educational purposes. More ›

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Federal District Court Limits Fee Request

Mor v. Collis, D. Del., No. 13-242-RGA (June 30, 2015)

This is an interesting decision for the way it treats a fee request in connection with the settlement of Delaware litigation. More ›

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Court Of Chancery Declines To Second Guess On Compensation

Friedman v. Dolan, C.A. No. 9425-VCP (June 30, 2015)

This is another in the line of decisions that goes back at least as far as the Disney case where the Delaware Court of Chancery declines to upset the compensation awarded to officers and directors.  More ›

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Court Of Chancery Rejects Management Projections In An Appraisal

LongPath Capital LLC v. Ramtron International Corp.  C.A. No. 8094-VCP (June 30, 2015)

This decision turns on rejecting the projections of management about the future cash flow of the company to be appraised. More ›

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Do Equities Militate Against Restrictions Barring Petition for Dissolution?

Delaware courts often emphasize the freedom of contract of parties to define their rights, powers, duties, obligations, liabilities and restrictions in a limited liability or operating agreement under the Delaware Limited Liability Company Act (LLC Act). Pursuant to Section 18-802 of the LLC Act, a member or manager may file an application, seeking the Court of Chancery to "decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with a limited liability agreement." Since judicial dissolution under Section 18-802 of the LLC Act is not a mandatory provision of the LLC Act, the right to file for judicial dissolution may be modified, restricted, or waived in an operating agreement, as in R&R Capital LLC v. Buck & Doe Run Valley Farms LLC, 2008 Del. Ch. LEXIS 115 (Del. Ch. Aug. 19, 2008). In an action for judicial dissolution, the Court of Chancery recently had the opportunity to address whether parties had prohibited or restricted in their operating agreement the right of a managing member to file a petition for judicial dissolution under Section 18-802 of the LLC Act. More ›

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Court Of Chancery Explores Risk Management Duties

In re General Motors Company Derivative Litigation, C.A. 9627-VCG (June 26, 2015)

This decision involves the currently hot topic of the extent of a board of directors’ duty to properly assess corporate risks and act to prevent loss. More ›

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Superior Court Extends Jurisdiction Under The Director Long Arm Statute

Ting v. Silver Dragon Resources, Inc., No. 14C-12-067 WCC (June 3, 2015)

It is conventional wisdom that the director long arm statute only confers jurisdiction for breaches of fiduciary duty. Yet as this decision points out, that limitation is not firmly grounded in the words of the statute. Hence, this decision may expand the sort of claims for which a director may be subject to Delaware court jurisdiction when the tort or other claim  is only “related and predicated” on conduct that implicates a breach of fiduciary duty.

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Delaware Enacts Online Privacy Law – Website Operators Will Need to Comply

Online businesses take note. Delaware may finally have an online privacy law. On June 25, 2015, the Delaware General Assembly passed SS1 for SB68, known as the “Delaware Online Privacy and Protection Act.” If signed by the governor, DOPPA will go into effect on January 1, 2016. More ›

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Court Of Chancery Explains Claims Available To LLC Members

CMS Investment Holdings LLC v. Castle, C.A. No. 9468-VCP (June 23, 2015)

This is an interesting decision because it explains what direct claims are available to investors in an LLC. More ›

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Court Of Chancery’s Newest Appraisal Precedent

Owen v. Cannon, C.A. 8860-CB (June 17, 2015)

This is the new Chancellor’s first appraisal decision. He adheres to prior precedent’s use of a special tax rate for sub S corporations and the preference for reliance on pre-merger projections.

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Court Of Chancery Resolves Attorney Conflict

Partners Healthcare Solutions Holdings LP v. Universal American Corp., C.A. 9593-VCG (June 17, 2015)

This is an interesting decision for the way it approves how to resolve a conflict over whether a law firm may represent some of an entity’s directors while at the same time suing that entity. An ethical screen seems to be enough to resolve the problem.

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Attorney Fees Awarded Notwithstanding Failure to Prove Damages for Breach

In In re Nine Systems Shareholders Litigation, (Del. Ch. May 7, 2015), the Delaware Court of Chancery faced the difficult task of deciding an appropriate fee award where the defendants engaged in disloyal, bad-faith conduct, but the plaintiffs failed to prove damages. The plaintiffs proved at trial that the defendants breached their duty of loyalty to plaintiffs by conducting a self-interested recapitalization. Among other things, the defendants "utterly failed" to understand their fiduciary relationship with the plaintiffs, employed a "grossly inadequate process" and sought to avoid full and fair communications with the company's stockholders. Based on this wrongdoing, the court found the defendants engaged in bad-faith pre-litigation conduct that warranted fee-shifting in the amount of $2 million. More ›

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