Posts from August 2009

Court of Chancery Explains Beneficial Ownership Proof Requirement

Smith v Horizon Lines, Inc., C.A. 4573-CC (August 31, 2009)

When the statute governing demands for inspection rights was changed to permit a demand by a beneficial owner, it also required proof of beneficial ownership. This decision explains what form that proof must take. An account statement that just has the owner's last name and does not indicate the date is not good enough. You would think that someone named "Smith" would have been told by now to be more explicit.

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Court of Chancery Approves Settlement in Countrywide Financial Case

Vice Chancellor Noble has approved a settlement in the class action arising from the merger of Countrywide Financial Corporation and Bank of America.  The opinion approving the settlement can be viewed here.

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Court of Chancery Explains Scope of Permitted Release

In Re Countrywide Corporation Shareholders Litigation, C.A. 3464-VCN (August 24, 2009)

This is another in a series of decisions explaining the limits of a release in settlement of a class action. The opinion particularly focuses on when a common law fraud or federal securities law claim may be released.

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Court of Chancery Addresses Effect of Typical Merger Agreement Provision

Case Financial Inc. v. Alden, C.A. 1184-VCP (August 21, 2009)

This decision is of interest because it explains the effect of a common merger agreement provision that is often misunderstood. It is common for such an agreement to say that representations expire at a certain date, such as the merger date. What does that mean? Some would argue it means that any claim for misrepresentation ends that day. That is not correct.

As this decision explains, this language only means exactly what it says-the representation of a fact ends on that date and the facts may change afterwards. A claim for fraud or misrepresentation may still be filed later.

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Laster Nominated for Vice Chancellor

J. Travis Laster, a highly-regarded Delaware corporate litigator and founding partner of the firm Abrams & Laster, has been nominated by Governor Jack Markell to fill Vice Chancellor Lamb's seat on the Court of Chancery.  An article from the Delaware News Journal announcing the nomination can be viewed here.

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Court of Chancery Explains Limits of Review of Arbitration Award

World-Win Marketing Inc. v. Ganley Management Co., C.A. 3905-CC (August 18, 2009).

The extent to which a court will review an arbitration award is a tricky question. The court may do so when the arbitrator exceeds his authority. But, what does that really mean? This decision explains this vague standard of review.

In general, if the decision seems grounded in the facts presented to the arbitrator and is within the subjects that she may deal with under the parties agreement to arbitrate, the decision will be upheld even if the court would have decided the matter differently.

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Court of Chancery Extends Time To Seek Indemnification

Wesley T. O'Brien v. IAC/Interactive Corp., C.A. 3892-VCP (August 14, 2009).

In this decision, the Court dealt with an odd set of facts that are not likely to be repeated. However, the opinion is noteworthy because the Court declined to bar a suit for indemnification even when the complaint had been filed more than three years after the right to indemnification arose. The plaintiff was, in a sense, a victim of a judicial nightmare in Florida where his claim had first been barred and then reinstated by an appeal court after the statutory limitations period expired. In permitting his claim to go forward, the Court of Chancery again showed its support for indemnification claims.

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Three Nominated for Vice Chancellor

Delaware's Judicial Nominating Commission, a panel tasked with screening candidates for judgeships in Delaware, has forwarded three candidates to Governor Jack Markell for his consideration as potential replacements for Vice Chancellor Lamb on the Court of Chancery.  The three are:

• Mary Johnston, a former partner at Morris James and a Superior Court Judge since 2003;
• Richard Forsten, a partner at Saul Ewing;
• Travis Laster, a partner at Abrams & Laster.

Governor Markell is expected to forward one of these three names to the Delaware Senate for a confirmation vote that is expected to occur in September.

 

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Delaware State Bar Association Submits Comments on SEC Proxy Access Proposal

In what may be the first time that the Delaware State Bar Association (DSBA) has ever submitted comments upon a proposed SEC rule, the DSBA has recently submitted comments upon proposed Rule 14a-11, the SEC's proposed proxy access rule.  The DSBA comment letter can be viewed here, and the SEC's proposed proxy access rule can be viewed here.  The DSBA argues that SEC should decline to implement the proposed rule: 

It should instead allow proxy access systems to develop under the framework of private ordering and shareholder choice created by state law.  The one-sided inflexibility of proposed Rule 14a-11 impairs that scope of choice, and with it, significant substantive rights under state corporate law.

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Court of Chancery Upholds Advancement Right in Employment Contract

Martinez v. Regions Financial Corporation, C.A. 4128-VCP (August 8, 2009).

This decision deals with an unusual right to have attorney fees advanced to an employee who is suing to enforce her interpretation of  her employment agreement. The Court upheld the right to advancement based on the broad language used that made it clear that even if the employee lost her suit, she was entitled to attorney fees.

As the Court again points out in its opinion, companies need be carefully if they want to limit attorney fee claims, and, if they do not, they will lose the argument under Delaware's broad public policy of enforcing such agreements.

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ABA Corporate Governance Committee Issues Report on Corporate Roles and Responsibilities

In response to the ongoing financial crisis, the Corporate Governance Committee of the ABA Section of Business Law formed a Task Force on the Delineation of Governance Roles and Responsibilities in the summer of 2008.  The Task Force included Lawrence Hammermesh, the Ruby Vale Professor of Corporate and Business Law at Widener University here in Delaware.  The Task Force has issued its report, which aims to "provide a context for policymakers, participants in the corporate governance process and the public in considering responses to the current crisis."  The report can be viewed here.

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Summary of Amendments to Delaware Alternative Entity Statutes

The Harvard Law School Forum on Corporate Governance and Financial Regulation has posted a useful summary of the recent amendments to Delaware's alternative entity statutes, drafted by Delaware practitioner Louis G. Hering.  The post can be viewed here.

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