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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Showing 7 posts from September 2016.

Pleading Tortious Interference With Prospective Business Relations Claim

The Delaware Court of Chancery's recent decision in Chapter 7 Trustee Constantino Flores v. Strauss WaterC.A. No. 11141-VCS (Del. Ch. Sept. 22), covers many familiar aspects of Delaware law, such as the importance of contracts under Delaware law and enforcing contracts as written and not how a plaintiff wishes it might have been written. The opinion also addresses ground less traveled—how to plead properly a claim for tortious interference with prospective business relations. This article focuses on the distinction the Delaware Court of Chancery drew between the tortious interference claim that survived the motion to dismiss and the one that did not. More ›

Court Of Chancery Rejects Fee Application From Litigation Funder

Judy v. Preferred Communication Systems, Inc., C.A. 4662-VCL (September 19, 2016)

This is a decision worth reading because it so well tells an interesting story. But its legal significance may well be that it holds a litigation funding firm is not entitled to an attorney fee award at least when it does not have a written agreement with a plaintiff entitling it to fees. Hence, if you are going to fund litigation, get the deal in writing. Of course, the decision has other important holdings, all set out in a good review of existing law on when fees may be awarded absent a contract.

Del. Forum Non Conveniens Doctrine Doesn't Depend on Adequate Alternative Forum

Corporations sued in Delaware and subject to jurisdiction here sometimes employ the doctrine of forum non conveniens (FNC) to seek dismissal of the litigation if defending here would create an overwhelming hardship. In a recent decision from Delaware's Superior Court, Judge Vivian L. Medinilla provided important guidance about the doctrine and affirmed that in the final analysis it remains a defendant-centric test, as in Hupan v. Alliance One International, Del. Super. C.A. No. N12C-02-171 VLM (Aug. 25). The FNC doctrine recognizes the substantial weight given to a plaintiff's choice of forum by permitting a defendant to displace the Delaware forum only upon demonstrating "overwhelming hardship" if forced to litigate here. When a defendant can demonstrate such hardship, however, Hupan makes clear that dismissal is appropriate even if the plaintiff is not assured of an alternative forum to bring its claims. AsHupan illustrates, the doctrine has particular relevance to suits brought by foreign plaintiffs seeking recovery for harm incurred in foreign lands, governed by foreign law and requiring extensive use of foreign language More ›

Court Relies on DCF Valuation to Appraise Private Company

In an appraisal proceeding under Section 262 of the Delaware General Corporation Law, the Delaware Court of Chancery determines the "fair value" of a company's "shares exclusive of any element arising from the accomplishment or expectation of the merger." In determining fair value of a company's shares, the court values the company as a "going concern" based on the "operative reality" existing as of the date of the merger. The court has "significant discretion to use the valuation methods it deems appropriate, including the parties' proposed valuation frameworks, or one of the court's own making." Both the petitioner and the respondent share the burden of proof in an appraisal proceeding to establish fair value of a company's shares by a preponderance of the evidence. More ›

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 ›

Court Of Chancery Denies Inspection When The Board Has An Obvious Defense To A Claim Of Wrongdoing

Beatrice Corwin Living Irrevocable Trust v. Pfizer, C.A. 10425-JL (Del. Ch. Aug. 31, 2016, corrected Sept. 1, 2016)

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.

Court 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 ›