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Chancery Interprets Merger Agreement Termination Fee Provision But Denies Summary Judgment to Resolve Questions of Fact in Continuing Busted Deal Litigation Between The Williams Companies and Energy Transfer

The Williams Cos., Inc. v. Energy Transfer LP, C.A. No. 12168-VCG (Del. Ch. July 2, 2020)

The Court of Chancery will enforce a merger agreement’s plain and unambiguous terms, including parties’ agreed-upon conditions for liability of a termination fee. Termination fee litigation, however, often involves critical factual determinations, such as issues of materiality or best efforts that may require a trial to develop the appropriate record to determine liability. More ›

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Chancery Interprets Right of First Refusal Provision in LLC Agreement

HUMC Holdco, LLC, et al. v. MPT of Hoboken TRS, LLC, et al., C.A. No. 2019-0972-KSJM (Del. Ch. July 2, 2020)

Litigation arose among members of a limited liability company regarding the operating agreement’s right of first refusal provision after certain members entered in an agreement to sell membership interests and certain real estate to a third party. While the Court of Chancery denied defendants’ motion for judgment on the pleadings, the Court offered notable guidance on the interpretation of first-refusal right provisions. More ›

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Court Finds LLC Manager Consent Statute Authorizes Personal Jurisdiction for Tort Claims Related to the Company, Not Just Alleged Breaches of Managers’ Duties; However, Court Dismisses Investor Defendants with Insufficient Delaware Contacts

CLP Toxicology, Inc. v. Casla Bio Holdings LLC, C.A. 2018-0783-PRW (Del. Ch. Jun. 29, 2020) & NC18C-10-332 PRW CCLD (Del. Super. Jun. 29, 2020)

In both the corporation and LLC contexts, Delaware law employs consent statutes, which authorize personal jurisdiction over officers and directors of corporations and over managers (in name or in fact) of LLCs. Despite broad language in such statutes, courts traditionally interpreted the statutes to apply to only claims related to breaches of fiduciary or statutory duties. As demonstrated here, however, the modern trend is to interpret consent statutes to apply to a broader range of claims related to the entity. More ›

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Chancery Interprets Contractual Language Permitting Asset Sale

AM Gen. Holdings LLC v. The Renco Grp., Inc., C.A. No. 7639-VCS (Del. Ch. June 26, 2020)

Under fundamental contract interpretation principles, the Court of Chancery will interpret a contract to give effect to specific over general contract language, and to avoid interpretations that render contractual language as surplusage. More ›

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Chancery Dismisses Challenge to Top Executives’ Stock Awards in Disney-Fox Merger, Finds Plaintiff Lacks Standing to Pursue Derivative Claim

Brokerage Jamie Goldenberg Komen Rev TRU U/A 06/10/08 Jamie L Komen Trustee for the Benefit of Jamie Goldenberg Komen v. Breyer, C.A. No. 2018-0773-AGB (Del. Ch. June 26, 2020)

Following a merger that alters a stockholder’s ownership status, the stockholder may be able to challenge the entirety of the merger as a direct claim, but the stockholder will typically lack standing to challenge the individual aspects of the merger as derivative claims. The instant case, involving the Disney-Fox merger, shows the difficulties a stockholder faces in attempting to mount such a challenge. More ›

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Court of Chancery Dismisses Aiding and Abetting Claim Against NetSuite’s Fiduciaries for Role in Alleged Overpayment by Oracle

In re Oracle Corp. Derivative Litig, Consol. C.A. No. 2017-0337-SG (Del. Ch. June 22, 2020)

At the pleadings stage, a claim for aiding and abetting a breach of fiduciary duty requires that it is reasonably conceivable that the alleged aider and abettor knowingly provided substantial assistance in the breach of fiduciary duty. This decision reflects that substantial assistance in an alleged conspiracy of silence might not meet the reasonably conceivable standard if public statements and securities filings contain sufficient information about the underlying course of conduct. More ›

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Chancery Finds Party Waived Privilege When Documents Were Produced to FCC

In re Straight Path Communications Inc. Consol. S’holder Litig., C.A. No. 2017-0486-SG (Del. Ch. June 15, 2020)

Plaintiffs brought a Motion to Compel seeking thirty-one documents withheld by Defendant on attorney-client privilege grounds. The documents had previously been disclosed by Defendant to the Federal Communications Commission (“FCC”) in 2016 during an investigation related to the current litigation. Plaintiffs did not argue that the documents were not privileged at the time of creation, but rather that the privilege was waived when the Defendant provided those documents to the government. More ›

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Chancery Dismisses Action Involving Unusual Issue of Personal Jurisdiction

Sustainability Partners LLC, v. Jacobs, C.A. No. 2019-0742-SG (Del. Ch. June 11, 2020)

In this action involving “an unusual issue of personal jurisdiction,” plaintiff Sustainability Partners LLC (“SP” or the “Company”) sought a declaratory judgment that defendant, a former SP employee (the “Defendant” or “Jacobs”), had no rights under a purported oral agreement between the Defendant and the Company. Despite the fact that Jacobs was not a signatory, the Company claimed that there was personal jurisdiction over Jacobs pursuant to the forum selection clause in the Company’s Operating Agreement based on a theory of equitable estoppel. The Court of Chancery disagreed and dismissed the action for lack of personal jurisdiction pursuant to Chancery Court Rule 12(b)(2).  More ›

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In Post-Trial Opinion, Chancery Finds for Defendant, Rejecting Claims Alleging Breach of Purchase Agreement and Right to “Board Packages”

Braga Investment & Advisory, LLC v. Yenni Income Opportunities Fund I, L.P., C.A. No. 2017-0393-AGB (Del. Ch. June 8, 2020)

In this post-trial opinion, the Court of Chancery held in favor of defendant Yenni Income Opportunities Fund I, L.P. (the “Fund”) finding that the Fund was not required to obtain the signature of Braga Investment & Advisory, LLC (“Braga”) as a “Buyer” when it executed a side letter agreement (the “Side Letter”), nor had the Fund breached a co-investment agreement by denying Braga access to certain materials in connection with its position as a board observer. More ›

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Chancery Applies Contract’s Choice of Law to Related Fraud Claims, Declines to Dismiss Fraud Claims Where Contract Lacked Clear Anti-Reliance Language

The Anshutz Corp. v. Brown Robin Cap., LLC, 2019-0710-JRS (Del. Ch. June 11, 2020)

In dealing with what the Court of Chancery called “a version of a [commercial] dispute as old and abiding as commerce itself,” the Court provides insights useful to drafters of both pleadings and contracts. More ›

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Chancery Rejects Argument that Books and Records Plaintiff Could “Retroactively” Comply with Statutory Demand Requirements

Martinez v. GPB Capital Holdings, LLC, C.A. No. 2019-1005-SG (Del. Ch. June 9, 2020)

The Delaware Court of Chancery largely entered judgment on the pleadings in favor of GPB Capital Holdings, LLC (“Defendant”), the general partner to four limited partnerships, holding that the plaintiffs had failed to meet the statutory requirements of 6 Del. C. §17-305 (Delaware’s statute pertaining to access to the books and records of limited partnerships).  More ›

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CCLD Bars Tort Claims Overlapping with Contract Claims under Economic Loss Doctrine

GEA Sys. N. Am. LLC v. Golden State Foods Corp., C.A. No. N18C-11-242 EMD CCLD (Del. Super. Ct. June 8, 2020)

This case illustrates the extent to which the economic loss doctrine bars tort claims arising out of the same transaction as claims for breach of contract. In this case, plaintiff GEA Systems North America LLC (“GEA”) sold defendant Golden State Food Corp. (“Golden State”) three industrial freezers for use in Golden State’s hamburger patty facility. Golden State argued, among other things, that the freezers did not meet the production figures that GEA promised and GEA failed properly to install or repair the freezers. For this alleged misconduct, Golden State brought claims for negligence, fraudulent inducement, and intentional misrepresentation as well as for breach of contract. On a motion to dismiss, the Delaware Superior Court held that the economic loss doctrine barred the fraudulent inducement and intentional misrepresentations claims, but not the claims for negligence and gross negligence. More ›

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Chancery Finds Pre-Closing Privilege Did Not Transfer to Buyer Under Asset Purchase Agreement

Posted In Discovery, M&A, Privilege

DLO Enterprises, Inc. v. Innovative Chemical Products Group, LLC, C.A. No. 2019-0276-MTZ (Del. Ch. June 1, 2020).

Defendants/Counterclaim Plaintiffs (“Buyers”) acquired substantially all of the assets of Arizona Polymer Flooring, Inc., later renamed DLO Enterprises, Inc. (“Sellers”). Sellers filed this action disputing who was financially responsible for certain defective products. During discovery, Sellers produced several pre-closing communications with their counsel that were redacted in part to protect the privilege. Buyers filed a motion to compel unredacted copies of the documents. More ›

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Court of Chancery Sustains Aiding-and-Abetting Breach of Fiduciary Duty Claim Against Financial Advisor Based on its Conflicts of Interest in Going-Private Transaction

Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. June 1, 2020)

Even if fiduciary duty of care claims against a target company’s board of directors are exculpated, an aiding-and-abetting claim against a financial advisor to the board may survive a motion to dismiss when the advisor is alleged to have knowingly misled the board and prevented the board from running a reasonable sales process. More ›

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Delaware Supreme Court Clarifies Materiality Standard for Director Disclosure

A plaintiff challenging a merger when a majority of the board approving the transaction is disinterested and independent and there is no controlling stockholder on both sides cannot state a cognizable claim of breach of fiduciary duty unless it can plead facts demonstrating that the business judgment rule does not apply.  More ›

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