About This Blog

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

Morris James Blogs

Links

Are Post-Merger Facts Ever Relevant?

Posted In Appraisal, Articles

Appraisal litigation is unique under Delaware law. In almost every instance you can think of, once an event provides a right to recover damages (such as a fire caused by negligence), what happens later is relevant to determining the amount of damages. For example, the actual future earnings of a business is relevant to a claim for lost profits. But, that is not always so in an appraisal case. There the valuation of the company involved is determined as of “the point just before the merger transaction ‘on the date of the merger,’” see Merion Capital v. Lender Processing Services, (Del. Ch. Dec. 16, 2016). More ›

Delaware Superior Court Narrows Jurisdiction In Mass Tort Litigation

Posted In Jurisdiction

In Re: TALC Product Liability Litigation, C.A. N17C-03-054 TAL (September 10, 2018)

This is an important decision that applies recent United States Supreme Court jurisdiction cases to a non-resident’s Delaware complaint. While the opinion carefully reviews a string of such cases ending with Bristol-Meyers Squibb Co. v. Superior Court of California that is worth reading, the bottom line is that it holds that a non-resident of Delaware cannot bring a tort claim against a non-Delaware entity unless she can show its actions in Delaware that directly lead to her injury. This may effectively end the past practice of filing mass tort litigation in the Delaware Superior Court on behalf of non-residents of Delaware, at least against non-Delaware entities.

Delaware District Court Explains Tolling Based on Books and Records Inspection

Norman v. Elkin, C.A. No. 06-005-LPS (D. Del. Sept. 4, 2018)

Litigation seeking to inspect a corporation’s records under Section 220 of the DGCL might toll the statute of limitations for certain claims under the right circumstances.  There are important limits to this form of tolling.  For example, it is not automatic and will only apply to claims that are the subject of the inspection demand.  This decision does a good job of explaining these limits and the factors a court will consider in determining whether inspection-based tolling should apply.  It otherwise examines and applies the law on the statute of limitations and issues of inquiry notice.

Court of Chancery Addresses Contractual Fiduciary Duties, Secondary Liability, and Banker Liability in the MLP Context

Posted In LP Agreements

Mesirov v. Enbridge Energy Company, C.A. No. 11314-VCS (Del. Ch. Aug. 29, 2018)

This is the latest decision in a long-running saga in the master limited partnership (MLP) context involving Enbridge Energy.  The Court of Chancery had previously dismissed the complaint for failure to state a claim.  The Delaware Supreme Court reversed that dismissal while providing important guidance on properly construing contractual fiduciary duties in the MLP context.  The defendants moved to dismiss the amended complaint on remand.  This is the Court of Chancery’s decision granting in part and denying in part that motion.  More ›

Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims

Posted In Appraisal

In re Appraisal of Columbia Pipeline Group, Inc., C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018)

It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the inevitable exchange of commercially-sensitive information during the discovery process.  Those orders spell out how such information may or may not be disclosed, including in court filings, while adopting the standards and procedures reflected in the Court of Chancery rule on the topic, Rule 5.1.  More ›

Delaware Superior Court Explains When Expert Opinion Is Admissible

Posted In Daubert/Experts

The State of Delaware v. Card Complaint LLC, C.A. N13C-06-289 PRW CCLD (August 29, 2018)

This is an excellent summary of the law governing the admissibility of an expert opinion. It is particularly useful in dealing with non-scientific opinions that are based on experience in an industry.

Morris James Named a Top Work Place for Mid-sized Employers in Delaware Eleventh Consecutive Year

Morris James was named a top work place for mid-sized employers in Delaware for the eleventh consecutive year.  This year's top workplace honor makes Morris James the only law firm in Delaware to be consistently top-ranked in the mid-sized employers category for the past eleven years. More ›

Court of Chancery Authorizes Use of Extrinsic Evidence to Construe Preferred Stock Rights

Posted In Case Summaries

Cedarview Opportunities Master Fund LP v. Spanish Broadcasting System Inc., C.A. No. 2017-0785-AGB (Del. Ch. Aug. 27, 2018)

Stock preferences are in derogation of the common law and thus strictly construed.  Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated.  But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.

Court Of Chancery Explains How To Interpret Interlocking LLC Agreements

Posted In LLC Agreements

Godden v. Franco, C.A. 2018-0504-VCL (August 21, 2018)

When multiple LLC agreements for several entities contain provisions that relate across the entities, deciding how to interpret those provisions is a potential problem. As this decision points out, the separate identities of the entities need to be respected. Nonetheless, when the LLC agreements create contract rights, those rights can be enforced, just as a stockholders’ agreement can be enforced to require action by the signatories to the agreement.

Court Of Chancery Explains How To Set A TRO Bond

Posted In TRO

Applied Energetics Inc. v. Farley, C.A. 2018-0489-TMR (August 14, 2018)

A plaintiff who obtains a TRO must post a bond to cover any damages the defendant may suffer from the TRO. How to calculate the amount of that bond is often difficult. This decision does a good job of explaining how to make that calculation.

Court of Chancery Enforces Redemption Rights and Addresses the Potential Effect of a Merger on Previously-Exercised Put Rights

QC Holdings Inc. v. Allconnect Inc., C.A. No. 2017-0715-JTL (Del. Ch. Aug. 28, 2018)

This decision is necessary reading for drafters of redemption rights.  It involves the interpretation of a redemption rights agreement granting a stockholder the right to force the company to buy back its shares and some interplay between those put rights and the DGCL in the event of a merger.  More ›

Superior Court CCLD explains “Wrongful” Conduct in Tortious Interference Claim

Posted In Case Summaries, CCLD

KT4 Partners LLC v. Palantir Technologies Inc., C.A. No. 17C-12-212 EMD CCLD (August 22, 2018)

A claim for tortious interference with a contractual relationship must include an allegation that the conduct complained about was itself wrongful. This decision explains what is such “wrongful” conduct and concludes that the use of confidential information to contact a party to a contract to dissuade it from going forward is such wrongful conduct.

Jason C. Jowers Named Fellow of Litigation Counsel of America

Jason C. Jowers has been selected as a Fellow of the Litigation Counsel of America. Mr. Jowers is the Vice Chair of the Corporate and Commercial Litigation Group at Morris James.  A 2000 graduate of the Rhodes College, Jason received his Juris Doctor degree from The George Washington University School of Law in 2003.  Mr. Jowers' practice focuses on corporate, alternative entity, and commercial litigation. He primarily represents members and managers of LLCs, officers and directors of corporations, and companies in high-stakes litigation in the Delaware Court of Chancery, Delaware Superior Court, Delaware Supreme Court, and United States District Court for the District of Delaware. Additionally, Jason handles arbitrations governed by the AAA Commercial Arbitration Rules, including cases governed by the Procedures for Large, Complex Commercial Disputes. He has led litigation teams in disputes involving mergers and acquisitions, corporate and LLC control issues, judicial dissolution, and complex commercial arrangements. More ›

Court of Chancery Addresses Discovery Obligations Regarding Text Messages

In re Appraisal of Kate Spade Company, C.A. No. 2017-0714-AGB (Del. Ch. June 21, 2018)

The duty to collect and produce non-privileged relevant information extends beyond email to text messages and other forms of electronic communications. Standard practice in Delaware involves at least inquiring of custodians the extent to which they used text messages to engage in substantive communications on potentially relevant topics and to collect text message data when they answer affirmatively, absent an agreement to contrary between the parties. This bench ruling addresses that practice and reflects the Chancellor’s view that text messages often may be a critical source of information.

Chancery Awards Fair Value of Member Interest to Expelled Member of Del. LLC

Delaware statutes enabling formation of unincorporated entities like limited liability companies (LLCs) and limited partnerships afford freedom for owners to structure business relationships as they see fit. This freedom carries with it the responsibility  to accurately and completely describe the parties’ rights and duties. It also means that when disputes arise among owners or managers, a Delaware court will resolve the dispute through application of principles of contract interpretation. Moreover, if the parties in their foundational agreement do not address an issue, the court will apply default rules under the applicable business entity statute. The recent case of Domain Associates LLC v. Shah, C.A. No. 12921-VCL (Aug. 13, 2018), well illustrates these principles—the court applied default rules under the Limited Liability Company Act to hold that an expelled member of a Delaware LLC was entitled to the fair value of his interest and not simply to the value of his capital account. More ›