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Applying New Rule 23.1, Chancery Establishes Leadership Structure in Fox Derivative Litigation


In re Fox Corp. Deriv. Litig., C.A. 2023-0418-JTL (Del. Ch. Dec. 29, 2023).
The newly amended Court of Chancery Rule 23.1 identifies factors for a court to consider when resolving a litigation leadership dispute. In this case, which is the first decision to apply the amended Rule, the Court of Chancery carefully balanced those factors and identified the lead plaintiff and the lead counsel. More ›

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Chancery Denies Application for Preliminary Injunction After Finding Restrictive Covenants Arose from Breach of Fiduciary Duty and Were Facially Unreasonable


Sunder Energy, LLC v. Jackson, C.A. No. 2023-0988-JTL (Del. Ch. Nov. 22, 2023)
The head of sales for a company that sold residential solar power systems nationwide resigned from his position after signing an independent contractor agreement with a corporate competitor. His former employer—headquartered in Utah and incorporated in Delaware—filed an action in Delaware seeking injunctive relief and enforcement of the restrictive covenants in its limited liability company agreement. More ›

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Chancery Finds Defendants Were Bound by Voting Agreement to Follow Board’s Recommendation


Texas Pacific Land Corp. v. Horizon Kinetics LLC, C.A. No. 2022-1066-JTL (Del. Ch. Dec. 1, 2023)
In this post-trial opinion, the plaintiffs argued that a voting agreement required that the defendants follow the board’s recommendation regarding a charter amendment to increase the corporation’s authorized shares. In opposition, the defendants argued that exceptions to the voting agreement allowed them to vote against the proposal, despite the board’s recommendation, if it related to a merger, acquisition, recapitalization, or other corporate transaction requiring a stockholder vote. The Court of Chancery found that portions of the voting agreement were ambiguous, and after considering certain course of performance extrinsic evidence, concluded that the defendants were required to follow the board’s recommendation because the defendants failed to show that the proposal fell under a contractual exception. As a remedy, the Court deemed the shares as voted in support of the proposal under the Court’s equitable power to treat as done that which in good conscious ought to be done. Notably, in reaching its conclusion, the Court enforced a clause in the agreement that excluded the consideration of the parties’ drafting history.

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Chancery Denies Request for Mandatory Preliminary Injunction to Waive Advance Notice Bylaw and Permit Director Nominees to Stand for Election


Paragon Tech., Inc. v. Cryan, C.A. 2023-1013-LWW (Del. Ch. Nov. 30, 2023).
In Delaware, a preliminary injunction is granted “sparingly and only upon a persuasive showing that it is urgently necessary, that it will result in comparatively less harm to the adverse party, and that, in the end, it is unlikely to be shown to have been issued improvidently.” A party seeking a mandatory injunction must also show entitlement to the relief it seeks as a matter of law based on undisputed facts – akin to a summary judgment standard. In this case, “with some trepidation[,]” the Court of Chancery denied a request for preliminary mandatory injunctive relief due to factual disputes concerning whether a stockholder plaintiff complied with advance notice bylaws requiring disclosure of plans to change the corporation’s business and potential conflicts of interest.   More ›

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Chancery Finds Wholly Generic Objections to Discovery Requests Result in Waiver and Fee-Shifting


Bocock v. Innovate Corp., C.A. No. 2021-0224-PAF (Del. Ch. Dec. 6, 2023)
In this recent letter opinion, Vice Chancellor Fioravanti considered whether the plaintiffs’ failure to provide specific objections to discovery requests in a timely manner resulted in the waiver of those objections. More ›

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Chancery Finds that Non-Settling Defendants Waived their Right to Seek a Settlement Credit Under DUCATA


In re Mindbody Inc. S’holder Litig., Consol. C.A. 2019-0442-KSJM (Del. Ch. Nov 15, 2023)
The Delaware Uniform Contribution Among Tortfeasors Act (“DUCATA”) establishes the legal framework applicable when plaintiffs release only some joint tortfeasors through settlement. DUCATA creates a right of contribution among joint tortfeasors and specifies that an ultimate damages award against non-settling defendants can be reduced by amounts received in settlement from other joint tortfeasors. In this fiduciary duty action challenging the fairness of a merger, the Court ruled that, despite a settlement of claims against certain defendants, the non-settling defendants waived their right to seek a damages reduction More ›

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Chancery Evaluates Supplemental Disclosures to Determine the Corporate Benefit and Awards Plaintiffs a Proportional Fee


Allen v. Harvey, C.A. No. 2022-0248-MTZ (Del. Ch. Oct. 30, 2023)
Delaware cases provide guidance on the standard for evaluating the “corporate benefit” from supplemental disclosures in advance of a stockholder vote – and the fees that should be awarded to plaintiffs for prompting such disclosures. This case involved supplemental disclosures of potential sources of conflicts held by a special committee’s chair and advisors in advance of a merger vote. The Court held that such disclosures were not extraordinary, but they still warranted a proportional fee award. More ›

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Delaware Supreme Court Affirms Busted-Deal Decision and Attorneys’ Fees for Contingency Fee Based Representation


Energy Transfer LP v. The Williams Companies, Inc., No. 391, 2022 (Del. Oct. 10, 2023)
Busted-deal litigation is commonplace in Delaware and often requires Delaware courts to interpret provisions in merger agreements obligating parties to work towards closing and granting one party or the other fees in the event of a breach and failed deal, e.g., break-up fees or reimbursement fees. Here, in a decade-long busted deal suit, the Court of Chancery had found that the plaintiff had fulfilled its contractual obligations and the defendant, therefore, was not entitled to a break-up fee that would have exceeded $1.5 billion. The trial court also found that the defendant owed the plaintiffs approximately $410 million in reimbursement fees and $85 million in attorneys' fees under the merger agreement. On appeal, the Delaware Supreme Court affirmed each finding, examining the at-issue provisions and the trial court's determinations. Notably, on the attorneys' fees issue, the Supreme Court agreed with the trial court that the contingency fee nature of the plaintiff's representation did not warrant a finding of unreasonableness. While most decisions addressing the reasonableness of contractual fee awards have dealt with hourly fee representations, the Court found nothing inherently unreasonable about enforcing a contractual fee-shifting arrangement to cover a contingent fee award.

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Chancery Largely Denies Books-and-Records Inspection Exploring Dividend Potential


Greenlight Capital Offshore Partners, LTD., v. Brighthouse Financial Inc., C.A. No. 2022-1067-LWW (Del. Ch. Nov. 20, 2023)
Valuation is a well-established proper purpose to inspect corporate books and records. While each case turns on its own facts, in general the availability of public information to satisfy a valuation demand will result in a relatively narrow court-ordered inspection. Here, the plaintiff conceded the availability of public information for valuation purposes, but sought more to help it speculate regarding the company’s dividend potential, after recent extraordinary dividends at the subsidiary level caused the stock price to jump. While dividend capacity may be relevant to valuation, the Court of Chancery largely denied the inspection, finding the requested information too removed from the company’s current value and thus not necessary and essential to the plaintiff’s valuation purpose.

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Chancery Awards Mootness Fee Applying Recently Adopted Standard


Assad v. Botha, et al., C.A. No. 2022-0691-LWW (Del. Ch. Oct. 30, 2023)
Here, Vice Chancellor Will awarded a $100,000 mootness fee for “material—and unremarkable—disclosures” following the recently heightened mootness fee standard announced in Anderson v. Magellan Health, Inc. (analyzed here), authored by Chancellor McCormick.  Magellan announced that the Court would award mootness fees for supplemental disclosure only where such disclosures are “material,” not merely “helpful,” and such fees, if awarded, may be lower than those awarded historically. This opinion represents one of the first decisions applying Magellan, and awarded $100,000 where plaintiffs sought $850,000. 

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Chancery Holds that LLC Agreement Did Not Confer Jurisdiction Over Contract and Tort Claims


Ramco Asset Mgmt. LLC v. USA Rare Earth, LLC, C.A. No. 2022-0665-SG (Del. Ch. Oct. 20, 2023)
Plaintiffs brought claims alleging improper dilution of their equity interests when transferring their holdings in an Australian rare-earth mining company to a Delaware limited liability company. Their claims included breach of fiduciary duty, fraud, breach of contract, and conspiracy. All five defendants moved to dismiss for failure to state a claim and on forum non conveniens grounds, and four of the five moved to dismiss for lack of personal jurisdiction. More ›

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Chancery Decision Explains Availability of Reformation as a Targeted Remedy


AECOM, et al. v. SCCI Nat’l Hldgs., Inc., C.A. No. 2022-0727-MTZ (Del. Ch. Sept. 27, 2023)
Although the Court of Chancery frequently resolves contractual disputes, it grants contractual reformation only when “intervention [is necessary] to ensure the deal is what the parties agreed upon.” This pleadings-stage decision provides insight into the Court’s approach to reformation because the Court found that one claim supported reformation but the other did not. More ›

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Chancery Concludes Accountant Provision in Stock Purchase Agreement Calls for Expert Determination Rather than Arbitration


ArchKey Intermediate Holdings Inc. v. Mona, C.A. No. 2021-0383-JTL (Del. Ch. Oct. 3, 2023)
Parties to a stock purchase agreement disputed post-closing price adjustments. The agreement called for an independent accountant to resolve such disputes and referred to the accountant as an “arbitrator.” As the parties litigated in the Court of Chancery, the purchaser moved to compel arbitration so that an independent accountant could resolve all disputes the seller raised. The seller contended that the agreement’s accountant provision called for an expert determination rather than an arbitration. More ›

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Chancery Denies Advancement for Director Suspected of Leaking Confidential Financial Information


Hoffman v. First Wave BioPharma, Inc., C.A. No. 2023-0097-MTZ (Del. Ch. September 27, 2023)
A company's board of directors suspected one of its members had leaked the company's financial information to a third party and that the third party used the information to obtain a more favorable settlement with the company. In response, the board formed a board committee for discussion of confidential matters consisting of all directors other than the one suspected of having leaked information. The excluded director engaged an attorney to contest the formation of the board committee and filed an action for the advancement of his legal fees. He relied on an indemnification agreement that granted him a mandatory advancement right for fees incurred by reason of his corporate status in connection with a covered proceeding; he argued that the directors must have investigated his conduct if they had reached a conclusion that he had leaked information and that an investigation was a covered proceeding. More ›

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Supreme Court Upholds Contractual Voidness Provision in LLC Agreement


Holifield v. XRI Investment Holdings, LLC, No. 407, 2022 (Del. Sept. 7, 2023)
This decision concerned the disputed transfer of a member's LLC units. Below, the Court of Chancery held that the disputed transfer was invalid because it violated the LLC agreement's terms governing transfers. The trial court also held that, under CompoSecure II, the transfer was incurably void, and thus beyond affirmative defenses like acquiescence, because the LLC agreement's “void" language provided for that outcome. However, in dicta, the trial court invited the Supreme Court to revisit its ruling in CompoSecure II, which upheld contractual voidness provisions in the alternative entity context. On appeal, the Supreme Court declined the invitation and ruled that CompoSecure II was correctly decided citing, inter alia, contractual freedom in the LLC context and the doctrine of stare decisis

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