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Showing 9 posts from November 2005.

Court Dismisses Minority Stockholder's Claims Challenging Her Termination as President and CEO

Posted In Fiduciary Duty

Dweck v. Nassar, C.A. No. 1353-N, 2005 WL 3272363 (Del. Ch. Nov. 23, 2005). Plaintiff alleged that she and Defendant orally agreed as co-founders that corporation would have a four-member board of directors and that each party would appoint two directors. Plaintiff alleged that this agreement was later reduced to written drafts but never finalized or signed. Plaintiff further alleged that Defendant, who owned 52.5% of the corporation's outstanding stock, breached this agreement and his fiduciary duties when he terminated Plaintiff as CEO and President, installed his unqualified nephew in her stead, and added a fifth member to the board. Plaintiff also sought appointment of custodian under 8 Del.C. -226, suggesting that the company's board, when properly constituted with two directors per side, would be deadlocked. Defendant moved for partial judgment on the pleadings. More ›


Actions Filed Four Months Apart Treated as Contemporaneous Filings for Purposes of Forum Non Conveniens Analysis

Rapoport v. The Litigation Trust of MDIP Inc., C.A. No. 1035-N, 2005 WL 3277911 (Del. Ch. Nov. 23, 2005). Former directors moved to dismiss breach of fiduciary duty action brought against them by bankruptcy liquidation trust in Delaware District Court for lack of subject-matter jurisdiction. That same day, the former directors filed a parallel action in the Court of Chancery seeking a declaration that they did not breach their fiduciary duties in connection with the conduct challenged in the District Court action. Four months later, the directors' motion to dismiss was granted. The following day, the trust re-filed its breach of fiduciary duty action in Ohio state court. The directors moved to enjoin the trust from prosecuting the Ohio action. The trust cross-moved to stay or dismiss the Chancery action. The court denied both parties' motions. More › Share

Books-and-Records Action Dismissed Where No Credible Evidence to Justify Investigation of Alleged Misconduct

Seinfeld v. Verizon Communications, Inc., C.A. No. 1100-N, 2005 WL 3272365 (Del. Ch. Nov. 23, 2005). Shareholder sought to compel inspection of books and record under 8 Del.C. -220 related to three senior executives' compensation, which Plaintiff claimed to be excessive and wasteful. Plaintiff's complaint claimed that those executives received total compensation of $205 million for ostensibly performing the same services as co-chief executives. The complaint also alleged that Verizon's long-term bonus plan was amended shortly after at least two of the three employee contracts were entered into, which caused a further increase in the executives' total compensation. After discovery, the parties cross-moved for summary judgment, and the court granted judgment in the company's favor. More › Share

Portions of Lawsuit Alleging Breach of Fiduciary Duty and Waste Dismissed Based Res Judicata, Laches, and Failure to State a Claim

Posted In Fiduciary Duty
Orloff v. Shulman, C.A. No. 852-N, 2005 WL 3272355 (Del. Ch. Nov. 23, 2005). Dissident shareholder group filed individual and derivative complaint alleging that director defendants violated their fiduciary duties and committed waste by mismanaging and misappropriating corporate assets and by disseminating misleading information to the corporation's minority shareholders. Complaint further alleged that Defendants self-interestedly adopted an advancement bylaw and exculpatory charter provision. Defendants moved to dismiss based on res judicata, laches, lack of standing, forum non conveniens, failure to state a claim, and failure to plead facts excusing demand under Court of Chancery Rule 23.1. More › Share

Superior Court Finds Defendant Acted in Good Faith When it Terminated Asset Purchase Agreement Pursuant to Provision of Contract Allowing for Termination if Defendant Could be Exposed to Asbestos Liability

Rohn Industries, Inc. v. Platinum Equity LLC, 887 A.2d 983 (Del. Super. Ct. 2005), aff'd in part, rev'd in part, No. 591, 2005, 2006 WL 2988698 (Del. Oct 20, 2006). The plaintiff, the seller, sued the buyer for breach of an asset purchase agreement that was governed by New York law. The agreement contained a provision that allowed the purchaser to terminate the deal if the purchaser "determines in good faith that there is a reasonable basis in law and in fact to conclude" that the buyer "could reasonably be anticipated to have any . . . material liability for any asbestos-related claim." Following a non-jury trial, the Superior Court found for the defendant, holding that the defendant acted in good faith. More ›


Corporation's Use of Sale Proceeds Violates Language in Indenture Agreements

Calpine Corporation v. The Bank of New York, C.A. No. 1669-N, 2005 WL 3454729 (Del. Ch. Nov. 22, 2005). Plaintiff energy company attempted to use proceeds from sale of certain assets to fund a series of purchases of natural gas for burning in its power plants. Plaintiff's note holders objected to those purchases because the relevant indenture agreements only allowed sale proceeds to be used for certain purposes. In response to the note holders' objection, the indenture trustees refused to authorize release of any additional monies to Plaintiff for those purchases. Plaintiff subsequently sued the indenture trustees seeking declaration that corporation's past and proposed use of proceeds was permissible. More › Share

Court of Chancery Partially Grants Motion For Summary Judgment Based Upon Plaintiffs' Lack Of Standing To Bring Derivative Claims As Result Of Merger

Gentile v. Rossette, C.A. No. 20213-NC, 2005 WL 2810683 (Del. Ch. Oct. 20, 2005). Plaintiffs, former shareholders of SinglePoint Financial, Inc. which merged into a subsidiary of Cofiniti, Inc., alleged that two former directors of SinglePoint breached their fiduciary duties in connection with the issuance of a large number of shares to one of the defendants and the merger. Defendants moved for summary judgment. More › Share

Entire Fairness Applied to Third-party Merger Transaction Where Controlling Shareholder Acquired Minority Stake in Resulting Company

In re LNR Propert Corp. Shareholders Litigation, C.A. No. 674-N, 2005 WL 3418631 (Del. Ch. Nov. 4, 2005, rev'd Dec. 14, 2005). Former shareholders filed fiduciary class action in connection with a cash-out merger, naming corporation and former directors as defendants. The complaint alleged that the corporation's controlling shareholder negotiated to sell the company to a third-party investment firm in all-cash deal. The complaint further alleged that, as part of the transaction, the controlling shareholder and other members of company management agreed to invest approximately $184 million to acquire a 25% equity stake in the surviving entity. Defendants moved to dismiss for failure to state a claim. More › Share

Court Enforces Provision in Merger Agreement Permitting Arbitration of Disputed Representation-and-Warranty and Working-Capital Claims

Posted In Arbitration, M&A
Mehiel v. Solo Cup Co., C.A. No. 1596-N, 2005 WL 3074723 (Del. Ch. Nov. 3, 2005). Following the closing on a merger, several disputes developed between the shareholder representative of an acquired company and the acquirer involving working-capital-adjustment issues and the accuracy of seller's representations and warranties. The merger agreement contained two separate arbitration provisions for working capital adjustment disputes and disputes regarding the parties' respective representations and warranties. The acquirer first attempted to submit its disputes with the shareholder representative to arbitration as working-capital claims. The arbitrator refused to consider those claims, however, based on the acquirer's failure to comply with certain procedural requirements. In response, the acquirer submitted the same claims to the separate arbitrator for representation-and-warranty claims. The shareholder representative subsequently filed a complaint asking the court to issue an injunction barring the second arbitrator from hearing the disputed claims. More › Share
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