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

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Showing 10 posts from July 2005.

Superior Court Refuses to Dismiss Delaware Action, But Stays Delaware Action in Favor of Michigan Action

Royal Indem. Co. v. General Motors Corp., C.A. No. 05C-01-223 RRC, 2005 WL 1952933 (Del. Super. Ct. July 26, 2005). Royal Indemnity Company ("Royal") sought a declaratory judgment to determine whether it had an obligation to General Motors ("GM") in relation to insurance purchased by GM over the course of several decades from Royal. GM filed a motion to dismiss on forum non conveniens grounds, and the Court denied the motion to dismiss. More ›

Court of Chancery Dismisses Consumer's Fiduciary Duty Claim Against Online Brokerage, Stating that the Scope and Existence of any Duty is Governed by Their Contract

Weil v. Morgan Stanley DW Inc., 877 A.2d 1024 (Del. Ch. 2005). Plaintiff consumer brought an action on behalf of himself and others similarly situated alleging that defendant Morgan Stanley breached its fiduciary duties and that HarrisDirect, the buyer of its online brokerage business, aided and abetted in the breach. The two defendants moved to dismiss under Rule 12(b)(6) for failure to state a claim. More ›

Court of Chancery Holds that Private Securities Litigation Reform Act and Securities Litigation Uniform Standards Act do not Preempt Books and Records Action

Romero v. Career Educ. Corp., C.A. No. 793-N, 2005 WL 1798042 (Del. Ch. July 19, 2005). Plaintiff shareholder brought an action against Career Education Corporation ("CEC"), a Delaware corporation, seeking to compel inspection of certain books and records. CEC moved to dismiss the complaint or to stay. More ›

Court of Chancery Holds Fund to be Beneficial Owner Even When it Holds a Net Short Position or Purchases Shorted Shares from its Other Accounts

Deephaven Risk ARB Trading Ltd. v. UnitedGlobalCom, Inc., C.A. No. 379-N, 2005 WL 1713067 (Del. Ch. July 13, 2005). Plaintiff Deephaven Risk ARB Trading Ltd. ("Deephaven"), an investment fund, sought to compel inspection of defendant UnitedGlobalCom's ("UGC") books and records to investigate possible wrongdoing in connection with a rights offering. In response, UGC moved to dismiss the complaint, challenging Deephaven's status as a beneficial owner and the purpose for its demand. The court denied UGC's motion. More ›

Federal Court Decides Start and End Dates Of Class Certification Are The Registration Statement Date And The Date Typicality Of Claims End

Shockley v. Adams Golf, Inc., No. Civ.A. 99-371-KAJ, 2005 WL 3654346 (D.Del. June 27, 2005). This is a securities class action. The background to this case is provided in In re Adams Golf, Inc. Securities Litigation, 176 F.Supp.2d 216, 219-22 (D.Del. 2001), aff'd in part, rev 'd in part, 381 F.3d 267, 270-72 (3d Cir. 2004). In the present opinion, the Court resolved two remaining issues related to class certification. Pursuant to oral arguments on plaintiff's motion for class certification on May 17, 2005, the Court granted the motion but reserved its decision as to both: the appropriate time period applicable for defining the class of securities holders bringing an action under Section 11 of the Securities Act of 1933, 15 U.S.C. § 77l(a)(2); and the "nature of a subclass with respect to any liability under section 12(a)(2)" of the Securities Act of 1933, "including the appropriate time period for defining the subclass." The Court held that July 10, 1998, the date when the Registration Statement became effective was the start date of the class. Similarly, October 22, 1998, signifying the last date when the class had typical claims was the end-date for the class. More ›

Court of Chancery Grants Preliminary Injunction Against Majority Stockholder Seeking to Purchase Additional Shares for a Penny Each in an Attempt to Convert Some of its Debt to Equity

Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. July 11, 2005). Plaintiff Flight Options International, Inc. ("FOI") sought a preliminary injunction against defendant Flight Options LLC ("the Company"), a Delaware limited liability company. More ›

Court of Chancery Holds that Unitholders in Private Equity Fund Can Inspect Books and Records After Fund Loses 75% of Value

Forsythe v. CIBC Employee Private Equity Fund, C.A. No. 657-N, 2005 WL 1653963 (Del. Ch. July 7, 2005). Plaintiffs Forsythe and Tesche, who were unitholders in a Delaware limited partnership, brought an action to inspect the books and records. At the close of trial, two issues remained for post-trial briefing: (1) whether the plaintiffs stated a proper purpose; and (2) whether plaintiffs had a right to demand inspection of documents held or under the control of an entity other than the general partner. More ›

Court of Chancery Denies Request for Permanent Injunction Against Shareholder Seeking to Challenge Merger-After Merger is Consummated

Examen, Inc. v. VantagePoint Venture Partners 1996, C.A. No. 1142-N, 2005 WL 1653959 (Del. Ch. July 7, 2005). Johnson v. VantagePoint Venture Partners 1996, C.A. No. 1260-N, 2005 WL 1653959 (Del. Ch. July 7, 2005). This case arose out of an earlier dispute in which VantagePoint Venture Partners ("VantagePoint"), an investor holding the majority of a series of preferred stock in Examen, Inc. ("Examen"), a Delaware corporation, sought to veto a merger between Examen and a Delaware subsidiary of Reed Elsevier Inc. VantagePoint argued for a determination that under California law the holders of the series of preferred stock issued by Examen had a right to a class vote in the merger. But the Court of Chancery held that California law did not apply and that all of the stockholders were permitted to vote on the proposed merger. More ›

Court of Chancery Denies Preliminary Injunction to Business Partner Who Alleges Breach of Confidentiality and Misappropriation of Trade Secrets

Nutzz.com v. Vertrue Inc., C.A. No. 1231-N, 2005 WL 1653974 (Del. Ch. July 6, 2005). Plaintiff Nutzz.com ("Nutzz") sought a preliminary injunction against defendant Vertrue Inc. ("Vertrue"), a company with which Nutzz contracted to develop an online membership program for NASCAR fans. After Vertrue terminated the agreement (claiming that Nutzz missed deadlines and promotion requirements), it sent an email to 1,200 Nutzz members advertising Vertrue's own membership program as an upgrade. Nutzz claimed that Vertrue's actions constituted a breach of their confidentiality agreement and a misappropriation of trade secrets. More ›

Court of Chancery Refuses to Pierce Corporate Veil or Impose Successor Liability to Enable a Former Employee to Recover Judgment

Mason v. Network of Wilmington, Inc., C.A. No. 19434-NC, 2005 WL 1653954 (Del. Ch. July 1, 2005). Plaintiff won an employment discrimination suit against Network Personnel, Inc. ("Personnel"), a Delaware corporation solely owned by defendant Barry Schlecker ("Schlecker"). But plaintiff was unable to collect on the judgment, so she sought to recover from Schlecker personally by piercing the corporate veil and recovering from his new company, Network of Wilmington ("Network"), under a theory of successor liability. The parties filed cross-motions for summary judgment. More ›