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

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Showing 18 posts from January 2006.

Superior Court Grants Defendant's Motion to Dismiss for Lack of Personal Jurisdiction

Hutchison v. Bruehl, C.A. No. 05C-07-047 (JTV), 2006 WL 1149151 (Del. Super. Jan. 31, 2006) Plaintiff's father had an interest in gas and oil property in West Virginia from which he received royalties through an agent in Maryland. When her father died, the right to the royalties passed to Plaintiff. Agent failed to make payments until Plaintiff took steps to stop payment through the agent and have checks sent directly to her. She then sued to recover the funds kept by the agent in the interim. Defendant agent moved to dismiss, claiming Delaware lacked personal jurisdiction over him as a Maryland resident. More ›

Delaware Supreme Court Reverses the Superior Court's Certification of Class in Suit Against Securities Dealers

Wit Capital Group, Inc. v. Benning, No. 568, 2004, 2006 WL 249983 (Del. Jan. 31, 2006). The plaintiffs sued the defendants, Wit Capital Group Inc. and Wit Capital Corporation ("Wit"), securities broker/dealers, alleging that the defendants breached their account agreement by failing to allow the plaintiffs to purchase certain IPO shares. The plaintiffs argued, pursuant to Superior Court Civil Rule 23(b)(3), that common questions of law or fact predominated over questions affecting individual class members. Reversing the Superior Court's decision to certify a class, the Delaware Supreme Court found that the plaintiffs failed to show fact of common injury affecting all plaintiffs. More ›

Superior Court Finds that Insurers Are Not Yet Obligated to Reimburse AT&T for Funds Used for Shareholder Settlement and Grants Insurers' Motions to Dismiss Claims For Reimbursement of Settlement

AT&T Wireless Services, Inc. v. Federal Ins. Co., 03C-12-232 WCC, 2006 WL 267135 (Del. Super. Ct. Jan. 31, 2006). In 2002 AT & T Wireless Services, Inc. ("AWS") merged with TeleCorp PSC, Inc. Following the merger the TeleCorp shareholders filed a derivative action alleging that the TeleCorp directors had breached their fiduciary duties. The Court of Chancery approved a settlement of $47.5 million. AWS filed an action in Superior Court seeking reimbursement from TeleCorp's insurance carries and its own primary insurer, Faraday Capital Limited ("Faraday"), and its excess insurer, National Union Fire Insurance Company ("National Union"). AWS voluntarily dismissed Faraday. Subsequently, pursuant to Rule 12(b)(6), the insurers moved to dismiss, and the court granted their motions to dismiss the claims relating to reimbursement for the settlement. However, the court denied TeleCorp's primary insurer's motion to dismiss the claim for defense costs. More ›

Superior Court Finds "Volunteer" Director of LLC Immune from Suit and Requires Plaintiff to File a More Definite Statement As to Whether Board's Actions Were Void

Gilliland v. St. Joseph's at Providence Creek, C.A. No. 04C-09-042, 2006 WL 258259 (Del. Super. Ct. Jan. 27, 2006). After the board of directors of an LLC terminated the plaintiff, the plaintiff filed suit, alleging, among other things, that the board's actions were void. The defendants moved to dismiss plaintiff's suit. The court found that one of the directors was immune from suit pursuant to 10 Del. C. § 8133, which grants immunity to an organization's volunteers. Another defendant, the LLC from which plaintiff had been terminated, argued that the claim against it should be dismissed because the board's actions were voidable rather than void. However, there was no indication that the Board had ever ratified the voidable acts. The Court directed the Plaintiff to file a more definite statement as to what it was claiming against that defendant. More ›

Court Of Chancery Dismisses Complaint For R. 23.1 Failure Despite Corporation's Inadequate "Internal Controls" Attracting $50 million Fine

Stone, et al. v. Ritter, et al., C.A. No. 1570-N, 2006 WL 302558 (Del. Ch. Jan. 26, 2006). This matter involved an attempt to institute a derivative proceeding against fifteen current and former director defendants of AmSouth Bancorporation for alleged failures of fiduciary duties through insufficient internal control systems to guard against statutory violations under the Bank Secrecy Act and the Anti-Money Laundering Regulations. The defendants filed a motion to dismiss and it was granted by the court for insufficiency of pleading under Chancery Court Rule 23.1. On November 6, 2006, the Delaware Supreme Court affirmed this decision. More ›

Court Of Chancery Holds That Unlike Corporations, LLC Agreements Can Mandate Arbitration For Fiduciary Breach Claims

Douzinas, et al. v. American Bureau of Shipping, Inc., et al., C.A. No. 1496-N (Del. Ch. Jan. 24, 2006) (published at 888 A.2d 1146 (Del. Ch. 2006). Minority shareholders brought a breach of fiduciary duty action against the managing member of the LLC. Additionally, they plead aiding and abetting conspiracy and unjust enrichment claims against defendants' affiliate entities. Relying on Delaware Supreme Court precedent, the defendants insist all claims require mandatory arbitration under the LLC agreement. The court agreed. More ›

District Court Dismisses Potential Securities Fraud Class Action Involving Only Foreign Parties

Blechner v. Daimler-Benz AG, C.A. No. 04-331-JJF, 2006 WL 167835 (D.Del. Jan. 24, 2005). Plaintiffs, on behalf of themselves and other foreign shareholders who invested in securities of DaimlerChrysler AG, filed a class action complaint alleging securities fraud in connection with the merger of Chrysler Corporation and Daimler-Benz AG. Defendants moved to dismiss the complaint. More ›

Delaware Supreme Court Reverses Superior Court and Finds that Defendant Became an "Insured" for Purposes of 18 Del. C. § 4211(2)(a) by Operation of Law after Named Insured Merged Into Defendant

Delaware Ins. Guar. Ass'n v. Christiana Care Health Services, Inc., No. 244, 2005, 2006 WL 196382 (Del. Jan. 24, 2006). The Delaware Insurance Guaranty Association ("DIGA") sought reimbursement from Christiana Care Health Services ("CCHS") pursuant to one of the Delaware Insurance Guaranty Association Act's provisions for claims paid on behalf of an insolvent insurer. In this case the insolvent insurer had insured a corporation that merged into CCHS. The Superior Court granted CCHS's motion for summary judgment, finding that CCHS was not an "insured" under the insurance policy. Reversing the lower court, the Delaware Supreme Court found that a court must consider the purpose and intent of 18 Del. C. § 4211 when determining if a company is an "insured." A court may not rely on terms in an insurance policy that are inconsistent with the purpose and intent of Section 4211. The Supreme Court found that CCHS became an insured after the named insured merged into the defendant, and CCHS is obligated to reimburse DIGA pursuant to Section 4211. More ›

Court Of Chancery Upholds Voluntary Advancement Provisions Irrespective Of Alleged Wrongful Conduct

Radiancy, Inc. v. Zion Azar, et al., C.A. No. 1547-N, 2006 WL 224059 (Del. Ch. Jan. 23, 2006). This is a summary judgment motion for advancement of legal fees made by defendant-officers. Their corporation alleged fraud, fiduciary violations and usurpation of corporate opportunity against defendants as a bar to advancement. Defendants replied with counterclaims under their respective employment contracts. The motion was granted and denied in part. More ›

Court Of Chancery Awards Litigation Fees Advancement Under LLC Agreement And Fees On Fees For Present Suit

Joyce C. Delucca v. KKAT Management, L.L.C. et al., C.A. No. 1384-N, 2006 WL 224058 (Del. Ch. Jan. 23, 2006). This case was decided on a motion for judgment on the pleadings. Plaintiff sought to obtain advancement of attorney fees allegedly contractually agreed, to defend a New York action and fees on fees for initiating and prosecuting this action. The plaintiff was sued in the New York action by affiliates-entities of her then employer. More ›

Court Of Chancery Permits Interlocutory Appeal On Poison Pill Contract Issues

Unisuper, Ltd. v. New Corporation, C.A. No. 1699-N (Del. Ch. Jan. 20, 2006). Opinion and order granting interlocutory appeal on two contract issues, after court dismissed corporate allegations of fraud, negligent misrepresentation and fiduciary duty breach. More ›

Superior Court Finds Company to be a De Facto Corporation and Dismisses Individual Defendants from Case

Caudill v. Sinex Pools, Inc., C.A. No. 04C-10-090 WCC, 2006 WL 258302 (Del. Super. Ct. Jan. 18, 2006). In his complaint, the plaintiff, Ken Caudill, alleged that Sinex Pools, Inc. breached its contract to build Caudill an in-ground swimming pool. Subsequently, plaintiff amended his complaint to include Romie Bishop and Shirley Bishop, individually, based on the theory that Sinex Pools, Inc. was not a legal entity. The Bishops moved for summary judgment, arguing that Sinex Pools, Inc., while not formally incorporated, amounted to a de facto corporation. A de facto corporation is a company that was not properly incorporated despite a good faith and bona fide effort, but is still treated as a corporation by the courts. Granting the Bishops' motions for summary judgment, the Superior Court found that they had met the three-pronged test to establish a de facto corporation. More ›

Superior Court Finds that Plaintiff Was Entitled to Advisory Fee Pursuant to Contract

Barker Capital LLC v. Rebus LLC, C.A. No. 04C-10-269 MMJ, 2006 WL 246572 (Del. Super. Ct. Jan. 12, 2006). The plaintiff, Barker Capital LLC ("Barker"), a Delaware LLC, sued Rebus LLC ("Rebus"), also a Delaware LLC, Mark A. Fox ("Fox"), and Twinlab Corporation ("Twinlab"), a Delaware corporation, alleging breach of contract, quantum meruit, tortious interference with contract, and unjust enrichment. Rebus and Barker entered into an Engagement Agreement, pursuant to which Barker would act as Rebus' nonexclusive financial advisor to identify and consummate a transaction to purchase two medical newsletters. Under the terms of the Engagement Agreement, Barker was entitled to an Advisory Fee in the amount of 2.5% of the transaction's value. Both sides moved for summary judgment. The court found that Barker was entitled to 2.5% of a $12 million loan associated with the deal, but was not entitled to a percentage of a $35 million loan connected with the deal. The court also found against the plaintiff on the quantum meruit claim because the plaintiff had been made whole when the court ruled in his favor on the breach of contract claim. Turning to the tortious interference claim, which was only alleged against Fox, the court found that it did not have the subject matter jurisdiction to pierce the corporate veil. More ›

Partial Summary Judgment Denied by Court Of Chancery On "Entire Fairness" And Disclosure Grounds

In re Tele-Communications Inc. Shareholders Litig., C.A. No. 16470, 2005 WL 3547674 (Del. Ch. Dec. 21, 2005), opinion revised and superseded by No. CIV. A. 16470, 2005 WL 3642727 (Del. Ch. Dec. 21, 2005), (revised Jan. 10, 2006)(Westlaw citation not available). This summary judgment action originates from a Consolidated Amended Complaint that alleged nondisclosure of material information <and a lack of fairness of the impugned merger transaction. More ›

Court Of Chancery Holds That Contractually Agreed Issues Of Substantive Arbitrability Are For Judicial Resolution

Willie Gary LLC. v. James & Jackson LLC., C.A. No. 1781, 2006 WL 75309 (Del. Ch. Jan. 10, 2006), aff'd, (Del. Mar. 14, 2006)(Berger, J.) Plaintiff sought to enjoin defendant to remedy an alleged breach of the LLC Agreement and to specifically enforce the defendant's alleged promise to guarantee a debt of the LLC. Alternatively, plaintiff sought to dissolve the entity in which he owned 80% of stock because of an alleged decisional deadlock. More ›

Court Of Chancery Grants Plaintiff's Rule To Show Cause And Finds Defendant Was Contemnor Despite Wrongful TRO

Richard Y. Johnson & Son, Inc. v. Just-In Construction, Inc., et al., C.A. No. 1735-S, 2006 WL 75308 (Del. Ch. Jan. 06, 2006). This case involved the issue of a TRO to prevent defendant from alienating goods and effects and imposition of a constructive trust pursuant to 6 Del. C. §3501 under a claim of breach of fiduciary duties, to capture receipts to defray vendors and contractors retained to complete DMV related work. More ›

Court Of Chancery Denies Declaratory Judgment And Anticipatory Breach Of Contract On Ripeness Grounds

Ubiquitel Inc. and Ubiquitel Operating Co. v. Sprint Corp, et al., C.A. No. 1489-N, 1518-N, 2006 WL 44424 (Del. Ch. Jan. 04, 2006). and Horizon Personal Communications, Inc. et al. v. Sprint Corp., et al., C.A. No. 1518-N (Del. Ch. Jan. 04, 2006). These cases pertain to summary judgment and a request for declaratory judgment involving an anticipatory breach of a commercial agreement concerning a merger transaction. More ›