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

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Showing 8 posts from September 2006.

Superior Court Declines to Perform Post-Settlement Allocation of Class Claims and Holds Insurer Responsible for Negotiated Settlement and for Insured's Attorneys' Fees

Premier Parks, Inc. v. TIG Insurance Co., C.A. No. 02C-04-126-PLA, 2006 WL 2709235 (Del. Super. Ct. Sept. 21, 2006). The parties filed cross-motions for summary judgment on counterclaims in an ongoing declaratory judgment action. The plaintiff, TIG Insurance Company ("TIG"), sought a declaration that it was only liable to pay an allocated share of a global settlement that its insured, Six Flags, Inc. ("Six Flags") negotiated in a class action civil rights lawsuit that alleged that Six Flags had engaged in discriminatory practices at one of its amusement parks. TIG also sought a declaration that it was not responsible for covering the attorneys' fees that Six Flags incurred in defending the class action and negotiating the settlement. More ›

Superior Court Grants Defendant Insurers' Motion to Dismiss Because Employees who Served as Directors and Officers Suffered No Loss to which D&O Insurance Coverage Applies

AT&T Corp. v. Clarendon America Insurance, C.A. No. 04C-11-167, 2006 WL 2685081 (Del. Super. Ct. Sept. 18, 2006). This case is part of a larger insurance coverage dispute involving Directors and Officers and Company Liability ("D&O") coverage purchased from certain of the defendants by plaintiff AT&T Corp. ("AT&T") and the company of which AT&T was the majority stockholder, the now-bankrupt At Home Corporation ("At Home"). AT&T sought D&O coverage in connection with several underlying shareholder suits brought against it and certain directors and officers of AT & T and At Home. The court previously decided the potential coverage liability under the AT&T D&O policies but not the At Home policies. See AT & T Corp. v. Clarendon America Ins. Co., C.A. No. 04C-11-167 (JRJ), 2006 WL 1382268 (Del. Super. Ct. Apr. 13, 2006, amended Apr. 25, 2006). At issue in this case are the D&O policies issued by the five defendant insurers to At Home, including the primary insurer and the four excess insurers (collectively, the "At Home Insurers"). The At Home Insurers moved to dismiss AT&T's complaint. More ›

District Court Follows Reasoning Of Recent Court of Chancery Opinion On Whether Choice-of-Law Provision Governs Related Tort Claim

Millett v. Truelink, Inc., C.A. No. 05-599, 2006 WL 2583100 (D. Del. Sept. 7, 2006). The plaintiffs in this case were several individuals who brought suit for breach of contract and violations of the Delaware Consumer Fraud Act ("DCFA") and Credit Reporting Agencies Act ("CRAA"), among other claims, after purchasing credit-monitoring services from defendant Truelink. Truelink filed a motion to dismiss the DCFA and CRAA claims under 12(b)(6). And plaintiffs brought a motion to amend their complaint to substitute a claim under the California Consumer Legal Remedies Act ("CCLRA"). The District Court denied Truelink's motion to dismiss and plaintiffs' motion to amend the complaint to add a CCLRA claim, but did grant plaintiffs leave to amend their complaint to add a claim under the Kansas Consumer Protection Act. More ›

Supreme Court Upholds Application of Daubert Rules

Bowen v. E.I. DuPont de Nemours & Co. Inc. C.A. No. 580, 2005 (Del. Supr. September 15, 2006). The Supreme Court has upheld the decision of the Delaware Superior Court that rejected the testimony of an expert for the plaintiffs in a major toxic tort suit arising out of Benlate exposure to humans. The plaintiffs claimed that as a result of exposure to benlate while pregnant that their children had suffered serious birth defects. The plaintiffs' theory depended on the testimony of an "expert" that skin exposure would cause the fetus in turn to be exposed to benlate. The Superior Court after an exhaustive hearing ruled that the plaintiffs' expert testimony failed to meet the standards set for by the United States Daubert decision. It was this ruling that the Supreme Court affirmed. More ›

Court of Chancery Grants Ten Year Injunction

W.L. Gore & Associates, Inc. v. Wu, C.A. No. 263-N (Del. Ch. September 15, 2006). The extent to which a court will enjoin the violation of a confidentiality agreement covering trade secrets is often questioned. In this decision, the Court of Chancery issued an injunction that for ten years barred the defendant from working in a business that might permit him to use the trade secrets he had stolen from his employer. In part, the remedy was based on the useful life of the stolen materials. More ›

Supreme Court Adopts "Validly In Litigation" Rule

Braddock v. Zimmerman, C.A. No. 489 (Del. Sup. September 12, 2006). The Delaware Supreme Court has clarifed the rules as to when a plaintiff in a derivative suit must make a demand upon filing an amended complaint. The Court holds that if the derivative litigation has been properly instituted an amendment to the complaint does not need to be the subject of a demand on the board of directors as to those claims already "validly in litigation". Thus, even if the majority of the board has changed and is now independent under Rule 23.1 standards, no demand need be made in those circumstances. More ›

Court of Chancery Awards Interest On Advancement

Posted In Case Summaries
Citrin v. International Airport Centers LLC, C.A. No. 2005-N (Del. Ch. September 7, 2006). This decision awards interest on the fees due to a corporate officer who was wrongly denied advancement of those fees. While this award of interest is the normal rule, the decision is interesting because it dealt with an instance where the corporate defendant had discouraged the plaintiff from even submitting the fees in dispute and then argued that failure to submit a bill precluded interest when the plaintiff prevailed. Not surprising, this effort to avoid interest failed for want of any equity.

Court of Chancery Limits Creditor Fiduciary Duty Claims

North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, C.A. No. 1456-N (Del. Ch. September 1, 2006). This is another in a series of Court of Chancery decisions that limit the claims that creditors may make based on the theory the directors owe the creditors a duty when their corporation is insolvent or in the vicinity of insolvency. Ever since the famous footnote in Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp., 1991 WL 277613 (Del. Ch. Dec. 30, 1991), creditors have argued that directors should owe them a fiduciary duty to take their interests into account when the creditors are the residual interest holders in a corporation that is insolvent or nearly so. A series of recent decisions have limited those creditor arguments. See e.g. Production Resources Group, L.L.C. v. NCT Group, Inc., 863 A.2d 772 (Del. Ch. 2004) [holding most creditor claims must be brought as derivative claims]. This new decision further limits creditor claims by holding that creditors may not bring a direct claim for breach of fiduciary duty based on the theory the entity is in the vicinity of insolvency. Further, the decision holds that for clearly insolvent companies, only creditors whose claims are beyond fair dispute may claim the directors owe them a duty. More ›