Posts from November 2011

Supreme Court Clarifies Inspection Rights

Espinoza v. Hewlett-Packard Company, C.A. 208, 2011 (November 21, 2011) This decision clarifies the scope of the right to inspect a company's records to investigate allegations of wrongdoing.  The decision is somewhat unique because it also raised issues of attorney-client privilege and work product protection that the Supreme Court did not need to decide. Briefly, a document may be subject to inspection when it is "essential" to accomplish the purpose of the inspection.  That in turn means the document must address the issue involved, such as the alleged wrongdoing, and not just be information otherwise made available to the inspector. Obviously, this is a fact intensive test.  In this case, for example, the information sought was contained in other documents provided and the document sought did not really add much to the mix of information addressing the key question the stockholder wanted to investigate. Share

State Courts Continue to Wrestle With Jurisdictional Conflicts

 Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | November 16, 2011

What happens when two courts in different states have the same case? Delaware courts, both state and federal, frequently face that question.

A Delaware entity may be sued in Delaware because that is its place of incorporation. Particularly in class action litigation, the Delaware entity may also be sued by a second plaintiff in another jurisdiction where that plaintiff resides, on the same claim brought in Delaware.

In just the last few weeks, the Delaware Court of Chancery and the federal District Court in Delaware have provided guidance of what they will do when faced with multijurisdictional litigation. More ›

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Court Of Chancery Analyizes Class Conflicts

Garrett v. Zon Capital Partners LP,  C.A. 5607-CS (November 10, 2011)

This is a rare Court of Chancery decision discussing when a class should be certified. The Court reviewed and dismissed the claim that there was a conflict of interest among class members, based on a funds flow analysis.

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Court Of Chancery Explains Good Faith And Fair Dealing

Winshall v. Viacom International Inc.,  C.A. 6074-CS (November 10, 2011)

This is another case where a party tried to re-do a contract by claiming that the failure to give it more than it bargained for constituted a violation of the covenant of good faith and fair dealing.  In rejecting that claim, the Court again explains the tight limits of that covenant.  It just can not be used to make a new deal.

Affirmer, del Sup. 39, 2013 (October 7, 2013).

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Court Of Chancery May Appoint A Receiver To Collect Insurance

In The Matter of Krafft-Murphy Company Inc., C.A. 6049-VCP (November 9, 2011)

This decision upholds the power of the Court of Chancery to appoint a receiver for a dissolved Delaware corporation to collect on the corporation's insurance polices covering asbestos claims. This may be done even more than 10 years after formal dissolution and provides a way to pursue insurance coverage despite the general law that prohibits direct claims against an insurer.

See also the Supreme Court's reversal of part of the Court's ruling at Anderson v. krafft-Murphy Company, Inc. Del Sup. C.A. 85, 2013 ( November 26, 2013).

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Court Of Chancery Again Interprets The Step Transaction Doctrine

Coughlan v. NXPB, C.A. 5110-VCG (November 4, 2011)

It is sometimes important to decide if a series of transactions are to be coupled together to be treated as one.  The so-called step transaction doctrine does that when applied.  Here the Court used the step transaction to interpret an agreement that gave the selling stockholders the right to a bump up in the merger consideration and certain protections if company assets were sold before all the additional consideration was paid.  This somewhat lenient application of the doctrine may signal its greater acceptance by the Court.

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Out of Many Can Come One: Supreme Court Considers Transaction Aggregation Doctrines

Authored by Peter B. Ladig
This article was originally published in the Delaware Business Court Insider | November 2, 2011

Recently, the Delaware Supreme Court issued an opinion resolving a dispute between an indenture trustee and the issuer of bonds pursuant to an indenture governed by New York law arising out of the issuer's business plan of divesting certain assets. While any example of the Supreme Court's analysis of a contractual provision is helpful to drafters of those contracts, it was the Supreme Court's emphasis on uniform interpretation of boilerplate provisions that makes this opinion noteworthy. More ›

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