Main Menu

Showing 10 posts from February 2011.

Court Of Chancery Denies Receiver For LP

Posted In LP Agreements

Steven M. Mizel Roth IRA v. Laurus U.S. Fund LP, C.A. 5566-VCN (February 25, 2011)

This decision has a good summary of the past decisions holding that it is rare for a receiver to be appointed for an LP.  This is particularly true for an investment fund that is still in the business of investing even if the plaintiff is unhappy with the results.


Court Of Chancery Imposes Fees For Late Discovery

Posted In Discovery

Mickman v. American International Processing LLC, C.A. 4368-VCP (February 23, 2011)

This decision reaffirms the settled rule that if you fail to obey a court order to provide discovery, the Court will assess fees for a motion to compel and few excuses will change that result.


Court Of Chancery Re-affirms Board's Use Of Poison Pill To Block Inadequate Tender Offer

Posted In M&A

Air Products and Chemicals, Inc. v. Airgas, Inc., C.A. No. 5249-CC / In re Airgas Inc. Shareholder Litigation, C.A. No. 5256-CC (February 15, 2011)

The Court of Chancery denied an application by Air Products and Chemicals, Inc. to force the board of Airgas, Inc. to redeem its poison pill so as to allow the stockholders of Airgas to decide whether to tender into Air Products' all-cash, all-shares offer.  The Court in this 153-page opinion carefully applies Delaware Supreme Court precedent in holding that the Airgas board reasonably believed that the Air Products offer was inadequate and that its decision to maintain its pill was a reasonable response to that threat.  A major factor in upholding the reasonableness of the Airgas board's actions was that three directors nominated by Air Products supported the decision to maintain the pill.  While some have questioned the continued vitality of doctrine that allows the board to maintain a poison pill in the circumstance of an all-cash, all-shares and fully financed offer, this decision re-affirms Delaware's director-centric approach to corporate governance.  The description in the opinion of the process followed by the Airgas board serves as a primer for how a board might defend against a tender offer it believes is inadequate.




Court Of Chancery Validates Top Up Options

Posted In M&A

Olson v. ev3, Inc., C.A. 5583-VCL (February 21, 2011)

In recent years, top up options have been frequently used to speed up a merger by avoiding the time-consuming and expensive process of soliciting proxies to approve a merger after a successful tender offer.  This decision explains how such an option works and why they are permitted under Delaware law.

The decision is also important is pointing out certain perils in the way top up option rights are structured.  The option needs to comply with the provisions of the DGCL  governing stock options.


Court Of Chancery Permits Inspection of Pre-Ownership Events

Sanders v. Ohmite Holding LLC, C.A. 5145-VCL ( February 21, 2011)

This decision determines that an owner of an LLC interest may obtain inspection of its books and records even with respect to events that occurred before he became a member.


Court Of Chancery Explains Categories Of Damages

Posted In M&A

Pharmaceutical Product Development Inc. v. TVM Life Science Ventures VI, LP,  C.A. 5688-VCS (February 16, 2011)

Agreements sometimes try to limit any damages from a misrepresentation or contract breach by excluding consequential or special damages.  This decision notes that is hard to do because what falls into what category of damages is not always clear.  Better to limit damages some other way such as by the amount paid to the seller.

The opinion is also noteworthy as an example of the far-reaching scholarship the Court undertook to understand the science involved in the dispute.  Litigants should not underestimate the Court of Chancery in such matters.


Court Of Chancery Creates Unique Remedy

Posted In M&A

In re Del Monte Foods Company Shareholders Litigation, C.A. 6027-VCL (February 14, 2011)

This is an important decision if only for the creative remedy that the Court came up with to deal with the breach of faith by a target's investment bank.  In effect, the investment bank was willing to sell out its client to get a piece of the buy-side financing.  The Court enjoined the deal for 20 days to let a competing bid emerge while at the same time not killing a deal that the target's stockholders might want.

The decision gives guidance to advisers on the proper conduct they should be expected to follow.


Supreme Court Upholds Fee Award In No Damage Case

Posted In Fiduciary Duty

William Penn Partnership v. Saliba, C.A. 362, 2010 (February 9, 2011)

In this unusual decision the Supreme Court upheld an award of attorneys fees and costs to plaintiffs who proved a breach of fiduciary duties owed to them but where there were no apparent damages from the breach.  In that way the plaintiffs were compensated for the breach.  It is not clear if this means that in every breach of fiduciary duty case that attorney fees may be won by the plaintiffs as well.  I doubt it for the Court does not announce any such major change in Delaware law and the decision seems limited to its peculiar facts.  But, you can not know for sure. 


Special Master Reports On Fee Request

Fuhlendorf v. Isilon Systems, Inc., C.A. 5772-VCN (February 8, 2011)

In this report of a well-respected Delaware attorney serving as a special master, there is much to be learned about how to seek advancement of fees.  He does a good job of explaining Duthie v CorSolutions Medical Inc., 2008 WL 4173850 (Del. Ch., Sept. 10, 2008), a leading decision on the administration of advancement claims.  Finally, he comes up with the procedures going forward to avoid all the bickering over fees that so dominates this area.

If you doubt this is a real problem, note that the earnings restatement that gave rise to the underlying litigation involved  $4.8 million.  The attorney fees for just this one defendant approached $7 million.


Court Of Chancery Illustrates Possible Waiver Of LP Agreement

Posted In LP Agreements

Wimbledon Fund LP Absolute Return Fund Series v. SV Special Situation Fund LP,  C.A. 4780-VCS (February 4, 2011)

May the provisions of a limited partnership agreement governing withdrawal be waived?  This decision says that is possible.  That result is not particularly remarkable.

What is more interesting is the rest of the opinion.  For while the plaintiff's conduct in presenting its case was outrageous, the Court nonetheless stood fast in applying its rules on summary judgment to hold the plaintiff may have a trial on its claims.  While the case is more complicated than that [involving issues of what the Supreme Court meant in its remand to the trial court], the intellectual honesty of the Court of Chancery is heartening, as usual.


Back to Page