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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Showing 10 posts from February 2012.
This is the now-famous decision finding several breaches of fiduciary duties by the negotiators of a merger, but declining to kill the deal that would have given stockholders a large premium. The opinion is, as usual for its author, entertaining to read. More importantly, however, it is once again proof that money may deaden any sense of fiduciary duty, particularly any sense of when there is a conflict of interest.
This is an excellent primer on what deal protection provisions are acceptable, particularly when the board must have the right to change its recommendation to stockholders when a superior proposal surfaces. It is permissible to require a board to wait a short time before changing its recommendation to allow the first acquiror to match a new proposal. However, once that matching right period passes, the board must be free to act promptly.
This opinion also provides a good analysis of the scope of any pre-deal market check and the board's role in limiting the scope of any effort to shop a deal.
This decision upholds transfer restrictions in a limited partnership agreement.
When a dissatisfied stockholder petitions the Court of Chancery for an appraisal of shares extinguished in a merger, the petitioner will have the burden of persuading the court of the fair value of those shares. When the holder owns preferred stock, valuation issues arise that do not pertain to the holders of common stock. That is because, unlike for common stockholders, preferred stockholders' rights, including to redemption and sometimes to valuation in the event of a merger, are spelled out contractually. More ›
This is an interesting decision because the Court appointed a receiver to enforce its orders granting a right to inspect an LLC's records when the LLC management did not comply with those past orders. How far that receiver might go in his inspection is not clear but given that the receiver is the plaintiff's own agent, pretty far seems likely.
Litigation in multiple courts over the same basic claim continues to be a serious problem for corporate defendants. Indeed, some commentators argue the problem is getting worse. It is now almost certain that any merger or going-private transaction involving a publicly traded company will generate multiple suits. In fact, even the suits themselves now generate tag-along litigation. More ›
This is the leading decision on how to establish the "good faith" requirement for permissive indemnification after the indemnitee has lost his case. As the opinion notes, that may require a mini-trial when the good faith of the indemnitee has not been settled in the underlying action.
The opinion is also helpful in setting out what constitutes and how to prove "successful on the merits or otherwise," the usual test both under the statute and most bylaws for mandatory indemnification.
The interaction between two cases in two jurisdictions is again examined in this decision. The court held that a Section 220 books and records case may not be pursued to provide discovery to support the amendment of a complaint in a case pending elsewhere when the time to amend that complaint has passed. The mere possibility that the time to amend may be extended is not enough to get under the rule in the King decision that permitted a books and records action to proceed when the right to amend a complaint was still present.