About This Blog

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

Morris James Blogs

Links

Showing 18 posts from January 2015.

Court Of Chancery Rejects Application Of Delaware Law

Ascension Insurance Holdings LLC v. Underwood, C.A. 9897-VCG (January 28, 2015) This is an important decision on choice of law. The Court held that the parties' choice of Delaware law to govern the terms of a noncompete agreement was unenforceable in the face of contrary public policy of California that limited such agreements. This result is arguably at odds with a Third Circuit decision that upheld the choice of Delaware law in a noncompete agreement despite the policy of Louisiana that limits such agreements - Coface Collections North America Inc. v Newton, 430 Fed. Appx. 162 (3rd Circ. June 6, 2011).  As the decision points out, limitations on former employees' right to work for a competitor are subject to a wide variety of state laws. Hence, the drafter of such agreements will now need to carefully consider what law to choose to apply to the agreement and cannot just adopt Delaware as binding in every case.

Court Of Chancery Denies Late Amendment To Complaint

Posted In Uncategorized
Optimiscorp v. Waite, C.A. 8773-VCP (January 28, 2015) This decision is a primer on what not to do if you want to add claims to a complaint as the case develops. The lesson is to be sure that your discovery responses are both timely updated and sufficient to put the opposing side on notice and to move as early as possible to amend.

District Court Interprets Limitations Savings Statute

Posted In Business Torts
Hartsel v. The Vanguard Group Inc., C.A. 13-1128-SLR (D. Del. January 26, 2015) This is an interesting decision because it interprets the seldom-used Delaware Savings Statute [10 Del. C. Section 8118].  The court held that a derivative suit dismissed for failure to make a demand on the board is not saved from the expiration of the statute of limitations under the Savings Statute. Hence, a new suit that followed a demand of the board may be time barred.

Negotiating Admitted Facts in Pretrial Stipulation

Posted In Articles

This article was originally published in the Determining admitted facts can be one of the more difficult aspects of preparing a pretrial stipulation. Parties often propose factual statements that are advantageous to their position, while resisting facts that may favor their opponents. There is also a tendency to take a cautious approach and require an opponent to prove all facts in support of their case at trial. This approach, however, likely is contrary to counsel's duty to litigate a matter "efficiently and effectively" and to "cooperate as officers of the court and not waste time on issues not legitimately in dispute," as in Itron v. Consert, (Del. Ch. Jan. 15, 2015). More ›

Court Of Chancery Explains Borrowing Statute

Posted In Uncategorized
TrustCo Bank v. Mathews, C.A. 8374-VCP (January 22, 2015) There is perhaps no more confusing subject in Delaware non-corporate law than the application of the Delaware borrowing statute to statute of limitations issues. Under Supreme Court case law, the literal application of the borrowing statute is avoided under certain limited circumstances, often involving a plaintiff trying to avoid liability by forum shopping.  In any case, this decision explains very well how to apply the borrowing statute.

Court Of Chancery Explains Hierarchy Of Corporate Legal Principles

Posted In Uncategorized
Sinchareonkul v. Fahnemann, C.A. 10543-VCL (January 22, 2015) This is a helpful reminder that the DGCL governs what may be in the certificate of incorporation and what may be in the bylaws. Giving one director extra tie-breaking voting rights must be in the certificate to be valid.

Delaware Supreme Court to Chancery: You Have Broad Powers

Posted In Articles
Authored By Brett M. McCartney This article was originally published in the Delaware Business Court Insider January 21, 2014 Books-and-records litigation does not typically grab headlines. In fact, few cases litigated under Section 220 of the Delaware General Corporation Law result in written opinions authored by the Delaware Supreme Court. Nevertheless, books-and-records litigation is vibrant in Delaware. Books-and-records requests are the "tools at hand" Delaware courts encourage stockholders to use prior to filing derivative litigation. However, a stockholder's right to a Delaware company's books and records is not unfettered. Aside from needing to satisfy the preconditions set forth in Section 220, the Delaware Supreme Court recently apprised the Court of Chancery that it is within the Chancery Court's authority to restrict the use of certain books and records where equitable. More ›

David J. Soldo to Moderate Seminar on Ethics in Litigation

Posted In News
Tuesday, January 27, 2015 12:00 - 1:00 PM
David J. Soldo will moderate a CLE seminar on Ethics in Litigation sponsored by the Litigation Section and the Small Firms and Solo Practitioners Section of the Delaware State Bar Association. This seminar will cover recent trends in disciplinary matters and will offer tips on how to avoid ethical complaints. Topics include when to retain counsel, self-reporting to ODC, candor to a tribunal, advance fees and fee agreements, declining or terminating representation and safekeeping property. This seminar will feature speakers Patricia Bartley Schwartz, Esq., of the Office of Disciplinary Counsel, and Charles Slanina, Esq., of Finger & Slanina, LLC. More ›

Court Of Chancery Explains What Constitutes A Material Disclosure

Posted In M&A
Parsons v. Digital River Inc., C.A. 10370-VCG (January 12, 2015) What is a material disclosure in one deal is not always material in another transaction, as this decision explains. Context counts. Hence, merely arguing that a past decision held a disclosure was needed may not work in the present case.

Court Of Chancery Declines Mootness Fee

Posted In Class Actions
In re Zalicus Inc. Stockholders Litigation, C.A. 9602-CB (January 16, 2015) The Court of Chancery has again declined to dismiss a class action without notice to the class that the plaintiff's attorney is to be paid a so-called "mootness fee."  That is a too-clever attempt to avoid having the court actually look at how much is being paid to the lawyer who files an action attacking a transaction and then gives up the suit after some sort of additional disclosure is made that she argues makes the case "moot."  Instead, the Court wants notice to be given to the stockholders.

Court Of Chancery Explains Pro Se Procedure

Posted In Jurisdiction
Alfred v Walt Disney Co., C.A. 10211-VCG (January 14, 2015) This decision has generated a lot of comment about the plaintiff's outlandish complaint. However, it is also a good source on Delaware law dealing with how to treat pro se complaints, particularly what leniency they will receive.  Note as well the kindness of the Court to this litigant, which is to be commended.

Court Of Chancery Requires More Cooperation In Pretrial Orders

Itron Inc. v. Consert Inc., C.A. 7720-VCL (January 15, 2015) This decision may change litigation practice in the Court of Chancery.  Most lawyers, myself included, dislike arguing over the statement of admitted facts required in a pretrial order. There are many reason for that, such as the need to go over statements carefully to be sure each does not spin the facts unfairly.  That is tedious, particularly when the facts asked to be admitted seem irrelevant to the proceedings or are prejudicial.  After all, who wants a client's past troubles aired before the Court when attempts to get them into evidence would never succeed during trial?  However, Chancery trials are bench trails before experienced chancellors and unfair prejudice is less a problem there. In any case, this decision requires the parties to admit anything that is true in a proposed statement of facts in a pretrial order. The facts may come from admissions in an answer, in discovery, or otherwise.  This will take work.  However, given that the Court is already burdened, that the lawyers are getting paid to do the work, and that arguments over what is or is not relevant are too time consuming in a judge-only trial, the need to do the work is justified.

Chancery Court Permits Appraisal Arbitrage

Posted In Articles

A fairly new litigation development is the subject of two Delaware Court of Chancery decisions issued on the same day. Both In re Appraisal of Ancestry.com, Consol. C.A. No. 8173-VCG (Jan. 5, 2015), and Merion Capital v. BMC Software, C.A. No. 8900-VCG (Jan. 5, 2015), sustained the right of appraisal arbitrageurs to seek appraisal of the stockholdings following a cash-out merger. Had the court ruled differently, it might have severely limited such actions in Delaware. More ›

Court Of Chancery Upholds Contractual Extension Of Limitations

Bear Stearns Mortgage Funding Trust 2006-SL1 v. EMC Mortgage LLC, C.A. 7701-VCVL (January 12, 2015) This is an important decision because it is the first to interpret the amendment to the general statute of limitations in contract actions to permit extending the limitations period by a contract.

Del. Justices Reverse Injunction Halting Sale of Control Transaction

Posted In Articles
Authored By Lewis Lazarus This article was originally published in the Delaware Business Court Insider January 7, 2015 When a Delaware corporation engages in a sale of control transaction, its board's obligation is to obtain the highest value reasonably attainable. This obligation, often referred to as Revlon duties, may be fulfilled as long as the board acts reasonably even if its process is not perfect. A Delaware court reviewing a challenge to a board's exercise of Revlon duties does so with enhanced scrutiny to determine whether the board acted reasonably to maximize shareholder value. No single blueprint exists that a board must follow. More ›

Court Of Chancery Clarifies Standing For Appraisal Rights

Posted In Appraisal
Merion Capital LP v. BMC Software, Inc., C.A. 8900-VCG (January 5, 2015) and In Re Appraisal Of Ancestry.com Inc., C.A. 8173-VCG (January 5, 2015) both deal with appraisal arbitrage and resolve who is entitled to file an appraisal action. The basic issues these two decisions address is whether a buyer of stock after a merger is announced must prove the stock to be appraised did not vote for the merger. So long as the depository in whose name the  stock is listed did hold more stock than voted for the merger, the Court holds the new buyer need not trace his ownership to specific stock. Of course, the stock sought to be appraised must be less in number than the stock who did not vote for the merger.

Do Post-Closing Merger Price Adjustments Comport With DGCL?

Posted In Articles
Authored By Albert H. Manwaring, IV This article was originally published in the Delaware Business Court Insider December 30, 2014 Delaware courts have routinely upheld post-closing merger price adjustments that comply with the requirements of Section 251 of the Delaware General Corporation Law. To allow stockholders to make an informed decision as to whether to accept the merger consideration, or seek appraisal, Section 251 requires that the value of the "cash, property, rights or securities ... which the holders ... are to receive" as consideration in the merger be determinable or ascertainable by the stockholders at or about the time of the merger. More ›

Court Of Chancery Upholds Denial Of Inspection To Former Member

Prokupek v. Consumer Capital Partners LLC, C.A. 9918-VCN (December 30, 2014) This decision applies settled law in the corporate context to hold that a former member of an LLC may not obtain inspection rights because those are limited to current members. The opinion is also interesting in that it holds that even if the member interests were redeemed at too low a price, the right to inspect ended and the former member should pursue a breach of contract claim.