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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Showing 18 posts from June 2015.
This decision involves the currently hot topic of the extent of a board of directors’ duty to properly assess corporate risks and act to prevent loss. More ›
It is conventional wisdom that the director long arm statute only confers jurisdiction for breaches of fiduciary duty. Yet as this decision points out, that limitation is not firmly grounded in the words of the statute. Hence, this decision may expand the sort of claims for which a director may be subject to Delaware court jurisdiction when the tort or other claim is only “related and predicated” on conduct that implicates a breach of fiduciary duty.
Online businesses take note. Delaware may finally have an online privacy law. On June 25, 2015, the Delaware General Assembly passed SS1 for SB68, known as the “Delaware Online Privacy and Protection Act.” If signed by the governor, DOPPA will go into effect on January 1, 2016. More ›
This is an interesting decision because it explains what direct claims are available to investors in an LLC. More ›
This is the new Chancellor’s first appraisal decision. He adheres to prior precedent’s use of a special tax rate for sub S corporations and the preference for reliance on pre-merger projections.
This is an interesting decision for the way it approves how to resolve a conflict over whether a law firm may represent some of an entity’s directors while at the same time suing that entity. An ethical screen seems to be enough to resolve the problem.
In In re Nine Systems Shareholders Litigation, (Del. Ch. May 7, 2015), the Delaware Court of Chancery faced the difficult task of deciding an appropriate fee award where the defendants engaged in disloyal, bad-faith conduct, but the plaintiffs failed to prove damages. The plaintiffs proved at trial that the defendants breached their duty of loyalty to plaintiffs by conducting a self-interested recapitalization. Among other things, the defendants "utterly failed" to understand their fiduciary relationship with the plaintiffs, employed a "grossly inadequate process" and sought to avoid full and fair communications with the company's stockholders. Based on this wrongdoing, the court found the defendants engaged in bad-faith pre-litigation conduct that warranted fee-shifting in the amount of $2 million. More ›
Join us for a webinar on the new DRAA.
June 24, 2015 12:00 PM - 1:00 PM EST
The enactment of the Delaware Rapid Arbitration Act (the "DRAA") is a breakthrough in the quest for an efficient, cost-effective and timely process to resolve business disputes, This webinar explains how the DRAA differs from traditional arbitration by providing a fast resolution that avoids the expense of extensive pre-hearing discovery, disputes over arbitration solution and multiple appeals. More ›
Advancement and indemnification rights provide directors and officers of Delaware corporations comfort when accepting positions that often lead to being named in litigation. However, once the interests of the executive and the company diverge, advancement rights can become a hotly contested issue. In dealing with advancement and indemnification claims, the Court of Chancery will analyze a company's bylaws and charter to determine to what extent that company has contracted with its executives to advance and indemnify legal fees. Many Delaware corporations, like Echo Therapeutics Inc. in the matter discussed herein, have bylaws and charters that allow for advancement and indemnification "to the full extent not prohibited under Delaware law." It is within that broad scope that decisions from the Court of Chancery, like the one authored in this case, guide practitioners in crafting arguments both for and against the advancement of legal fees. More ›
CorpCast Episode 7: Better Know a Judge: the Honorable Mary M. Johnston of the Delaware Superior Court
In our second installment of “Better Know a Judge,” we welcome the Honorable Mary M. Johnston of the Delaware Superior Court in New Castle County. Judge Johnston, who is a member of the Superior Court’s Complex Commercial Litigation (“CCLD”) panel, explains how the CCLD track can benefit litigants seeking swift and comprehensive resolutions to their business disputes. In addition, Judge Johnston shares important lessons learned over the course of her career, as well as her advice for attorneys appearing before her and in the Superior Court. Our thanks to Judge Johnston for joining us as a guest on the podcast! More ›
On May 2, 2015, the Delaware Rapid Arbitration Act (the “DRAA”) became effective. The DRAA is the second attempt by the State of Delaware to create a state-sponsored voluntary arbitration process. In Episode 6, we sit down with Joe Slights, a former judge with the Delaware Superior Court, to discuss Delaware’s prior attempt to create a state-sponsored arbitration process, what happened to that scheme, and how the DRAA differs from the prior statute. We’ll also talk about how the DRAA addresses some of the problems present in private arbitration rules and procedures, as well as other benefits of the DRAA to parties seeking an alternative forum to resolve their disputes. More ›
Delaware law has long provided that the decisions of disinterested and independent directors who receive no special benefit from a transaction ought not be the basis of personal liability in monetary damages. To subject directors who are independent of interested parties and who themselves receive no benefit in a transaction not otherwise shared with public stockholders would discourage quality individuals from serving on boards or committees of Delaware corporations and likely also reduce appropriate risk-taking. Nonetheless, the courts since two Delaware Supreme Court decisions in Emerald Partners v. Berlin, 726 A.2d 1215 (Del. 1999), in 1999 (Emerald I) and 2001, 787 A.2d 85 (Del. 2001) (Emerald II), often denied motions to dismiss brought by disinterested and independent directors if a plaintiff could plead facts sufficient to invoke the entire fairness standard of review. More ›
This decision may answer the question of whether an LLC Agreement’s bar of dissolution without a member’s consent trumps the statutory remedy of court-ordered dissolution when the entity’s purpose cannot be achieved any longer. It concludes that dissolution is proper under the facts presented where the objecting member really had no good reason to object.
This is yet another decision declining to uphold a claim based on the covenant to deal in good faith and fairly. More ›
This is an important decision for several reasons. More ›
Morris James LLP is pleased to announce that R. Eric Hacker has joined the firm’s Georgetown office as an associate in its Real Estate and Business Litigation practice groups. His practice will focus on residential and commercial real estate, and commercial litigation. More ›
Directors of a Delaware corporation that enters into a financing agreement with a lender may breach their fiduciary duties if the financing agreement contains a common provision allowing the lender to accelerate and demand full payment of the indebtedness upon a substantial change in the composition of the board of directors. Moreover, the lender may be liable for aiding and abetting the directors' breach of fiduciary duty. Vice Chancellor J. Travis Laster's transcript ruling in Pontiac General Employees Retirement Fund v. Healthways, C.A. No. 9789-VCL transcript (Del. Ch. Nov. 3, 2014), denied the motions of the defendant directors and the lender to dismiss claims based on similar facts and allowed the action to proceed. The ruling and accompanying reasoning severely constrict the permissible use of the so-called "proxy put" often contained in corporate financing agreements. More ›
It is now established that a pending arbitration qualifies for purposes of applying Delaware’s law on when to stay a case in favor of a prior proceeding. This decision extends that law to enter a stay to let the arbitrator decide if he is going to deal with the issues in the later-filed Delaware case.