About This Blog
Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Showing 8 posts from May 2018.
Arising out of the highly-publicized dispute over the proposed transaction involving CBS and Viacom, each controlled by the Redstones, this decision is both front-page newsworthy and legally significant. CBS and Viacom used to be one entity but split. The Redstones retained voting control in each through a dual-class voting structure. Later, the Redstones began pushing to merge the entities once again and both entities formed special committees to consider the proposal. More ›
Alternative entity agreements may eliminate common law fiduciary duties and often do, supplanting them with contractual fiduciary duties. These frequently include an obligation to act “in good faith” or “in the best interests of the company,” broadly or in certain circumstances. Thus, even with fiduciary duty exculpation clauses in LLC agreements, managers may still find themselves exposed to a member’s allegations that they failed to satisfy their standard of conduct, as this decision illustrates. This decision also is interesting for its discussion of the potential impact of bankruptcy court sale orders on the Court of Chancery’s ability to enter equitable relief.
This is an important decision because it teaches two important lessons. First, when an asset sale agreement contains explicit requirements on how to give notice of a claim on an escrow account, those requirements must be followed or the claim will be waived. Second, absent fraud, a contractual provision will be enforced that provides that the exclusive remedy for a buyer is a claim on an escrow fund. Thus, for example, a separate breach of contract or negligent representation claim will be dismissed.
The famous Garner case permits inspection of otherwise privileged communications when its strict criteria are satisfied. But as this decision decides for the first time in Delaware, Garner does not apply when there is no fiduciary relationship between the party seeking discovery and the party claiming the privilege. Here the LLP agreement waived any fiduciary duties. Thus, Garner did not apply and discovery was denied.
On April 6, the Delaware Corporation Law Section of the Delaware Bar Association proposed some major and minor amendments to the Delaware Limited Liability Company Act. If introduced in and approved by the Delaware General Assembly and the governor, one of the most significant changes will involve the provisions of the act dealing with series limited liability companies (series LLCs). The proposed amendments are intended to clarify the characteristics of series LLCs and further facilitate their use. More ›
Chambers USA: America's Leading Lawyers for Business Recognizes 15 Morris James Lawyers and Issues 5 Firm Practice Rankings in the 2018 Edition
Thirteen Morris James partners have been named leaders in their respective fields by Chambers USA, and two additional partners were named “recognized practitioners” in Delaware for Corporate/M&A: Alternative Entities. Morris James also received five practice recognitions.
Clarkson Collins Jr.
Lewis H. Lazarus
Edward M. McNally
Brett D. Fallon
Carl N. Kunz III
Stephen M. Miller
Corporate/M&A: Alternative Entities
John M. Bloxom IV
Real Estate & Zoning/Land Use
Labor & Employment**
James H. McMackin III
David H. Williams
Richard K. Herrmann
Mary B. Matterer
* Recognized Practitioner
** Recognized Practice Areas
Third Circuit Dismisses Employees’ Class Action Suit and Finds Chemours’ Severance Plan is not Subject to ERISA
In developing severance plans, employers should take note of the factors courts will consider in determining whether a plan would be considered an “employee welfare benefit plan” under the Employment Retirement Security Act (ERISA). Severance benefits do not implicate ERISA unless they require the establishment and maintenance of a separate and ongoing administrative scheme, and it appears that the employer’s intention is to provide benefits on a regular and long-term basis.
On April 30, 2018, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal of a lawsuit initiated by a class of former employees against Chemours Company under ERISA related to an employee severance plan(Giraradot, et al. v. The Chemours Company). More ›
Parties who form Delaware limited liability companies to organize their business affairs do so to structure their relationships contractually. This enables them to organize the governance and economic rights in a manner tailored to the enterprise they are establishing. They do so secure in the knowledge that the Delaware Limited Liability Company Act expressly provides that it is the policy of the Delaware act “to give maximum effect to the principle of freedom of contract and to the enforcement of limited liability company agreements.” If the parties ever have a dispute over their internal affairs, then a Delaware court will apply well-settled principles of contract interpretation to resolve it. The recent decision of Capone v. LDH Management Holdings, C.A. No. 11687-VCG (Del. Ch. Apr. 25, 2018), illustrates the court’s application of contract law principles to determine that two Delaware LLCs’ affairs were not wound up in compliance with the Delaware LLC Act resulting in the nullification of prior-filed certificates of cancellation. More ›