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Showing 11 posts from October 2020.

Chancery Addresses Contract and Fraud Claims Relating to M&A Post-Closing Price Adjustments

Posted In Chancery, M&A

Roma Landmark Theaters, LLC v. Cohen Exhibition Co., LLC, C.A. No. 2019-0585-PAF (Del. Ch. Sept. 30, 2020)

In Roma Landmark Theaters, the parties’ purchase agreement contained a framework for post-closing price adjustments and set forth the pre-closing duties of the buyer (but not the sellers) relating to certain calculations and financial information. The agreement included a dispute mechanism, which provided for an independent accounting firm to make a binding determination as to the distribution of escrowed funds in connection with a dispute over post-closing price adjustments. The accounting firm decided the dispute largely in sellers’ favor. Sellers then filed suit in the Court of Chancery to confirm the accounting firm’s decision, and require buyer to release the escrowed funds. Buyer filed counterclaims, alleging that the sellers committed financial disclosure misrepresentations amounting to fraud and bad faith. More ›

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Chancery Confirms that, Without More, Threat of Proxy Contest from Activist Investor is Insufficient to Render Director Defendants Conflicted in Sale Transaction

Rudd v. Brown, C.A. No. 2019-0775 MTZ (Del. Ch. Sept. 11, 2020)

The Court of Chancery recently confirmed that the threat of a proxy contest from an activist investor alone was insufficient to render director defendants conflicted in a post-closing challenge to a sale of the company. Here, an activist investor that acquired a significant stake in the corporation expressed dissatisfaction with the board of directors for not exploring a potential sale of the company. Thereafter, the company announced that it would explore strategic alternatives. The company then entered into a cooperation agreement permitting the investor to appoint three members of the nine member board in exchange for not mounting a proxy fight. The strategic process resulted in a sale to a financial acquirer. The plaintiff then brought suit against the company’s board of directors and an officer alleging that that board’s acceptance of an inadequate offer was motivated by self-interest to avoid a proxy contest. More ›

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Chancery Discusses Standards for Reasonable Fees in Making Fee Award for “Bad Faith” Litigation

Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. Sep. 18, 2020)

Under the American Rule, parties to lawsuits in Delaware generally are responsible for paying their own attorneys’ fees and costs incurred in the litigation. Parties can petition Delaware courts, however, to shift the fees when such a party can prove that its opponent pursued its claims in “bad faith.”  More ›

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Court of Chancery Dismisses Claim of Aiding and Abetting Against a Minority Stockholder

A claim for aiding and abetting a breach of fiduciary duty fails if a plaintiff cannot allege an underlying breach. In that circumstance there is no breach to aid and abet. Where a plaintiff sufficiently alleges a breach, however, it still also must allege, in non-conclusory terms, facts sufficient to show knowing participation in the alleged breach to state a claim for aiding and abetting. In Jacobs v. Meghi, C. A. No. 2019-1022-MTZ (Del. Ch. Oct. 8, 2020), the Court of Chancery parsed the allegations of plaintiff’s complaint to conclude that it had failed to allege “specific facts supporting an inference of knowing participation in a breach” (Id. at 1) and dismissed plaintiff’s complaint against the alleged aider and abettor. As explained below, the Court also denied plaintiff’s claim for unjust enrichment.   More ›

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CCLD Finds Insurer’s Advancement Obligation Triggered Prior to Final Non-Appealable Damages Judgment

Posted In Advancement, CCLD

Ferrellgas Partners L.P v. Zurich American Insurance Company, C.A. No. N19C-05-275 MMJ CCLD (Del. Super. Aug. 20, 2020)

The Superior Court of Delaware, Complex Commercial Litigation Division recently expanded on its advancement jurisprudence regarding litigation fees and costs due under director and officer insurance policies. The insured brought a declaratory judgment action against two insurers in a tower of coverage. Judge Mary M. Johnston declared, on summary judgment, that the insured was entitled to advancement of reasonable attorneys’ fees and costs from one of the insurers. More ›

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Chancery Awards No Damages to Either Party After the Break-Up of the Anthem/Cigna Merger

In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114- JTL (Del. Ch. August 31, 2020)

This action arose out of a failed merger transaction involving the second and third largest health insurers in the United States, Anthem, Inc. and Cigna Corporation (“the Merger”). The parties had entered into a merger agreement on July 23, 2015 (“Merger Agreement”). Either party could terminate if the transaction did not close by January 31, 2017, a date later extended to April 30, 2017. The parties each agreed to covenants to cooperate and to use their best efforts to accomplish the Merger (“Efforts Covenants”). Specifically, they agreed to take all reasonable steps to consummate the Merger (the “Reasonable Best Efforts Covenant”) and to take “any and all actions” necessary to avoid impediments to the Merger from government entities (the “Regulatory Efforts Covenant”). The parties authorized Anthem to take the lead in working with government entities to facilitate the Merger, but the parties were required to cooperate to obtain regulatory approval (the “Regulatory Cooperation Covenant”). The parties’ obligations to close the Merger were subject to the condition that no governmental entity or court had acted to enjoin the consummation of the Merger (the “No Injunction Condition”).  More ›

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Superior Court Reinforces Established Delaware Insurance Coverage Law that Settlement of a Claim for Less than Policy Limits Attaches to Excess Policies

Pfizer, Inc. v. U.S. Specialty Insurance Company, C.A. No. N18C-01-310 PRW CCLD (Del. Super. Aug. 28, 2020)
On cross-motions for summary judgment in a director and officer insurance coverage dispute, the Superior Court of Delaware, Complex Commercial Litigation Division, reaffirmed the Delaware principle, also known as a the Stargatt Rule, that a settlement of a policy between an insured and an insurer for less than the policy limit amounts to satisfaction of such policy. Thus, excess policies attach irrespective of whether the insured collected the full amount of the primary policies.  More ›

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Chancery Upholds Class Claims Alleging Breaches of Fiduciary Duty in Alleged Controlling Stockholder’s Tender Offer

In re Coty Inc. Stockholder Litigation, C.A. No. 2019-0336-AGB (Del. Ch. Aug. 17, 2020)  

JAB Holding Company S.à.r.l. and its affiliates (together “JAB”) completed a partial tender offer (the “Tender Offer”) for shares of Coty Inc. (“Coty”) on April 25, 2019, increasing its ownership stake from 40% to 60% of the outstanding Coty shares. At the time of the Tender Offer, Coty had a nine-member board of directors – four directors affiliated with JAB (the “JAB Directors”) and five individual directors (the “Individual Directors”). Pierre Laubies, the CEO of Coty, was one of the Individual Directors. Although Laubies was the only Individual Director with a management position at Coty, he, like all of the Individual Directors, had professional ties to JAB and its officers, with Laubies having formerly served as CEO of a JAB affiliate.  More ›

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Alleged Third-Party Beneficiary’s Contract and Alternate Unjust Enrichment Claims Survive Dismissal at the Pleadings Stage Based on Ambiguous Contract Language

CHS/Cmty. Health Sys., Inc. v. Steward Health Care Sys. LLC, C.A. No. 2019-0165-JRS (Del. Ch. Aug. 21, 2020)

A claim for unjust enrichment will not lie where there is a contract that governs the relationship between parties. Both types of claims may survive a motion to dismiss, however, if there exists a contractual ambiguity that prevents the Court of Chancery from interpreting the meaning of contract at the pleadings stage. More ›

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Chancery Addresses Statutes of Limitations Issues Arising Out Employment-Related Claims

Weik, Nitsche & Dougherty, LLC, v. Pratcher, C.A. No. 2018-0803-MTZ (Del. Ch. Aug. 26, 2020)

Following an employment dispute between former employers and employees of a Delaware limited liability company, the employers (“Plaintiffs”) filed an action in the Delaware Court of Chancery seeking rescission of a contract recently executed by the parties. The contract at issue governed the percentage of fees to which the employees (“Defendants”) were entitled for any business the employees originated for the LLC. According to Plaintiffs, Defendants breached the contract by engaging in “self-marketing campaigns” through which Defendants failed to recognize any affiliation with the LLC and which caused a disparity in the amount of fees each party believed Defendants were entitled to.  In a series of counterclaims, Defendants argued that Plaintiffs owed Defendants certain sums of money pursuant to the contractual relationship. Defendants asserted that Plaintiffs owed those sums based on the Defendants’ “expectancy in the contracts” which were lost after Plaintiffs purportedly breached the contract and forced Defendants to “resign and lose their expected profits from [the contract].” More ›

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Chancery Provides Guidance on Agency and Joint Venture Theories of Vicarious Liability

Otto Candies, LLC v. KPMG, LLP, C.A. No. 2018-0435-MTZ (Del. Ch. Aug. 21, 2020)

The Court of Chancery dismissed a complaint filed by creditors and former business affiliates of a defunct Latin American offshore oil service company for failing to establish, under agency or joint venture theories, a basis for finding KPMG US vicariously liable for audits performed by KPMG Mexico.  More ›

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