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Showing 37 posts from 2021.

Chancery Sustains Claims Against Target’s CEO, Target’s Financial Advisor, and Acquirer for Allegedly Covertly Steering Merger Bidding Process

Firefighters’ Pension System of The City of Kansas City, Missouri Trust v. Presidio, Inc., C.A. No. 2019-0839-JTL (Del. Ch. Jan. 29, 2021)

Presidio illustrates potential pitfalls for parties in the M&A process, including executives managing personal interests in potential post-transaction employment while negotiating a deal, financial advisors with future business interests in mind while controlling competitive offer information, and acquirers potentially aware of a bidding process being steered in their direction. More ›

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Delaware Supreme Court Concludes Out-of-Pocket Damages Are the Default Remedy for Fraudulent Misrepresentation Absent an Enforceable Agreement

LCT Capital, LLC v. NGL Energy Partners, LLP, App. Nos. 565,2019 & 568,2019 (Del. Jan. 28, 2021)

Delaware law recognizes both benefit-of-the-bargain damages and out-of-pocket damages as remedies for fraudulent misrepresentation, but the law was unsettled whether benefit-of-the-bargain damages were available absent an enforceable agreement. Here, the Delaware Supreme Court confirms that out-of-pocket damages are the default remedy in the absence of an agreement. More ›

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Chancery Construes Notice Provisions Associated With Escrowed Funds Under an Asset Purchase Agreement

Posted In Chancery, Escrow, M&A

Schillinger Genetics, Inc. v. Benson Hill Seeds, Inc., C.A. No. 2020-0260-MTZ (Del. Ch. Feb. 1, 2021)

Delaware courts will apply the plain terms of an unambiguous asset purchase agreement (“APA”), including its provisions governing notices and the release of escrowed funds. More ›

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Superior Court Applies Affiliate Privilege Doctrine To Dismiss Tortious Interference Claim Against Controller, While Sustaining Fraud Claims Against LLC Managers

Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, C.A. No. N19C-11-092 PRW CCLD (Del. Super. Jan. 13, 2021)

In adjudicating a dispute over a scuttled deal in the music festival industry, the Delaware Superior Court applied the so-called affiliate privilege doctrine, which can immunize a controller from tort liability for its affiliates’ contractual breaches, and addressed the viability of fraud claims against individual managers of certain LLCs. More ›

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Delaware Corporate and Commercial Case Law Year in Review: 2020

This top ten list summarizes significant decisions of the Delaware Supreme Court and the Delaware Court of Chancery over the past calendar year. Our criteria for selection are that the decision either meaningfully changed Delaware law or provided clarity or guidance on issues relevant to corporate and commercial litigation in Delaware. We present the decisions in no particular order. The list does not include every significant decision, but provides practitioners with an array of decisions on varied issues likely to affect business transactions or business litigation. More ›

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Party Uniquely Escapes An Arbitration Provision, While The Court Reminds Us That Bootstrapped Fraud Claims Are Impermissible In Delaware

Posted In Arbitration, CCLD, Fraud, M&A

AluminumSource, LLC v. LLFlex, LLC, C.A. No: N18C-07-231-EMD CCLD (Del. Super. Jan. 21, 2021)

Delaware courts commonly enforce (and support) arbitration provisions, submitting disputes under the governing contract to a third-party neutral. Equally common is the dismissal by Delaware courts of fraud claims “bootstrapped” to a breach of contract based on allegations that a contracting party never intended to perform its obligations. This recent decision from the Superior Court’s Complex Commercial Litigation Division is the unique case where, on the first issue, an arbitration provision was found unenforceable due to impossibility of performance. On the second issue, this case confirms settled law that bootstrapped fraud claims are impermissible in Delaware. More ›

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Delaware Supreme Court Adopts Post-Merger Derivative Standing Framework From In re Primedia, Inc. Shareholders Litigation

Morris v. Spectra Energy Partners (DE) GP, LP, No. 489, 2019 (Del. Jan. 22, 2021)

In Delaware corporate law, “the standing inquiry has assumed special significance,” especially in the post-merger context. The Delaware Supreme Court in Morris v. Spectra Energy holds that a plaintiff has post-merger standing if she brings a claim disputing the fairness of a merger and satisfies the three-part framework set forth in In re Primedia, Inc. Shareholders Litigation, 67 A.3d 455 (Del. Ch. 2013), even if the underlying claim seems unlikely to succeed on the merits. More ›

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Delaware Choice of Law Provision in Stock Purchase Agreement Does Not Eliminate Claim for Fraud under California Securities Act

Swipe Acquisition Corp. v. Krauss, C.A. No. 2019-0509-PAF (Del. Ch. Jan. 28, 2021)

This decision concerned a motion to dismiss a claim for fraud under the California Securities Act, which the defendants argued was waived by a choice of law provision in the parties’ stock purchase agreement (“SPA”) indicating that “all claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement … shall be governed by, and enforced in accordance with, the internal laws of the State of Delaware, including its statutes of limitations.” More ›

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Director to Attend Board Meeting Under False Pretenses to Meet Quorum Requirements Invalidated Board Action

Delaware courts will use their equitable powers to invalidate otherwise valid board actions tainted by inequitable deception. Where a director is “‘tricked or deceived into attending a board meeting … the general rule is that actions taken at such a meeting are void.’” Delaware law requires that directors be truthful and candid in their interactions with their fellow directors, and does not permit inequitable sandbagging by fellow board fiduciaries. In short, even if the board action is legally authorized under a company’s organizational documents, deceiving fellow directors to procure their attendance at a board meeting under false pretenses, may be grounds for invalidating board actions taken at that meeting under equitable principles. More ›

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Chancery Dismisses Stockholder’s Claim that Directors Provided Materially-Deficient Notice of their Intent to Use Equity Bonus Plan to Reward Past Performance

Pascal v. Czerwinski, C.A. No. 2020-0320-SG (Del. Ch. Dec. 16, 2020)

This decision concerned a motion to dismiss a stockholder’s direct claim that Director-Defendants breached their duties by providing a materially-deficient proxy statement advocating adoption of an equity incentive plan (“EIP”) that ultimately allowed Defendants to award themselves bonuses. As a result of the alleged deficiencies, Plaintiffs sought invalidation of the entire EIP. More ›

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Chancery Modifies Confidentiality Order to Permit Assertion of Plenary Claims in Appraisal Action

Harris v. Harris FRC Corp., C.A. No. 2019-0736-JTL (Del. Ch. Jan. 7, 2021)
Under Rule 5.1, the Court of Chancery may enter a confidentiality order upon a showing of good cause that such an order is necessary to protect against disclosure of sensitive, non-public information. But Rule 5.1 does not set an express standard for later modification of the order. In this case, the Court of Chancery clarified that the standard for modifying a confidentiality order is the same as for entering one: good cause shown, taking into account related factors including the parties’ reliance on the existing order and the potential prejudice from modification. More ›

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Plaintiff’s Failure to Plead Demand Futility Leads to Dismissal of Caremark Claims Against MoneyGram Directors

Richardson v. Clark, C.A. No. 2019-1015-SG (Del. Ch. Dec. 31, 2020)
Under Court of Chancery Rule 23.1, a derivative plaintiff’s must make a demand on the corporation’s board of directors unless the plaintiff can plead particular facts to establish that demand was excused. Although demand may be excused where a majority of the board faces a substantial likelihood of personal liability, merely alleging wrongdoing by the corporation’s directors will not suffice. More ›

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Chancery Finds That Delaware’s Trade Secrets Statute Preempts Unjust Enrichment Claim for Same Alleged Misconduct

250ok, Inc. v. Message Sys., Inc., C.A. No. 2020-0588-JRS (Del. Ch. Jan. 22, 2021)

This decision clarifies the scope of preemption of common law claims under the Delaware Uniform Trade Secret Act (“DUTSA”). Plaintiff asserted both a claim under the DUTSA and a claim for unjust enrichment, where both claims arose from the same alleged misconduct. The Court of Chancery concluded that a trade secret claim under the DUTSA “occupies the field” and preempts a claim for common law unjust enrichment. Applying Delaware precedent on the issue, the Court explained that preemption applies not just to tort-based claims, but to any “alternative common law claims.” And, as previous decisions have held, preemption applies at the dismissal stage even though the Court may later find that the DUTSA does not protect the information at issue. Accordingly, the Court of Chancery dismissed the unjust enrichment claim.

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Chancery Orders Production of Privileged Emails Transmitted Using Third-Party Accounts

In re WeWork Litigation, Consol. C.A. No. 2020-0258-AGB (Del. Ch. Dec. 22, 2020)

This Court of Chancery discovery ruling illustrates the risks associated with directors and officers using non-company email accounts to communicate about company business, particularly as it relates to confidentiality and the attorney-client privilege. More ›

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Chancery Addresses Standing Defense And Control Allegations In Abandoned Tender Offer Dispute

In re WeWork Litig., C.A. No. 2020-0258-AGB (Del. Ch. Dec. 14, 2020)

This decision is the companion to another dismissal opinion in same case of the same date and arising out of the same abandoned multi-step tender offer transaction between WeCompany (“WeWork” or the “Company”) and SoftBank Group Corp. and Vision Fund (AIV M1) L.P. (together, “Softbank”). A summary of the companion opinion is available hereMore ›

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