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Showing 10 posts from July 2021.

Superior Court Upholds Claims that Entities Transferred Funds in Violation of Agreements with Creditor


CIBC Bank USA v. JH Portfolio Debt Equities, LLC, C.A. No. N18C-07-130 EMD CCLD (Del. Super. June 2, 2021)

Plaintiff CIBC Bank USA (“CIBC”) entered into a credit agreement with a group of borrowers to provide them with a revolving line of credit that was secured via a security agreement, which granted CIBC a priority interest in certain collateral. Under the security agreement, the borrowers agreed not to take any actions that would materially impair the collateral, or to permit any of their subsidiaries to amend their organizational documents to adversely affect the interests of CIBC. CIBC also entered into acknowledgment agreements with the borrowers’ joint venture partners, under which those partners agreed not to amend their own agreements with the borrowers without CIBC’s consent. More ›

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Chancery Finds that Deal-Price-Less-Synergies was Best Indicator of Fair Value in Statutory Appraisal of Public Company

Posted In Appraisal, Chancery


In re Appraisal of Regal Entertainment Grp., C.A. No. 2018-0266-JTL (Del. Ch. May 13, 2021)

Recent Delaware appraisal cases have found that reliable market indicators present the best evidence of a corporation’s “fair value.” Where the deal price itself provides the best evidence, the Court will deduct from the deal price any synergies paid to the sellers. Changes in value between signing and the closing date of the merger may also be taken into account. This decision applies these principles in determining the “fair value” payable to certain stockholders of Regal Entertainment Group, a public company, following its 2018 sale to Cineworld Group, a strategic acquirer, for $23 per share. More ›

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Clean-Up Doctrine to Adjudicate Legal Claims in Chancery May Take Precedence Over Request for Jury Trial


Firststring Research, Inc. v. JSS Medical Research Inc., C.A. No. 2020-0332-KSJM (Del. Ch. May 28, 2021)

Delaware has not merged its courts of law and equity, which may have implications for a litigant seeking a jury trial. When a counterclaim-plaintiff seeks a jury trial for a claim otherwise within the subject-matter jurisdiction of the Court of Chancery, application of the clean-up doctrine might justify retaining the counterclaims in Chancery and forgoing jury-trial rights. More ›

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Chancery Reasons That Board’s Decision To Address Alleged “Red Flags” Related To Pending Litigation, After Litigation Is Resolved, Is Not Bad Faith For Caremark Purposes


Pettry v. Smith et al., C.A. No. 2019-0796-JRS (Del. Ch. June 28, 2021)

As discussed in Caremark and its progeny, fiduciary duties require directors to monitor the business and affairs of a corporation. Here, the Court of Chancery addressed the issue of oversight liability in the context of a Board’s decision, despite “red flags,” to delay certain additional remedial actions pending resolution of directly related litigation. More ›

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Superior Court Examines Choice of Law Principles For Mixed Contractual and Non-Contractual Claims


Arkray America, Inc. v. Navigator Business Solutions, Inc., C.A. No. N20C-12-012 MMJ [CCLD] (Del. Super. June 9, 2021)
Arkray, a Delaware corporation based in Minnesota, manufactures diabetes testing and management supplies. Arkray brought claims against Navigator, a provider of Enterprise Resource Planning software solutions based in Utah, and N’Ware, a provider of custom “add-on” software for warehouse management based in New Hampshire. Arkray had contracted with Navigator under a software and consulting services agreement (the “Agreement”), which provided that it “shall be governed by and construed under the laws of the State of Utah without reference to its conflicts of law principles.” Arkray contracted with N’Ware under a similar “License Agreement,” which provided that it “shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America, without reference to its conflicts of laws principles.”  More ›

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Chancery Rejects Plaintiff’s Attempt to Recharacterize Pre-Suit Demands


The Raj & Sonal Abhyanker Fam. Tr. v. Blake, C.A. No. 2020-0521-KSJM (June 17, 2021)
Court of Chancery Rule 23.1 presents a would-be derivative plaintiff with two exclusive options: make a pre-suit demand on the board to bring the claims at issue, or bring the claims and plead demand futility. A stockholder who elects to make a demand on the board may challenge whether the board wrongly refused the demand, but the stockholder cannot later bring suit and allege demand futility. And, as this case shows, the Court of Chancery will scrutinize a stockholder’s attempt to circumvent this restriction. More ›

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Delaware Supreme Court Explains Delaware’s Intermediate Forum Non Conveniens Standard Under Gramercy


GXP Capital, LLC v. Argonaut Manufacturing Services, Inc. et al
., Nos. 247, 2020 and 248, 2020 (Del. May, 20, 2021)
Delaware has three standards for forum non conveniens motions. The two more commonly addressed are Cryo-Maid, which favors first-filed Delaware actions, and McWane, which favors first-filed litigation pending elsewhere. The third standard, Gramercy, consists of neutrally balancing the well-established forum non conveniens factors as between a later-filed Delaware action and another available forum. This decision clarifies Gramercy in the context of a Delaware action stayed in favor of an available alternate jurisdiction where no action was yet pending. More ›

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Chancery Dismisses Simultaneously-Filed Delaware Action in Favor of New Jersey Action


Sweeney v. RPD Holdgs. Grp., LLC, C.A. No. 2020-0813-SG (Del. Ch. May 27, 2021)
Delaware’s forum non conveniens jurisprudence typically turns on when parties file competing actions. Under Cryo-Maid’s “overwhelming hardship” standard, a defendant seeking to stay a first-filed Delaware action in favor of litigation elsewhere must show that the six so-called Cryo-Maid factors tip overwhelmingly in the defendant’s favor. By contrast, under McWane’s less onerous discretionary standard, a defendant seeking to stay a later-filed Delaware action often succeeds if the defendant can point to foreign litigation between the same parties in a forum that can do prompt and complete justice. More ›

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Board Approval of Stock Sale for Purpose of Interfering with Stockholder Voting Rights Must Have a Compelling Justification


Coster v. UIP Companies, Inc., No. 49, 2020, --- A.3d ---- (Del. June 28, 2021) (Seitz, C.J.)
The Delaware Supreme Court has recognized that the stockholder franchise is the “ideological underpinning upon which the legitimacy of the directors managerial power rests.” A proper balance between the stockholders’ right to elect directors and the board’s right to manage the company is dependent on the stockholders’ unimpeded right to vote in an election of directors. Accordingly, Delaware courts carefully scrutinize board actions that are designed for the primary purpose of interfering with or impeding the effective exercise of a stockholder vote, especially board actions designed to dilute an insurgent stockholder’s vote in an election of directors.  More ›

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Chancery Upholds Fiduciary Duty Claims Arising Out Of Deal Involving an Alleged Control Group That Included Non-Stockholders and a Sale Process Managed By a Disinterested and Independent Special Committee


In re Pattern Energy Grp. Inc. Stockholders Litig., C.A. No. 2020-0357-MTZ (Del. Ch. May 6, 2021)
This decision mostly denying a motion to dismiss examines several important issues in post-closing M&A fiduciary duty litigation relevant to stating a claim and overcoming an otherwise claim-cleansing stockholder vote under the Corwin doctrine. These include what it takes to adequately plead the existence of a control group, a fraud-on-the-board theory, a bad faith breach of fiduciary duty by admittedly disinterested and independent directors charged with managing a sale process and overseeing potential conflicts, and claims against individual officers. Core to the plaintiff’s well-pled complaint in this action were allegations that the committee and certain officers favored a buyer preferred by a private equity fund, which, among other things, formed the company, controlled its upstream supplier, and held significant contractual consent rights.  More ›

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