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Showing 8 posts from September 2021.

Chancery Shifts Fees, Finds That Defendant’s Litigation Tactics in Books and Records Case Crossed The Line Between Aggressive Litigation And Glaringly Egregious Conduct


Pettry, et al. v. Gilead Sciences, Inc., C.A. Nos. 2020-0132-KSJM; 2020-0138-KSJM; 2020-0155-KSJM; 2020-0173-KSJM (Del. Ch. July 22, 2021).
Delaware follows the American Rule: all litigants pay their own attorneys’ fees, no matter the outcome of the litigation. In rare cases where a litigant’s conduct is “glaringly egregious,” Delaware courts will make an exception and shift fees. This is known as the “bad faith” exception.
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Chancery Confirms Operation of Savings Statute and Tortious Interference Framework in Dispute Involving Fiduciaries with Competing Creditor Interests


Skye Mineral Invs., LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. July 28, 2021)
Delaware’s savings statute—10 Del. C. § 8118(a)—protects claims from being time-barred where they were timely brought in an incorrect forum. Here, the Court of Chancery applied the savings statute in the context of claims alleging that, in a course of conduct dating back to 2013, majority LLC members managed the company to protect their affiliate’s status as a senior secured creditor and drive the company into bankruptcy, all to eliminate the minority members’ interests. More ›

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Chancery Addresses Whether LLC Agreement Modified or Eliminated Fiduciary Duties


In Re Cadira Group Holdings, LLC Litigation, Consolidated C.A. No. 2018-0616-JRS (Del. Ch. July 12, 2021)
The Delaware Limited Liability Company Act provides that “the fiduciary duties of a member, manager, or other person that is a party to or bound by a limited liability company agreement may be expanded or restricted or eliminated by provisions in the limited liability company agreement.” Yet to eliminate fiduciary duties, Delaware law requires that the intent to do so must be “plain and unambiguous.” More ›

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Chancery Upholds Well-Pled Claims Relating to Former Fiduciaries’ Retention of Derivative Arbitration Award


Optimiscorp v. Atkins, C.A. No. 2020-0183-MTZ (Del. Ch. July 15, 2021)
In Optimiscorp, the Court upheld claims against former directors and officers of plaintiff Optimiscorp arising out of the defendants’ failure to turn over to the company an approximately $7 million derivative arbitration award. As part of a long-standing and acrimonious legal battle between warring factions of the company’s board of directors, defendants previously had brought a lawsuit in Delaware on behalf of the company asserting that the company’s sitting directors and former outside counsel had breached their fiduciary duties and engaged in legal malpractice. Stipulating to dismissal of the Delaware complaint, the parties pursued the matter in arbitration and the arbitrator ultimately found the outside counsel liable, issued an award, and ordered the payment of attorneys’ fees and costs. The financially struggling company received notice of the award and proceeded to make strategic business decisions in expectation of receiving the funds. However, asserting that certain shareholders who were accused of wrongdoing were not entitled to a pro rata portion of the award, the defendants declined to turn the award over to the company. As a result, the company was forced to take out short-term loans with unfavorable terms and faced other negative consequences. More ›

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Court of Chancery Denies Lead Plaintiff’s Application for Incentive Fee from Overall Fee Award


Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. July 12, 2021)
Delaware courts generally do not award special compensation to lead plaintiffs in class action litigation. Delaware courts typically limit awards to out-of-pocket costs and expenses, unless lead plaintiffs take on extra—essentially, exceptional—burdens in the litigation. Submitting a modest award request does not necessarily portend success that an applicant will receive an award. More ›

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Chancery Finds Change in Product’s Medicare Reimbursement Rate Was Not A Material Adverse Effect Excusing Buyer From Closing

Posted In Chancery, MAEs


Bardy Diagnostics, Inc. v. Hill-Rom, Inc. C.A. No. 2021-0175-JRS (Del. Ch. Jul. 9, 2021)
Bardy manufactures a patch that measures heart rate. Its reimbursement rate for the patch had for years been set around $365 per patch. When Hill-Rom acquired Bardy in early January 2021, the parties understood that this reimbursement rate might change, and prior to closing had built an earnout provision into their merger agreement to address this risk. The parties also included a Material Adverse Effect clause, giving Hill-Rom the ability to walk from the deal for any development that could “reasonably be expected to have a material adverse effect on … the Business of [Bardy] taken as a whole.” Yet any industry-wide change in the industries or markets in which Bardy operated, or any change in any “Health Care Law” would not constitute an MAE, unless such development had a “materially disproportionate impact on [Bardy] as compared to other similarly situated companies ….” More ›

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Chancery Finds That the Standard of Review for the Conduct of a Shareholders’ Representative Turns Upon the Merger Agreement’s Language

Posted In Chancery, M&A


Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021)

A merger agreement between a subsidiary of Healthport Technologies, LLC and Universata, Inc., gave the owners of 72 percent of Universata’s stock (the “Owners”) the power to appoint a Shareholders’ Representative. Among other responsibilities, the Shareholders’ Representative was charged with “disbursing among the Shareholders the cash portion of the Purchase Price and any other payments paid to Shareholders under this Agreement.”  More ›

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