Showing 7 posts from August 2022.
Twin Willows, LLC v. Pritzkur, C.A. No. 2020-0199-PWG (Del. Ch. Feb. 28, 2022)
This decision involved a Master in Chancery applying well-settled rules on the attorney-client privilege, common interest, and work product doctrines. Respondent Pritzkur was appointed to serve as partition trustee for owners and tasked with selling the property. Pritzkur negotiated a sale agreement that was ultimately assigned to Petitioner Twin Willows. The agreement was not fully performed, and Twin Willows moved to compel production of communications between Pritzkur and the owners. Pritzkur asserted both common interest privilege and attorney work product. More ›
Chancery Finds it Lacks Discretion to Decline Jurisdiction Over a Case Where Jurisdiction Exists Under Section 111 of the DGCL
S’holders Rep. Serv. LLC v. DC Capital Partners Fund II, L.P., C.A. No. 2021-0465-KSJM (Del. Ch. Feb. 14, 2022)
While the Court of Chancery has exclusive subject matter jurisdiction over claims and remedies sounding in equity, Section 111 of the DGCL grants the Court concurrent, non-exclusive jurisdiction in cases involving the interpretation of certain corporate instruments—regardless of whether those claims or the relief sought are equitable in nature. In DC Capital Partners, the plaintiff elected to bring legal (rather than equitable) claims involving the interpretation of stock purchase agreements in the Court of Chancery pursuant to Section 111’s concurrent subject matter jurisdiction. The defendants argued that because the claims did not otherwise fall within the Court’s subject matter jurisdiction, and because Section 111 provides for concurrent rather than exclusive jurisdiction, the Court had the discretion to decline to hear the case. Specifically, the defendants noted that Section 111 provides that certain claims “may” be brought in the Court of Chancery and argued that this permissive language provided the Court with the discretion not to hear such claims. The Court rejected the defendants’ contention, finding that the discretion to bring a claim in the Court of Chancery pursuant to Section 111 belongs to the plaintiff, not the Court. Therefore, the Court held that once a plaintiff elects to bring a claim in Chancery authorized under Section 111, the Court lacks the discretion to decline to hear the case based on subject matter jurisdiction.
Huret v. Mondobrain, Inc., C.A. No. 2021-0208-SG (Del. Ch. Apr. 27, 2022)
Under Section 145(c) of the DGCL, a director that has been successful on the merits or otherwise in defending a covered proceeding is entitled to indemnification. When determining success, Delaware law asks whether the indemnitee has avoided an adverse result, and generally does not look behind that result. Here, the plaintiff sought indemnification for derivative claims resolved by a settlement agreement, which also resolved claims brought by the plaintiff in French litigation. The Court examined the settlement agreement as a whole and found the plaintiff was not successful in the derivative action against him, and thus not entitled to indemnification. In settling the outstanding claims, the plaintiff did not admit guilt or make any settlement payment. However, he agreed to resign from the board, which was relief the stockholder originally sought, and he also agreed to release his own claims for money damages, which were in excess of the money damages sought for the derivative claims against him.
Zhou v. Deng, C.A. No. 2021-0026-JRS (Del. Ch. Apr. 6, 2022)
When deciding a summary proceeding regarding a disputed corporate office under Section 225 of the DGCL, the Court of Chancery may consider whether an election, appointment, or removal was tainted by fraud, deceit, or breach of contract. This decision involves the Court considering such defenses to the defendants’ removal and replacement as directors. Here, the Court declined to invalidate the challenged written consents based on allegations of breaches of fiduciary duty, breaches of contract, and fraud. The Court, for instance, rejected the breach of contract defense concerning stock purchases because the breach was already remedied in another action by an award of damages and the sale contract had not been rescinded.
Chancery Denies Petition to Appoint Custodian to Revive Abandoned Delaware Corporation for Use as Blank Check Company
In re Forum Mobile, C.A. No. 2020-0346-JTL (Del. Ch. Feb. 3, 2022)
In Forum Mobile, the Court of Chancery denied a petition to appoint a custodian pursuant to DGCL Section 226(a)(3). The petitioner sought to revive an abandoned and defunct Delaware corporation for use as a blank check company. Specifically, the petitioner sought to effectuate a reverse merger of the defunct company with a new business, allowing the new business to access public markets without implementing the formal IPO process. Holding that “the plain language of Section 226(b) does not contemplate that a custodian appointed under Section 226(a)(3) could revivify a corporation,” the Court denied the petition, reasoning that custodians appointed pursuant to Section 226(a)(3) are limited to “liquidating the affairs of the abandoned corporation and distributing its assets.” More ›
In re Straight Path Communications Inc. Consol. Stockholder Litig., C.A. No. 2017-0486-SG (Del. Ch. Feb. 17, 2022)
This summary judgment decision arose out of a transaction involving the company Straight Path. Straight Path’s controller had sold company assets to another company controlled by his family, IDT, for an allegedly inadequate price. One of the assets was an indemnification claim against IDT, which used to be Straight Path’s parent company, for indemnification rights arising following Straight Path’s spin-off. Straight Path thereafter was sold to Verizon, eliminating derivative standing for the company’s stockholders to challenge derivatively the asset sale to IDT. Straight Path’s controller allegedly leveraged his control to wrest that indemnification claim from the company’s stockholders prior to the Verizon transaction. Stockholders brought direct claims against the family members and an affiliated trust in this action. Their claims previously survived dismissal, and in this decision their claims survived summary judgment. More ›
Zaslansky v. FZ Holdings, C.A. No. 2021-0168-KSJM (Del. Ch. Feb. 8, 2022)
This order denying a motion to dismiss addresses the circumstances in which the Court of Chancery may appoint a receiver for an allegedly insolvent corporation under 8 Del. C. § 291. In determining whether to grant a petition to appoint a receiver for an insolvent corporation, the Court must determine whether the corporation is insolvent and whether the appointment of a neutral third party is necessary to protect the insolvent corporation’s creditors or shareholders. Here, the company had negative income, the petitioners alleged that the company commingled personal debt with company debt, and that the company selectively repaid some allegedly affiliated creditors without paying others, all making it reasonably conceivable that the facts may support a receiver appointment.