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Kuhu Parasrampuria

Attorney

Showing 21 posts by Kuhu Parasrampuria.

CCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims

Posted In CCLD, Fraud Claims, M&A

Infomedia Group, Inc. v. Orange Health Solutions Inc., C.A. No. N19C-10-212 AML CCLD (Del. Super. Ct. July 31, 2020)

This case is a strong reminder that Delaware will enforce anti-reliance clauses to bar claims for fraud where sophisticated parties voluntarily agree to the anti-reliance clauses. Here, plaintiff Infomedia Group, Inc., d/b/a Carenet Health Services entered into an asset purchase agreement (the “Purchase Agreement”) with defendant Orange Health Solutions, Inc. (“Citra”).  More ›

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Chancery Rejects Implied Covenant Claim for Failure to Prove that, Had the Issue Been Negotiated, Both Parties Would Have Agreed

Roundpoint Mortgage Servicing Corp. v. Freedom Mortgage Corp., C.A. No. 2020-0161-SG (Del. Ch. July 22, 2020)

To establish an implied contractual obligation pursuant to the implied covenant of good faith and fair dealing, a party must prove that, even though the contract does not state the term at issue, the parties would have agreed to it had they thought to negotiate it at the time of contracting. Here, the Court of Chancery post-trial denied an acquirer’s implied covenant claim even though the result arguably resulted in unfairness from a financial point of view to the acquirer. As illustrated by this case, unfairness alone to one party does not necessarily prove that both parties would have agreed to the implied term had they thought to negotiate about it. More ›

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Entire Fairness Standard Applies Where Controller Has Substantive Discussions with Minority Stockholders before Agreeing to MFW Protections

In re HomeFed Corporation Stockholder Litigation, C.A. 2019-0592-AGB (Del. Ch. July 13, 2020)
This case illustrates that the Court of Chancery will apply the entire fairness standard to review a squeeze-out merger by a controller, if the controller engages in substantive economic discussions before the company has enacted the procedural protections outlined in Kahn v. M & F Worldwide Corp, 88 A.3d 635 (Del. 2014) (“MFW”) that would permit business judgment review. In this case, Jefferies Financial Group Inc. (“Jefferies” or the “Controller”), which owned 70% of HomeFed Corporation (“HomeFed”), acquired the remaining shares of HomeFed in a share exchange in which each HomeFed minority shareholder received two Jefferies shares in exchange for one of its HomeFed shares (the “Transaction”). A HomeFed director originally proposed the 2:1 share exchange to Jefferies in September 2017, and Jefferies subsequently discussed the share exchange with HomeFed’s second largest shareholder Beck, Mack and Oliver, LLC (“BMO”). In December 2017, HomeFed’s board of directors (the “Board”) formed a special committee (the “Special Committee”) that had the exclusive power to evaluate and negotiate a potential transaction. When the parties were unable to agree to merger terms, the Special Committee “paused” its process in March 2018. Despite pausing the Special Committee, Jefferies continued to discuss a potential transaction with BMO for the next year.  More ›

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Chancery Values Non-Public Company with No Reliable Market-Based Data Using Discounted Cash Flow Analysis

Posted In Appraisal, Chancery

Kruse v. Synapse Wireless, Inc., C.A. No. 12392-VCS (Del. Ch. July 14, 2020)

This case illustrates how appraisal works outside of the public market context when a lack of data hinders a reliable valuation. Here, stockholder William Richard Kruse (“Kruse”) sought appraisal of his shares of SynapseWireless, Inc. (“Synapse”), a privately-owned corporation. McWane Inc. (“McWane”) acquired Synapse in two rounds of investments: McWane, first, acquired a controlling interest in 2012, and, then, acquired the remaining Synapse shares in 2016 in a cash-out merger (the “Merger”). As part of the 2012 transaction, McWane gained the right to purchase newly issued Synapse shares at a price set by the 2012 acquisition. Synapse had disappointing performance after the 2012 merger, posting less than half of the projected revenues used to calculate the 2012 merger price. To mitigate Synapse’s poor performance, McWane provided loans and purchased Synapse shares at the price set by the 2012 merger. For example, in 2014, McWane bought $31 million of shares at $4.99 per share to keep Synapse afloat, and to increase McWane’s ownership of Synapse to realize tax benefits. More ›

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CCLD Bars Tort Claims Overlapping with Contract Claims under Economic Loss Doctrine

GEA Sys. N. Am. LLC v. Golden State Foods Corp., C.A. No. N18C-11-242 EMD CCLD (Del. Super. Ct. June 8, 2020)

This case illustrates the extent to which the economic loss doctrine bars tort claims arising out of the same transaction as claims for breach of contract. In this case, plaintiff GEA Systems North America LLC (“GEA”) sold defendant Golden State Food Corp. (“Golden State”) three industrial freezers for use in Golden State’s hamburger patty facility. Golden State argued, among other things, that the freezers did not meet the production figures that GEA promised and GEA failed properly to install or repair the freezers. For this alleged misconduct, Golden State brought claims for negligence, fraudulent inducement, and intentional misrepresentation as well as for breach of contract. On a motion to dismiss, the Delaware Superior Court held that the economic loss doctrine barred the fraudulent inducement and intentional misrepresentations claims, but not the claims for negligence and gross negligence. More ›

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Chancery Finds Employment Agreement’s Forum Selection Clause Did Not Reach Fiduciary Duty Claims, But Stays Case Pending Resolution of First-Filed Texas Action

EnVen Energy Corp. v. Dunwoody, C.A. No. 2019-0579-KSJM (Del. Ch. May 28, 2020)

This case illustrates Delaware’s approach in interpreting contractual forum selection provisions and in considering whether to stay a later-filed action under the well-known McWane doctrine. More ›

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Chancery Dismisses Claims that Minority Stockholders who Rolled Over Equity in a Controlling Stockholder Merger Joined a “Control Group”

Gilbert v. Perlman, C.A. No. 2018-0453-SG (Del. Ch. Apr. 29, 2020)

Delaware law imposes fiduciary duties upon controlling stockholders who use their power to control the corporate machinery. For that reason, determining who comprises a control group affects who may owe fiduciary duties. In some circumstances, where minority stockholders pool their interests to gain majority control and then bind themselves to act together to effectuate a transaction, minority stockholders may take on the duties of a controlling stockholder as members of a control group. But where an already existing controlling stockholder effectuates a cash-out merger, minority stockholders who roll over their shares and enter into a voting agreement to support the transaction will not be deemed part of a control group unless a plaintiff can plead that “the minority-holder’s participation [was] material to the controller’s scheme to exercise control of the entity, leading to the controller ceding some of its control power to the minority-holders.” More ›

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Chancery Defers to Liquidating Trustee in Approving a Sale of LLC Assets

Acela Invs. LLC v. DiFalco, C.A. No. 2018-0558-AGB (Del. Ch. Apr. 27, 2020).  

This case affirms that, absent an abuse of discretion, the Court of Chancery will defer to a sale agreement proffered and negotiated by a Court-appointed liquidating trustee. In this case, the Court had appointed the liquidating trustee (the “Trustee”) after granting judicial dissolution of a Delaware LLC due to member deadlock. At the last minute, and following a six-month sale process, a bidder that was owned by two of the LLC’s members made an offer that the Trustee rejected as untimely and inadequate. The bidder challenged the Trustee’s judgment in rejecting its bid. The Court upheld the Trustee’s decision to reject the bid, finding no evidence of an abuse of discretion.   More ›

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Chancery Finds Tortious Interference By Financial Industry Competitor and Addresses the Requirements for Obtaining Permanent Injunctive Relief

Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. 2019-0169-SG (Del. Ch. April 9, 2020). 

This case illustrates the type of competitive conduct that will qualify as tortious interference with business relationships while demonstrating that permanent injunctive relief is unavailable absent a likelihood of future irreparable harm.  More ›

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LLC May Not Reverse Decision to Enter into Contractual Call Option Buyout Process with Members

Walsh v. White House Post Productions, LLC, C.A. No. 2019-0419-KSJM (Del. Ch. Mar. 25, 2020).  

Parties to LLC agreements often provide for buyout provisions upon specified events, such as when a member ceases to be an employee. The provisions set forth a process by which the parties agree up front to a price to acquire the departing member’s interest. In this case, the Court prohibited an LLC from withdrawing from a contractually agreed-upon process to buy its members’ shares once the LLC initiated the process. More ›

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Delaware Supreme Court Finds Limited Liability Partnership Agreement Chose the “Aggregate Model” and Partner Withdrawal Caused Dissolution

United States v. Sanofi-Aventis U.S. LLC, No. 256, 2019 (Del. Mar. 17, 2020).  

In this case, the Delaware Supreme Court answered three certified questions from the United States Third Circuit Court of Appeals concerning the effect of a partner’s withdrawal from a Delaware limited liability partnership formed to prosecute a qui tam action. The Court ruled that unambiguous language in the Partnership Agreement opting out of the “entity model” of partnership provided in the Delaware Revised Uniform Partnership Act meant that the partner’s withdrawal dissolved the partnership (Question 1). The Court also held that the entity that was continuing litigation through an amended complaint after the partner’s withdrawal was a new and different partnership (Question 2). Moreover, because the old entity dissolved at such an early point in the litigation, and because the partners had formed it solely to prosecute the litigation, the old partnership could not continue the litigation because to do so was inconsistent with the agreement’s requirements for a prompt liquidation (Question 3).  More ›

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Chancery Allows Fiduciary Duty Claims to Proceed against Minority Members Who Blocked Financings in Order to Bankrupt Company and Facilitate Unfair Asset Purchase

Skye Mineral Investors, LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. Feb. 24, 2020) (Slights, V.C.).

Where parties to an LLC agreement do not unambiguously disclaim fiduciary duties, then Delaware law provides by default that managers owe traditional fiduciary duties to the entity and its members. The corporate law principles relating to fiduciary duties of controlling shareholders also apply, including that a minority member who exercises actual control may owe fiduciary duties. In this decision, the Court held that plaintiffs, the majority members of an LLC, adequately alleged that minority members exercised contractual blocking rights in a manner that gave them actual control over financing decisions and then used that control to implement in bad faith a scheme to enable the minority members to acquire the LLC’s assets on the cheap. With those allegations, the Court sustained a non-exculpated claim against the minority members for direct and derivative contract- and fiduciary-based claims. More ›

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Court of Chancery Finds the Delaware Uniform Fraudulent Transfer Act Grants Standing for Insureds with Contingent, Unmatured Claims to Sue Insurers, but Dismisses Certain Claims as Time-Barred

Burkhart v. Genworth Fin. Inc., C.A. No. 2018-0691-JRS (Del. Ch. Jan. 31, 2020). 

This case illustrates not only that plaintiffs who have only unmatured and contingent claims against a transferor have standing to seek relief under the Delaware Uniform Fraudulent Transfer Act (“DUFTA”), but also that they must comply with that statute’s rules for timely filing to avoid dismissal. Here, the plaintiffs are a class of insureds who hold long-term care insurance policies and insurance agents who receive commission payments from selling the insurance policies. The defendant is Genworth Life Insurance Company (“GLIC”), which underwrote the insurance policies at issue. GLIC allegedly made fraudulent transfers between 2012 and 2014 while GLIC was near insolvency by: (1) declaring $410 million in dividends, and (2) terminating intra-company contracts that provided financial support. The plaintiffs filed an action in 2018 in which they argue that GLIC’s fraudulent transfers violate the DUFTA.  More ›

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Appraisal of Panera Bread: Court of Chancery Again Defers to Deal Price, Denies Request for a Refund of the Amount of Synergies

Posted In Appraisal, M&A

In re Appraisal of Panera Bread Co., C.A. No. 2017-0593-MTZ (Del. Ch. Jan. 31, 2020).

JAB Holdings B.V. (“JAB”), a private company that also owns Einstein Bros., Caribou Coffee and Krispy Kreme, acquired Panera Bread Company (“Panera”) via a cash-out merger for $315.00 per share on July 18, 2017. Multiple dissenting shareholders (the “Petitioners”) filed an appraisal action, asserting that the fair value of their shares was $361.00 per share. Post-trial, the Court of Chancery disagreed with the Petitioners, ruling that the deal price minus synergies was the best evidence of fair value. This was because Panera had followed a reliable sale process and any flaws in that process did not undermine its reliability. Specifically, the Court held that, among other factors, the parties’ arm’s length negotiations, Panera’s disinterested and independent board, price increases during negotiations, the fact that no other parties bid on Panera either before or after the announcement of the merger, and the outreach that Panera did with potential buyers provided persuasive evidence of a reliable sale process. More ›

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Supreme Court Affirms Dismissal of Uber Derivative Action for Failure to Plead Demand Futility

Mcelrath v. Kalanick, No. 181-2019 (Del. Jan. 13, 2020). 

This case exemplifies the Delaware courts’ approach to examining demand futility. In 2016, Uber Technologies, Inc. (“Uber”) acquired Ottomotto LLC (“Otto”), a company started by a contingent of employees from Google’s autonomous vehicles group, in order for Uber to gain expertise in developing autonomous vehicles. The shareholder-plaintiff brought a claim, on behalf of Uber, against some of Uber’s directors. The plaintiff alleged that Uber’s directors ignored the risks presented by Otto’s alleged theft of Google’s intellectual property, which eventually led to Uber paying a settlement of $245 million to Google and terminating its employment agreement with Otto’s founder. More ›

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kparasrampuria@morrisjames.com
T 302.888.6812
Kuhu Parasrampuria is an attorney in the Corporate and Commercial Litigation Practice Group. She focuses her practice on counseling and litigation involving corporations and other …
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