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Albert J. Carroll

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Showing 400 posts by Albert J. Carroll.

Chancery Declines to Dismiss Narrow Claims Relating to Entity’s Dissolution In Favor of Pending Related Action


Hawkins v. Daniel, C.A. No. 2021-0453-JTL (Del. Ch. Aug. 24, 2021)
The Delaware courts utilize several doctrines to address motions to dismiss or stay in favor of related litigation, including McWane and Cryo-Maid, all of which turn on legal and practical considerations and the court’s discretion.  This decision illustrates the application of the well-established Cryo-Maid factors to a Delaware action alleging narrow claims related to an entity’s winding-up process where the parties were engaged in long-pending litigation elsewhere.  More ›

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Chancery Addresses Viability of Contractual Fraud Claims Allegedly Barred by Agreement’s Terms

Posted In Chancery, Fraud


Online Healthnow, Inc. v. CIP OCL Investments, LLC, C.A. No. 2020-0654-JRS (Del. Ch. Aug. 12, 2021)
Online Healthnow concerns “contractual fraud claims,” meaning a statement made in the agreement itself that is known to be false by the party making the statement and on which the counterparty relies to its detriment. Under a prior Court of Chancery decision in ABRY Partners V, L.P. v. F&W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006), a seller cannot contractually eliminate its liability for engaging in knowing contractual fraud through provisions regarding anti-reliance and knowledge, and cannot rely on contractual caps for indemnity to limit the recovery for contractual fraud. This decision addressed the sellers’ unsuccessful attempt to limit the reach of ABRY Partners based on the relevant agreement’s survival clause purporting to terminate the challenged contractual representations at closing and the combination of anti-reliance and non-recourse provisions involving certain defendants. More ›

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Chancery Explains Standards of Review for Receiver Determinations and Shifts Fees and Expenses in Dissolution


In re Dissolution of Jeffco Management, LLC, C.A. No. 2018-0027-PAF (Del. Ch. Aug. 16, 2021)
When the Court of Chancery appoints a receiver to effectuate a company’s dissolution, certain determinations are subject to de novo review and others are given a more deferential review depending on the nature of each determination. Here, the Court appointed a receiver to effectuate the relevant LLC’s dissolution based on a deadlock between the two members. Upon review of the record, the receiver found that one of the members had a negative capital account balance and decided to distribute the company’s assets in-kind to the other member with a positive capital account balance. The member with the negative account balance challenged that decision based on various objections.  More ›

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Chancery Addresses Common Interest and Privilege Log Issues in Matter Involving Special Discovery Master


Buttonwood Tree Value Partner, L.P. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del Ch. Jul. 30, 2021)

With increasing frequency, the Court of Chancery is appointing Special Discovery Masters and Discovery Facilitators as discovery issues continue becoming more complex and time-intensive. With those appointments also comes the opportunity for litigants to challenge the findings of those Special Masters and Facilitators and force the Court’s de novo review. This is just such a case. More ›

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Chancery Finds LLC Managers Liable for Self-Dealing Scheme Depleting Nearly All Investment Capital


Stone & Paper Investors, LLC v. Blanch, C.A. No. 2018-0394-PAF (Del. Ch. July 30, 2021)
This post-trial opinion involves a particularly egregious set of facts. Two LLC managers were accused of breaching their contractual and fiduciary duties and of fraudulently inducing the plaintiff, Stone & Paper, to invest $3.5 million in the company, Clovis Holdings, in connection with a series of self-dealing transactions wherein the managers paid themselves large sums of money in the form of salary and purported “loans” without receiving the required approvals for interested transactions.  More ›

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Chancery Dismisses Claims Relating to Proposed Financing of Italian Soccer Club

Posted In Chancery, LLCs


Feldman v. AS Roma SPV GP, LLC, C.A. No. 2020-0314-PAF (Del. Ch. July 22, 2021)
In Feldman, plaintiffs were minority members of a Delaware limited liability company that held a controlling interest in a premier Italian soccer club. The LLC’s managing member and its controllers and associated entities sought to exit their control investment in the club. A sales process stalled during the coronavirus pandemic. The controllers called for additional capital from existing members on a pro rata basis, either through new financing or conversion of debt, in exchange for units with priority status and liquidation preferences. The controllers approved a related amendment to the LLC agreement. Due to insufficient interest from members, the controllers instead proposed a financing transaction that included member loans with certain preferences, such as premium payments in the event of the company’s sale. Eighty percent of membership interests participated in the loans. Soon after, a sale of the club was announced. 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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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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Chancery Addresses Claims Arising Out of LLC Dispute Involving Parallel Venture

Posted In Chancery, LLCs


Largo Legacy Group, LLC v. Evens Charles, C.A. No. 2020-0105-MTZ (Del. Ch. June 30, 2021)
In this LLC dispute, an investor in a hotel development company alleged that the company principals breached the operating agreement and their fiduciary duties by implementing a fraudulent scheme whereby a parallel venture, that they owned and controlled, was provided with certain adjacent land and company funds in a manner that improperly advantaged the parallel venture and the principals while harming the plaintiff. The plaintiff also alleged that the defendants had breached their fiduciary and contractual duties by refusing to provide it with financial information that it was entitled to under the operating agreement. The defendants moved to dismiss. The Court of Chancery, finding, as an initial matter, that laches did not block the claims, held that while plaintiff had failed to plead its fraud claim with adequate particularity, it had properly pled both its breach of fiduciary duty claim in connection with the alleged scheme and its breach of contract claim in connection with the company’s refusal to provide certain financial information. In addition to dismissing the fraud claim, the Court also dismissed plaintiff’s duplicative breach of fiduciary duty claim relating to the withheld financial information.  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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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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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 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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acarroll@morrisjames.com
T 302.888.6852
Albert Carroll is a partner in the firm's Corporate and Commercial Litigation Group and focuses his practice on litigation involving corporations and alternative entities formed …
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