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Albert H. Manwaring, IV

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Showing 73 posts by Albert H. Manwaring, IV.

Court of Chancery Harmonizes Operating Agreement Governance Provisions To Resolve LLC Control Dispute

Pearl City Elevator, Inc. v. Gieseke, C.A. No. 2020-0419-JRS (Del. Ch. Mar. 23, 2021)

Under Delaware law, limited liability company agreements are interpreted like other contracts; they are read as a whole in light of the commercial context, in a manner that gives effect to and harmonizes all of their terms. In this expedited control dispute, the Court of Chancery applied those canons to consider whether certain of the plaintiff’s purchases of units from other members complied with transfer restrictions. More ›

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Chancery Finds After Trial That $10 Billion Unit-for-Unit Merger Was “Fair and Reasonable” Under Partnership Agreement

Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Feb. 15, 2021)

This matter concerned limited partners’ challenge under the governing limited partnership agreement to an acquisition of the partnership by another entity controlled by the partnership’s ultimate owner. A member of a conflicts committee, which had approved the $10 billion unit-for-unit controlling unitholder merger, also served the board of another company ultimately controlled by the same owner, contrary to the terms of the partnership agreement. After considering this issue, the Court of Chancery nevertheless held after a five-day trial that the merger was “fair and reasonable to the Partnership” under a contractual safe harbor, and that the plaintiffs failed to prove damages. More ›

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Chancery Construes Notice Provisions Associated With Escrowed Funds Under an Asset Purchase Agreement

Posted In Chancery, Escrow, M&A

Schillinger Genetics, Inc. v. Benson Hill Seeds, Inc., C.A. No. 2020-0260-MTZ (Del. Ch. Feb. 1, 2021)

Delaware courts will apply the plain terms of an unambiguous asset purchase agreement (“APA”), including its provisions governing notices and the release of escrowed funds. More ›

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Delaware Corporate and Commercial Case Law Year in Review: 2020

This top ten list summarizes significant decisions of the Delaware Supreme Court and the Delaware Court of Chancery over the past calendar year. Our criteria for selection are that the decision either meaningfully changed Delaware law or provided clarity or guidance on issues relevant to corporate and commercial litigation in Delaware. We present the decisions in no particular order. The list does not include every significant decision, but provides practitioners with an array of decisions on varied issues likely to affect business transactions or business litigation. More ›

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Director to Attend Board Meeting Under False Pretenses to Meet Quorum Requirements Invalidated Board Action

Delaware courts will use their equitable powers to invalidate otherwise valid board actions tainted by inequitable deception. Where a director is “‘tricked or deceived into attending a board meeting … the general rule is that actions taken at such a meeting are void.’” Delaware law requires that directors be truthful and candid in their interactions with their fellow directors, and does not permit inequitable sandbagging by fellow board fiduciaries. In short, even if the board action is legally authorized under a company’s organizational documents, deceiving fellow directors to procure their attendance at a board meeting under false pretenses, may be grounds for invalidating board actions taken at that meeting under equitable principles. More ›

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Chancery Declines to Order Specific Performance of $5.8 Billion Luxury Hotel Deal Scuttled by COVID-19 Changes to Hotel Business Operations

AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, C.A. No. 2020-0310-JTL (Del. Ch. Nov. 30, 2020)

Parties to a sale and purchase agreement (“SPA”) had planned to close a deal to sell fifteen luxury hotels for $5.8 billion. As the COVID-19 pandemic spread across the globe in early 2020 and battered the hotel industry, the buyer terminated the SPA. Seller sought specific performance in the Court of Chancery. After trial, the Court denied seller’s request for relief. More ›

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Delaware Superior Court Applies Law-of-the-Case Doctrine and Collateral Estoppel to a Prior Chancery Proceeding

Posted In CCLD, Superior Court

Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. N19C-10-107-MMJ [CCLD] (Del. Super. Dec. 15, 2020)

Plaintiff and defendants competed as institutional investors in the high-yield municipal bond market. Seeking to impair plaintiff’s standing in the marketplace, defendants made statements to broker-dealers critical of plaintiff. In turn, plaintiff sent defendants a cease-and-desist letter. In response, defendants sent letters to broker-dealers that suggested defendants would not participate in investments with broker-dealers who continued to do business with plaintiff. Plaintiff then filed suit in the Court of Chancery, which held that defendants had committed tortious interference with prospective business relations, but dismissed plaintiff’s defamation claim, and transferred this claim to the Superior Court. More ›

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Delaware Supreme Court Finds that Court of Chancery Had Jurisdiction To Enjoin a Collateral Attack on a Prior Arbitration Award Under the Federal Arbitration Act

Gulf LNG Energy, LLC v. ENI USA Gas Mktg., LLC, No. 22, 2020 (Del. Nov. 17, 2020)

This decision confirms that the Court of Chancery has jurisdiction to enjoin a collateral attack on a prior arbitration award. The Delaware Supreme Court also reasons that the determination of whether a second arbitration collaterally attacks a prior arbitration does not depend on the res judicata or collateral estoppel effect of claims raised or decided in the prior arbitration, but rather whether the claimant asserts irregularities in the prior arbitration or seeks to rectify the harm it suffered, which are issues subject to exclusive review under the post-award procedure in the Federal Arbitration Act (“FAA”). More ›

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Chancery Sustains CEO’s Contract Claims in WeWork Litigation

Posted In Chancery

In re WeWork Litig., Consol. C.A. No. 2020-0258-AGB (Del. Ch. Oct. 30, 2020).
A company facing a liquidity crisis (the shared working space company, WeWork), its outgoing CEO (Adam Nuemann), and two related SoftBank investment entities that collectively owned more than forty percent of the company’s equity entered into a Master Transaction Agreement (“MTA”). The MTA was designed to provide funding to the company, facilitate the CEO’s exit, and provide liquidity to minority stockholders. The MTA required a specific sequence of transactions from the entities: (1) equity financing; (2) stock purchase via a tender offer; and (3) debt financing after the closing of the tender offer. The tender offer’s closing was subject to certain conditions, which the parties to the MTA were required to use their reasonable best efforts to meet. More ›

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Chancery Questions Utility of Aronson Test, Dismisses Derivative Suit of Facebook Stockholder for Failure To Allege Demand Futility

United Food and Comm. Workers Union v. Zuckerberg, C.A. No. 2018-0671-JTL (Del. Ch. Oct. 26, 2020)
In its recent decision in United Food and Comm. Workers Union v. Zuckerberg, the Court of Chancery discussed the legal tests to demonstrate demand futility in derivative actions under the seminal cases of Aronson and Rales. Reconciling longstanding and recent case law, the Court ruled that demand futility turns on whether at the time of filing of the complaint, the majority of a board of directors is disinterested, independent, and capable of impartially evaluating a litigation demand to bring suit on behalf of a company. More ›

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Chancery Finds Warrant Issuance Triggered Stockholder Preemption Rights

Posted In Chancery

L-5 Healthcare Partners, LLC v. Alphatec Holdings, Inc., C.A. No. 2019-0412-KSJM (Del. Ch. Oct. 12, 2020)

Pursuant to a share purchase agreement, a plaintiff stockholder had preemption rights that entitled the stockholder to participate on a pro-rata basis if the defendant company issued common stock equivalents to a third-party buyer. Defendant issued warrants convertible into common stock to a nonparty. In consideration of plaintiff’s preemption rights, defendant made a proposal for plaintiff to provide the company with a loan in exchange for acquiring warrants, based on a blended version of the prices and other terms of the issuance to the nonparty. The proposal was, however, subject to approval by defendant’s board and the nonparty, and contingent upon defendant drawing down on the loan provided by plaintiff. Plaintiff filed suit in the Delaware Court of Chancery, seeking to enforce its preemption rights, and moved for partial judgment on the pleadings. More ›

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Chancery Addresses Contract and Fraud Claims Relating to M&A Post-Closing Price Adjustments

Posted In Chancery, M&A

Roma Landmark Theaters, LLC v. Cohen Exhibition Co., LLC, C.A. No. 2019-0585-PAF (Del. Ch. Sept. 30, 2020)

In Roma Landmark Theaters, the parties’ purchase agreement contained a framework for post-closing price adjustments and set forth the pre-closing duties of the buyer (but not the sellers) relating to certain calculations and financial information. The agreement included a dispute mechanism, which provided for an independent accounting firm to make a binding determination as to the distribution of escrowed funds in connection with a dispute over post-closing price adjustments. The accounting firm decided the dispute largely in sellers’ favor. Sellers then filed suit in the Court of Chancery to confirm the accounting firm’s decision, and require buyer to release the escrowed funds. Buyer filed counterclaims, alleging that the sellers committed financial disclosure misrepresentations amounting to fraud and bad faith. More ›

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Alleged Third-Party Beneficiary’s Contract and Alternate Unjust Enrichment Claims Survive Dismissal at the Pleadings Stage Based on Ambiguous Contract Language

CHS/Cmty. Health Sys., Inc. v. Steward Health Care Sys. LLC, C.A. No. 2019-0165-JRS (Del. Ch. Aug. 21, 2020)

A claim for unjust enrichment will not lie where there is a contract that governs the relationship between parties. Both types of claims may survive a motion to dismiss, however, if there exists a contractual ambiguity that prevents the Court of Chancery from interpreting the meaning of contract at the pleadings stage. More ›

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Chancery Holds Statutory Rights to Inspect Books and Records of a Delaware Corporation are Subject to the Internal Affairs Doctrine and Governed Exclusively by Delaware Law

JUUL Labs, Inc. v. Grove, C.A. No. 2020-0005-JTL (Del. Ch. Aug. 13, 2020)

Stockholder inspection rights are a core matter of the governance of a corporation. This decision holds that, pursuant to the internal affairs doctrine, inspection rights for a stockholder of a Delaware corporation are governed exclusively by Delaware law, not by laws of other jurisdictions, regardless of where a company’s principal place of business is located. More ›

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Chancery Determines Validity of LLC Ownership Following Fraud and Deceit in Cross-Border Control Dispute

Lynch v. Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. July 31, 2020)

Disputes over control of a Delaware limited liability company can turn on rigorous fact-finding efforts by the Court of Chancery where issues of witness credibility may be paramount. As this decision illustrates, the Court will not permit trickery or misrepresentations to prevail in a control dispute, nor will it apply the doctrine of unclean hands to permit an undeserved windfall or countenance a fraudulent scheme. More ›

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amanwaring@morrisjames.com
T 302.888.6868
Albert H. Manwaring, IV is a partner of Morris James LLP, where he is the Chair of the Firm’s Corporate and Commercial Litigation Group and a member of the firm’s Executive Committee …
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