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Barnaby Grzaslewicz

Attorney

Showing 12 posts by Barnaby Grzaslewicz.

Chancery Reasons That Board’s Decision To Address Alleged “Red Flags” Related To Pending Litigation, After Litigation Is Resolved, Is Not Bad Faith For Caremark Purposes


Pettry v. Smith et al., C.A. No. 2019-0796-JRS (Del. Ch. June 28, 2021)

As discussed in Caremark and its progeny, fiduciary duties require directors to monitor the business and affairs of a corporation. Here, the Court of Chancery addressed the issue of oversight liability in the context of a Board’s decision, despite “red flags,” to delay certain additional remedial actions pending resolution of directly related litigation. 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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Stockholders Lack Derivative Standing to Challenge Transactions Whose Terms Were Set Before They Became Stockholders


In re SmileDirectClub, Inc., 2021 WL 2182827 (Del. Ch. May 28, 2021)
Under the “contemporaneous ownership rule,” to have standing to bring derivative claims, stockholders in a Delaware corporation must own stock at the time of a challenged transaction. The general rule is that the time of the transaction is when the terms were established, but there are narrow exceptions, such as where the terms were modified and not disclosed, in which case a court may look to when the transaction was consummated. In In re SmileDirectClub, Inc., 2021 WL 2182827 (Del. Ch. May 28, 2021), the Delaware Court of Chancery found that the general rule applied where plaintiffs challenged the terms of a transaction related to an IPO through which they became stockholders. More ›

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Chancery Orders Specific Performance of Deal, Despite Lack of Debt Financing, Finding that COVID-Related Business Decline Was Not an MAE and Seller’s Cost-Cutting Efforts Were Not Breaches of the “Ordinary Course” Covenant


Snow Phipps Grp., LLC v. KCake Acquisition, Inc., 2020-0282-KSJM (Del. Ch. Apr. 30, 2021)
In Snow Phipps, the Court of Chancery refused to allow a private equity buyer with pandemic-related cold feet to back out of its bargained for agreement to purchase DecoPac, a cake decorating company. In ordering specific performance, the Court found: (1) the durationally insignificant COVID-related business decline did not constitute a material adverse effect (“MAE”); (2) the seller had not violated any of its covenants to operate in the ordinary course by attempting to mitigate business losses; and (3) the condition to closing that the buyer secure debt financing was excused under the prevention doctrine, because the buyer’s actions caused the condition not to be satisfied. More ›

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Chancery Refuses to Enforce Alleged Contractual Rights Not Obtained at the “Negotiating Table”


Obsidian Fin. Grp., LLC v. Identity Theft Guard Solutions, Inc., C.A. No: 2020-0485-JRS (Del. Ch. Apr. 22, 2021)
Delaware is “more contractarian” than many other jurisdictions. Accordingly, as this case illustrates, a court applying Delaware law will respect parties’ contractual choices and will not enforce alleged contractual rights not reflected in the plain language of the agreement. More ›

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Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims


Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021)

Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized” pleading standard. This pleading challenge is compounded when a plaintiff attempts to bring a Caremark failure of oversight claim – “possibly the most difficult theory in corporate law.” Similarly, a plaintiff alleging false or misleading disclosures not made in connection with soliciting shareholder action faces the additional pleading challenge of demonstrating that those disclosures were knowing or deliberate. More ›

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Chancery Dismisses Unripe Contribution Claim but Finds That Corporate Director and Officer Adequately Pled Right to Indemnification Following Merger


Wunderlich v. B. Riley Fin., Inc. et al., C.A. No: 2020-0453-PAF (Del. Ch. Mar. 24, 2021)

Delaware corporations may provide indemnification rights to their directors and officers either through the corporation’s organizational documents or by separate agreements. This case concerned the survival and scope of these rights following a merger. More ›

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Chancery Denies Claim Arising Out of Controller’s Announced Intention to Oppose a Transaction Unfavorable to His Interests


RCS Creditor Trust v. Schorsch et al., C.A. No: 2017-0178-SG (Del. Ch. Mar. 18, 2021)
Controlling shareholders of a Delaware corporation owe fiduciaries duties, but those duties do not require controllers to sacrifice contract rights or to vote altruistically. In the Court of Chancery’s recent decision in RCS Creditor Trust v. Schorsch et al., the Court affirmed this proposition, holding that where a special committee and its review process were otherwise independent, a controlling shareholder did not breach his fiduciary duties or improperly influence the committee by sharing how he planned to vote in connection with two proposed, competing transactions. More ›

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Chancery Finds Implied-in-Fact LLC Agreement

Posted In Chancery, LLCs

Robinson v. Darbeau, C.A. No: 2019-0853-KSJM (Del. Ch. Mar. 1, 2021)

As Robinson v. Darbeau demonstrates, Delaware law recognizes implied limited liability company agreements. Plaintiff operated a daycare as a sole proprietor and without any formally organized business entity. After Plaintiff began a personal relationship with Defendant, Defendant became involved in day-to-day activities at the daycare, invested in the business (including through the co-purchase of the property where the daycare was operated) and was held out publicly as the daycare’s co-director. Through the use of an online incorporator, and with Defendant’s assistance, Plaintiff filed a certificate of formation for a Delaware limited liability company. The certificate listed both parties as members (allegedly without Plaintiff’s knowledge) and further provided that management of the company was vested in the members. No written LLC agreement was ever executed. More ›

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Superior Court Addresses Scope of Privilege Waiver in Dispute Involving The American Bottling Company, Coke, and Bodyarmor

The American Bottling Co. v. BA Sports Nutrition, LLC et. al, C.A. No: N19C-03-048-AML CCLD (Del. Super. Feb. 11, 2021)

Delaware courts generally uphold the attorney-client privilege, including by recognizing waivers that are limited in scope. But they also police selective disclosures to ensure fairness using doctrines like the “partial waiver doctrine,” under which a partial disclosure of a privileged communication may waive privilege as to the entire communication, and the “at issue” exception, under which privilege may be waived by injecting a particular privileged communication or broader issue into the litigation. Applying these doctrines in The American Bottling Company decision, the Delaware Superior Court’s Complex Commercial Litigation Division defined the scope of a party’s tactical waiver broader than that party contended was appropriate. More ›

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Chancery Applies Forum Non Conveniens Analysis to Grant Partial Stay of Dispute Between LLCs and Former Manager

AG Resource Holdings, LLC v. Thomas Badford Terral, C.A. No. 2020-0850-JRS (Feb. 10, 2021)

In AG Resource, the Court of Chancery was tasked with determining whether it or a Louisiana state court should resolve similar claims filed at nearly the same time in each forum. Affording neither suit first-filed status, the Court applied a forum non conveniens analysis using the Cryo-Maid factors and split the claims, finding that Louisiana had a greater interest in resolving claims relating to provisions in an employment agreement, but Delaware had a greater interest in resolving a claim implicating the internal affairs of a Delaware LLC. More ›

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Party Uniquely Escapes An Arbitration Provision, While The Court Reminds Us That Bootstrapped Fraud Claims Are Impermissible In Delaware

Posted In Arbitration, CCLD, Fraud, M&A

AluminumSource, LLC v. LLFlex, LLC, C.A. No: N18C-07-231-EMD CCLD (Del. Super. Jan. 21, 2021)

Delaware courts commonly enforce (and support) arbitration provisions, submitting disputes under the governing contract to a third-party neutral. Equally common is the dismissal by Delaware courts of fraud claims “bootstrapped” to a breach of contract based on allegations that a contracting party never intended to perform its obligations. This recent decision from the Superior Court’s Complex Commercial Litigation Division is the unique case where, on the first issue, an arbitration provision was found unenforceable due to impossibility of performance. On the second issue, this case confirms settled law that bootstrapped fraud claims are impermissible in Delaware. More ›

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bgrzaslewicz@morrisjames.com
T 302.888.6885
Barnaby Grzaslewicz is an attorney in the Corporate and Commercial Litigation Practice Group. He focuses his practice on counseling and litigation involving corporations and other …
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