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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 1344 posts by Edward M. McNally.
Appraisal litigation is unique under Delaware law. In almost every instance you can think of, once an event provides a right to recover damages (such as a fire caused by negligence), what happens later is relevant to determining the amount of damages. For example, the actual future earnings of a business is relevant to a claim for lost profits. But, that is not always so in an appraisal case. There the valuation of the company involved is determined as of “the point just before the merger transaction ‘on the date of the merger,’” see Merion Capital v. Lender Processing Services, (Del. Ch. Dec. 16, 2016). More ›
This is an important decision that applies recent United States Supreme Court jurisdiction cases to a non-resident’s Delaware complaint. While the opinion carefully reviews a string of such cases ending with Bristol-Meyers Squibb Co. v. Superior Court of California that is worth reading, the bottom line is that it holds that a non-resident of Delaware cannot bring a tort claim against a non-Delaware entity unless she can show its actions in Delaware that directly lead to her injury. This may effectively end the past practice of filing mass tort litigation in the Delaware Superior Court on behalf of non-residents of Delaware, at least against non-Delaware entities.
Litigation seeking to inspect a corporation’s records under Section 220 of the DGCL might toll the statute of limitations for certain claims under the right circumstances. There are important limits to this form of tolling. For example, it is not automatic and will only apply to claims that are the subject of the inspection demand. This decision does a good job of explaining these limits and the factors a court will consider in determining whether inspection-based tolling should apply. It otherwise examines and applies the law on the statute of limitations and issues of inquiry notice.
Court of Chancery Addresses Contractual Fiduciary Duties, Secondary Liability, and Banker Liability in the MLP Context
This is the latest decision in a long-running saga in the master limited partnership (MLP) context involving Enbridge Energy. The Court of Chancery had previously dismissed the complaint for failure to state a claim. The Delaware Supreme Court reversed that dismissal while providing important guidance on properly construing contractual fiduciary duties in the MLP context. The defendants moved to dismiss the amended complaint on remand. This is the Court of Chancery’s decision granting in part and denying in part that motion. More ›
Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims
It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the inevitable exchange of commercially-sensitive information during the discovery process. Those orders spell out how such information may or may not be disclosed, including in court filings, while adopting the standards and procedures reflected in the Court of Chancery rule on the topic, Rule 5.1. More ›
This is an excellent summary of the law governing the admissibility of an expert opinion. It is particularly useful in dealing with non-scientific opinions that are based on experience in an industry.
Stock preferences are in derogation of the common law and thus strictly construed. Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated. But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.
When multiple LLC agreements for several entities contain provisions that relate across the entities, deciding how to interpret those provisions is a potential problem. As this decision points out, the separate identities of the entities need to be respected. Nonetheless, when the LLC agreements create contract rights, those rights can be enforced, just as a stockholders’ agreement can be enforced to require action by the signatories to the agreement.
A plaintiff who obtains a TRO must post a bond to cover any damages the defendant may suffer from the TRO. How to calculate the amount of that bond is often difficult. This decision does a good job of explaining how to make that calculation.
Court of Chancery Enforces Redemption Rights and Addresses the Potential Effect of a Merger on Previously-Exercised Put Rights
This decision is necessary reading for drafters of redemption rights. It involves the interpretation of a redemption rights agreement granting a stockholder the right to force the company to buy back its shares and some interplay between those put rights and the DGCL in the event of a merger. More ›
A claim for tortious interference with a contractual relationship must include an allegation that the conduct complained about was itself wrongful. This decision explains what is such “wrongful” conduct and concludes that the use of confidential information to contact a party to a contract to dissuade it from going forward is such wrongful conduct.
In re Appraisal of Kate Spade Company, C.A. No. 2017-0714-AGB (Del. Ch. June 21, 2018)
The duty to collect and produce non-privileged relevant information extends beyond email to text messages and other forms of electronic communications. Standard practice in Delaware involves at least inquiring of custodians the extent to which they used text messages to engage in substantive communications on potentially relevant topics and to collect text message data when they answer affirmatively, absent an agreement to contrary between the parties. This bench ruling addresses that practice and reflects the Chancellor’s view that text messages often may be a critical source of information.
Court of Chancery Validates Cure of Defective Corporate Acts Affecting Herman Miller’s Acquisition of DWR
Sections 204 and 205 of the DGCL permit corporations to cure and validate defective corporate acts under the right circumstances. This is another decision explaining when the Court will validate an attempted cure under Section 204. The opinion explains, among other things, that there is no set time limit to seek validation of a cure under Section 205. It further explains what sort of defective acts may be addressed in Section 205 proceedings. More ›
Enterprise Holdings Inc. v. Rolen Stockholder Representative LLC, C.A. No. 2017-0422-AGB (Del. Ch. June 27, 2018)
Merger agreements sometimes provide for post-merger purchase price adjustments to be made by an independent accounting firm. This is another decision, in the form of a bench ruling, where the Court of Chancery readily enforces such an agreement, albeit with some guidance to the accountant on what issues are for the accountant to decide and what issues must remain for the Court.
Under the Cryo-Maid decision, a forum non conveniens motion must consider the impact on a defendant forced to litigate in Delaware when discovery is needed in a foreign land. Here the Court considered the impact of the recent amendments to the Italian Data Protection Code on discovery and found that it did not impose an undue hardship under the facts present in this case. This may become more important as those European laws on privacy protection start to be considered for their effect on litigation outside of the EU.