R. Eric Hacker

Delaware Court of Chancery Applies Direct/Derivative Distinction In Voting Context

Clifford Paper, Inc. v. WPP Investors, LLC, 2021 WL 2211694 (Del. Ch. Jun. 1, 2021)
The disenfranchisement of an investor with voting or consent rights often is considered to be a direct harm, thus permitting the investor to bring direct claims. Sometimes, however, the alleged harm from the violation of voting rights is to the company, and it does not directly affect the investor. The Court of Chancery’s recent decision in Clifford Paper, Inc. v. WPP Investors, LLC, 2021 WL 2211694 (Del. Ch. Jun. 1, 2021), illustrates that, in such instances, a court applying Delaware law may treat those claims as derivative. More ›

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Chancery Declines to Enforce Forum Selection Provision Actively Hidden From Defendant During Transaction

UBEO Holdings, LLC et al. v. Drakulic, C.A. No. 2020-0669-KSJM (Del. Ch. Apr. 30, 2021)
Generally, Delaware courts will enforce the terms an executed agreement, even against a party claiming not to have read the terms before signing. This rule applies with full force to forum selection provisions in which a contracting party consents to jurisdiction in a particular forum. As this case shows, however, rare exceptions exist. More ›

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Chancery Rules Corporation Cannot Offset Wife’s Recoupment Against Husband’s Advancement Simply Because the Pair Signed a Single Undertaking

Perryman v. Stimwave Tech. Inc., C.A. 2020-0079-SG (Del. Ch. Apr. 15, 2021)
Section 145 of DGCL permits corporations to grant advancement rights to persons who may be entitled to indemnification so that they may fund covered litigation costs pending indemnification. As part of this right, the DGCL also requires these individuals to undertake to repay the corporation if the advanced expenses ultimately prove not to be indemnifiable. In this case, the Court clarifies that two individuals who are married and execute the same undertaking nonetheless retain their individual rights to advancement and separate obligations for repaying any non-indemnifiable expenses. More ›

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Chancery Enjoins Prosecution of Fraudulent Inducement and Declaratory Judgment Claims Based on Exclusive Delaware Forum Provision

SPay, Inc. v. Stack Media Inc. k/n/a JLC2011, Inc., et al., CA No. 2020-0540-JRS (Del. Ch. Mar. 23, 2021)
To obtain a preliminary anti-suit injunction, a movant must show (1) a reasonable likelihood of success on the merits, (2) irreparable harm absent an injunction, and (3) the balance of hardships tips in its favor. Although the Court of Chancery does not grant anti-suit injunctions lightly, it will do so when a party to a valid and absolutely clear forum selection clause attempts to litigate covered claims outside of the parties’ chosen forum. More ›

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Chancery Appoints Amicus Curaie to Provide Independent Guidance Regarding Unopposed Petition to Revive Defunct Corporation for Use as a Blank Check Entity

In re Forum Mobile, Inc., C.A. 2020-0346-JTL (Del. Ch. Mar. 18, 2021)

The Court of Chancery has the inherent authority to appoint an amicus curaie if the Court believes it would benefit from a more fulsome presentation of the issues. This case presents that situation: an unopposed petition seeking relief that, on its face, appears contrary to the Court’s prior decisions and to Delaware’s public policy. More ›

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Chancery Holds Prior Rulings in Appraisal and Securities Litigation Do Not Bar New Columbia Pipeline Fiduciary Duty Action

In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (Del. Ch. Mar. 1, 2021)
Certain judicial doctrines, including collateral estoppel and stare decisis, promote efficiency and finality by barring the re-litigation of factual and legal issues. For these doctrines to apply, however, there must be overlap between the parties, the claims or the legal posture. This case demonstrates that, without such overlap, courts will permit subsequent claims even when the underlying transaction has already been the subject of significant prior litigation. More ›

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Chancery Allows McDonald’s to Pursue Claims Against Ex-CEO, Finding Separation Agreement’s Integration Clause Does Not Bar Them

McDonald’s Corp. v. Easterbrook, C.A. 2020-0658-JRS (Del. Ch. Feb. 2, 2021)

Delaware has a strong public policy against fraud. Consequently, parties who seek to bar extra-contractual fraud claims must expressly provide in their agreement that neither is relying upon the other party’s extra-contractual representations. As this case confirms, a standard integration clause, without clear anti-reliance language, is insufficient to bar such claims. More ›

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Delaware Supreme Court Concludes Out-of-Pocket Damages Are the Default Remedy for Fraudulent Misrepresentation Absent an Enforceable Agreement

LCT Capital, LLC v. NGL Energy Partners, LLP, App. Nos. 565,2019 & 568,2019 (Del. Jan. 28, 2021)

Delaware law recognizes both benefit-of-the-bargain damages and out-of-pocket damages as remedies for fraudulent misrepresentation, but the law was unsettled whether benefit-of-the-bargain damages were available absent an enforceable agreement. Here, the Delaware Supreme Court confirms that out-of-pocket damages are the default remedy in the absence of an agreement. More ›

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Chancery Dismisses Stockholder’s Claim that Directors Provided Materially-Deficient Notice of their Intent to Use Equity Bonus Plan to Reward Past Performance

Pascal v. Czerwinski, C.A. No. 2020-0320-SG (Del. Ch. Dec. 16, 2020)

This decision concerned a motion to dismiss a stockholder’s direct claim that Director-Defendants breached their duties by providing a materially-deficient proxy statement advocating adoption of an equity incentive plan (“EIP”) that ultimately allowed Defendants to award themselves bonuses. As a result of the alleged deficiencies, Plaintiffs sought invalidation of the entire EIP. More ›

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Chancery Modifies Confidentiality Order to Permit Assertion of Plenary Claims in Appraisal Action

Harris v. Harris FRC Corp., C.A. No. 2019-0736-JTL (Del. Ch. Jan. 7, 2021)
Under Rule 5.1, the Court of Chancery may enter a confidentiality order upon a showing of good cause that such an order is necessary to protect against disclosure of sensitive, non-public information. But Rule 5.1 does not set an express standard for later modification of the order. In this case, the Court of Chancery clarified that the standard for modifying a confidentiality order is the same as for entering one: good cause shown, taking into account related factors including the parties’ reliance on the existing order and the potential prejudice from modification. More ›

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Plaintiff’s Failure to Plead Demand Futility Leads to Dismissal of Caremark Claims Against MoneyGram Directors

Richardson v. Clark, C.A. No. 2019-1015-SG (Del. Ch. Dec. 31, 2020)
Under Court of Chancery Rule 23.1, a derivative plaintiff’s must make a demand on the corporation’s board of directors unless the plaintiff can plead particular facts to establish that demand was excused. Although demand may be excused where a majority of the board faces a substantial likelihood of personal liability, merely alleging wrongdoing by the corporation’s directors will not suffice. More ›

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Chancery Declines to Apply Stockholder Approval Requirement of DGCL § 271 to Agreement to Transfer All Assets in Lieu of Foreclosure

Stream TV Networks, Inc. v. SeeCubic, Inc., C.A. No. 2020-0310-JTL (Del. Ch. Dec. 8, 2020)

In this decision, the Delaware Court of Chancery reviews the history of requirements to approve transfers of all assets both at common law and under the Delaware General Corporation Law, and concludes that Delaware law does not require majority stockholder approval for an insolvent corporation’s transfer of assets to a secured creditor in lieu of a foreclosure. The Court thus rejected an attempt by the corporation’s founders, who owned a majority of its stock, to invalidate the corporation’s agreement in that regard.  More ›

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Chancery Excuses Demand Where General Partner and its Controller Faced Substantial Likelihood of Liability

Lipman v. GBP Capital Holdings, LLC, C.A. No. 2020-0054-SG (Del. Ch. Nov. 18, 2020)

In derivative actions, a plaintiff must either make a pre-suit demand or plead with particularity why demand should be excused. As this case shows, the facts that must be pled differ when the demand would be made upon the general partner in a limited partnership as opposed to a corporate board. More ›

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Chancery Holds California Statutory Bar to Choice-of-Forum Clauses in Employment Contracts Prevents Exercise of Personal Jurisdiction – Despite Parties’ Choice of Delaware Law and Agreement to Litigate in Delaware

Focus Fin. Partners, LLC v. Holsopple, C.A. No. 2020-0188-JTL (Del. Ch. Oct. 26, 2020).
Delaware law promotes freedom of contract, and Delaware courts enforce contractual choice-of-forum and choice-of-law provisions, including those in employment-related contracts. Recently, however, several Delaware cases have considered whether such provisions can be enforced against non-residents in the face of contrary substantive law or fundamental public policy in their home jurisdiction. In California, a statute (“Section 925”) makes choice-of-law and choice-of-forum provisions voidable by the employee if the provisions appears in an agreement signed as a condition of employment. Here, the Court addressed how to reconcile Section 925 with the parties’ agreement to resolve disputes in Delaware and to apply Delaware law. Specifically, when the defendant (a former employee who lives and works in San Francisco) was hired, he received incentive units pursuant to agreements that contained restrictive covenants and selected Delaware as the exclusive forum for disputes, and selected Delaware law as the applicable law. The plaintiff brought suit in Delaware to enforce the restrictive covenants, and the employee moved to dismiss for lack of personal jurisdiction. More ›

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Chancery Invokes Internal Affairs Doctrine to Dismiss Dispute Over Former Delaware Corporation Brought Over Two Years After Its Migration to Nevada

Sylebra Capital Partners Master Fund, LTD v. Perelman, et. al., C.A. No. 2019-0843-JRS (Del. Ch. Oct. 9, 2020)

Defendant Scientific Games Corporation (the “Company”) is a gaming and lottery company that reincorporated in Nevada from Delaware in January 2018. The Company adopted new Nevada bylaws that, among other things, require stockholders to bring claims for breaches of fiduciary duties in Nevada. Because the Company operates in the gaming industry, the bylaws also require stockholders to meet “suitability” requirements and restrictions on sale set by gaming regulators in jurisdictions where the Company operates. Approximately four months before Plaintiffs filed suit, the Company filed suit in Nevada to force Plaintiffs to comply with an investigation into their suitability as stockholders. More ›

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