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Jonathan G. Strauss

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Showing 39 posts by Jonathan G. Strauss.

Chancery Applies Contractual Shortening of Limitations Period for Breaches of Representations, Finds it Inapt to Fraud Claims and Enforces Clear Anti-Reliance Clause

Pilot Air Freight, LLC v. Manna Freight Systems, Inc., C.A. No. 2019-0992-JRS (Del. Ch. Sept. 18, 2020)

In a familiar fact pattern, an acquirer of a business brought suit against sellers claiming, inter alia, that the representations and warranties in the asset purchase agreement were untrue and, indeed, fraudulent when made. The sellers moved to dismiss on the basis of a provision they claimed shortened the limitations period for breaches of representations and warranties and an anti-reliance clause they claimed eliminated any potential claims for misrepresentations or omissions outside of the written agreement. More ›

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Chancery Confirms that, Without More, Threat of Proxy Contest from Activist Investor is Insufficient to Render Director Defendants Conflicted in Sale Transaction

Rudd v. Brown, C.A. No. 2019-0775 MTZ (Del. Ch. Sept. 11, 2020)

The Court of Chancery recently confirmed that the threat of a proxy contest from an activist investor alone was insufficient to render director defendants conflicted in a post-closing challenge to a sale of the company. Here, an activist investor that acquired a significant stake in the corporation expressed dissatisfaction with the board of directors for not exploring a potential sale of the company. Thereafter, the company announced that it would explore strategic alternatives. The company then entered into a cooperation agreement permitting the investor to appoint three members of the nine member board in exchange for not mounting a proxy fight. The strategic process resulted in a sale to a financial acquirer. The plaintiff then brought suit against the company’s board of directors and an officer alleging that that board’s acceptance of an inadequate offer was motivated by self-interest to avoid a proxy contest. More ›

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CCLD Finds Insurer’s Advancement Obligation Triggered Prior to Final Non-Appealable Damages Judgment

Posted In Advancement, CCLD

Ferrellgas Partners L.P v. Zurich American Insurance Company, C.A. No. N19C-05-275 MMJ CCLD (Del. Super. Aug. 20, 2020)

The Superior Court of Delaware, Complex Commercial Litigation Division recently expanded on its advancement jurisprudence regarding litigation fees and costs due under director and officer insurance policies. The insured brought a declaratory judgment action against two insurers in a tower of coverage. Judge Mary M. Johnston declared, on summary judgment, that the insured was entitled to advancement of reasonable attorneys’ fees and costs from one of the insurers. More ›

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Superior Court Reinforces Established Delaware Insurance Coverage Law that Settlement of a Claim for Less than Policy Limits Attaches to Excess Policies

Pfizer, Inc. v. U.S. Specialty Insurance Company, C.A. No. N18C-01-310 PRW CCLD (Del. Super. Aug. 28, 2020)
On cross-motions for summary judgment in a director and officer insurance coverage dispute, the Superior Court of Delaware, Complex Commercial Litigation Division, reaffirmed the Delaware principle, also known as a the Stargatt Rule, that a settlement of a policy between an insured and an insurer for less than the policy limit amounts to satisfaction of such policy. Thus, excess policies attach irrespective of whether the insured collected the full amount of the primary policies.  More ›

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Chancery Provides Guidance on Agency and Joint Venture Theories of Vicarious Liability

Otto Candies, LLC v. KPMG, LLP, C.A. No. 2018-0435-MTZ (Del. Ch. Aug. 21, 2020)

The Court of Chancery dismissed a complaint filed by creditors and former business affiliates of a defunct Latin American offshore oil service company for failing to establish, under agency or joint venture theories, a basis for finding KPMG US vicariously liable for audits performed by KPMG Mexico.  More ›

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Chancery Certifies Interlocutory Appeal for Determination of Impact of Remote Proceedings on a Party’s Due Process Rights

Forescout Tech., Inc. v. Ferrari Grp. Holdings, L.P., C.A. No. 2020-0385-SG (Del. Ch. July 14, 2020)

In the midst of this global pandemic, the Court of Chancery certified an interlocutory appeal to the Delaware Supreme Court to address two unique issues presented by COVID-19: (i) whether the Court could rightly decide to accept trial testimony remotely; and (ii) whether the Court had discretion to decline to compel a witness to travel to Delaware so that the witness may be cross-examined in-person without infringing upon the opposing party’s due process rights. More ›

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Delaware Supreme Court Affirms Use of Unaffected Market Price to Determine Public Corporation’s “Fair Value” in Appraisal Proceeding

Fir Tree Value Master Fund, L.P. v. Jarden Corp., No. 454, 2019 (Del. July 9, 2020)

Adding to its appraisal jurisprudence, the Supreme Court of Delaware recently affirmed the use of the unaffected trading price of a public corporation’s stock to determine its “fair value” in the circumstances presented, while clarifying that “it is not often that a corporation’s unaffected market price alone could support fair value.” More ›

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Chancery Interprets Right of First Refusal Provision in LLC Agreement

HUMC Holdco, LLC, et al. v. MPT of Hoboken TRS, LLC, et al., C.A. No. 2019-0972-KSJM (Del. Ch. July 2, 2020)

Litigation arose among members of a limited liability company regarding the operating agreement’s right of first refusal provision after certain members entered in an agreement to sell membership interests and certain real estate to a third party. While the Court of Chancery denied defendants’ motion for judgment on the pleadings, the Court offered notable guidance on the interpretation of first-refusal right provisions. More ›

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CCLD Offers Guidance on the Application of Tolling Doctrines to M&A Agreement Clauses Modifying the Statute of Limitations for Representations and Warranties Claims

AssuredPartners of Virginia, LLC v. Sheehan, C.A. No. N19C-02-175 AML CCLD (Del. Super. Ct. May 29, 2020)

A disgruntled buyer brought suit against its seller for breaches of representations and warranties four years after the execution of the applicable asset purchase agreement (“APA”). The APA contained a clause providing that certain representations and warranties survived for two (2) years post-closing except for those fraudulently given, which survived from closing until sixty days after expiration of the applicable statute of limitations. The defendant-sellers sought dismissal of the breach claims as untimely, requiring Judge Abigail M. LeGrow of the Superior Court of Delaware to determine whether the doctrine of tolling applied to the APA’s survival clause and if the parties intended to contractually extend the statute of limitations for fraudulent representation claims under 10 Del. C. § 8106(c). More ›

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Chancery Offers Guidance on the Effect of Charging Orders on Contractual Obligations

Posted In LLCs

GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, C.A. No. 2018-0840-SG (Del. Ch. May 18, 2020)

Charging orders authorized by 6 Del. C. § 18-703 of the Delaware Limited Liability Company Act offer judgment creditors of LLC members a collection method. These orders function as a lien against the membership interest and grant the judgment creditor the right to monetary distributions that would otherwise be funneled to the member. The imposition of a charging order does not, however, afford the judgment creditor the right to obtain possession of or exercise remedies, legal or equitable, with respect to the LLC’s property. More ›

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Chancery Dismisses GoPro Derivative Action for Failure to Allege Directors Intentionally Made Inflated Revenue Forecasts or Failed to Exercise Appropriate Caremark Oversight

In re GoPro, Inc. S’holder Deriv. Litig., C.A. No. 2018-0784-JRS (Del. Ch. Apr. 28, 2020)

This opinion serves as a reminder that particularized allegations of non-exculpated wrongdoing are necessary to support the contention that a demand would be futile. Vice Chancellor Joseph R. Slights, III dismissed a breach of fiduciary duty derivative action for failure to allege demand futility with the detail prescribed by Chancery Court Rule 23.1. The plaintiffs, GoPro, Inc. stockholders, filed suit against officers and directors after complications with the launch of a new drone caused the company to miss its revenue forecast. The complaint alleged that pre-suit demand was futile because a majority of the board faced liability for its knowledge of, but failure to disclose, the company’s revenue shortfall and were beholden to the CEO/controlling stockholder such that they could not exercise independence. The missed revenue projections also spurred a federal securities class action suit, naming three of the same defendants, where a ruling denying a dismissal motion found that the class plaintiffs well pled that the named overlapping defendants made false or misleading statements regarding the drone. More ›

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Superior Court Allows Fraudulent Inducement and Breach of Contract Claims to Proceed in Parallel Based on Rescissory Damages Request

Posted In CCLD, Fraud

Firmenich Inc. v. Natural Flavors, Inc., C.A. No. N19C-01-320 MMJ [CCLD] (Del. Super. Apr. 7, 2020).

Fraud claims that overlap with breach of contract claims often are subject to dismissal under Delaware law. Sometimes, however, fraud and contract claims may proceed in parallel, as the Complex Commercial Litigation Division of the Superior Court determined in Natural Flavors. Here, the Superior Court declined to dismiss a fraudulent inducement claim seeking rescissory damages notwithstanding an alternatively-pled breach of contract claim. The litigation concerned an Asset Purchase Agreement and allegations of fraud arising from a former employee’s whistleblowing. After the plaintiff-buyer’s initial fraud claim was dismissed as impermissibly bootstrapped to its breach of contract claim, the plaintiff filed an amended complaint for rescissory damages as compensation for alleged fraudulent inducement to enter into the APA, while alternatively seeking relief for alleged breach of the APA. The defendant-seller, again, sought dismissal of the fraud claim as duplicative of the breach of contract count. More ›

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Chemours v. DowDuPont: Chancery Requires Subsidiary to Arbitrate Separation Agreement Dispute with Parent Despite the Subsidiary’s Lack of “Real World” Consent to the Separation Agreement

The Chemours Co. v. DowDuPont Inc., et al., C.A. No. 2019-0351-SG (Del. Ch. Mar. 30, 2020).

The subsidiary-plaintiff, created after the reorganization of the parent-defendant, brought an action against its parent and related entities challenging the enforceability of the Separation Agreement memorializing the terms of the subsidiary’s spin-off, including its arbitration clause. According to the subsidiary, certain liabilities assigned to the subsidiary in the spin-off were “vastly and wrongfully underestimated” by the parent, and the subsidiary brought suit to limit its obligations for those liabilities. The defendants moved to dismiss for lack of subject matter jurisdiction because the Separation Agreement contained an arbitration clause.        More ›

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Chancery Enforces LLC Agreement Arbitration Clause and Finds that Member’s Resignation Did Not Prevent Enforcement

360 Campaign Consulting, LLC v. Diversity Communication, LLC, C.A. No. 2019-0807-MTZ (Del. Ch. Mar. 20, 2020).

Following a dispute between the two members of a Delaware LLC, Plaintiff filed an eleven (11) count complaint against the Defendant former member, the LLC, its manager and others. Defendant moved to dismiss for lack of subject matter jurisdiction based on an arbitration provision in the LLC Agreement. The Court’s threshold question was whether it (as opposed to an arbitrator) had jurisdiction to decide whether the dispute was arbitrable, an issue otherwise known as substantive arbitrability.  More ›

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Chancery Sustains Breach of Fiduciary Duty Claim Against Long-Time Friend and Financial Advisor, and Addresses Double-Derivative Standing for Alternative Entities

Bamford v. Penfold, L.P., C.A. No. 2019-0005-JTL (Del. Ch. Feb. 28, 2019).

After realizing that a 2016 reorganization stripped them of their voting and other governance rights in a highly profitable limited liability company, the plaintiffs brought direct and derivative claims against their former business partner and the entities he controlled. The defendant and his entities moved to dismiss, which the Court largely denied. Of particular note were the Court’s rulings about one of the breach of fiduciary duty claims and the plaintiffs’ standing to bring double-derivative claims challenging pre-organization conduct.     More ›

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jstrauss@morrisjames.com
T 302.888.6848
Jonathan Strauss is a partner in Morris James’ Business Transactions, Strategic Planning and Counseling Practice, a group that has been involved in over $100 Billion in financings …
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