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Kirsten A. Zeberkiewicz

Associate

Showing 41 posts by Kirsten A. Zeberkiewicz.

Delaware Supreme Court Upholds Contractual Waiver of Statutory Appraisal Rights


Manti Holdings, LLC, et al. v. Authentix Acquisition Co., Inc., No. 354, 2020 (Del. Sept. 13, 2021)
This decision arose out of the acquisition of Authentix Acquisition Company, Inc. and a subsequent appraisal proceeding brought by dissenting stockholders under 8 Del. C. § 262. As a condition of an earlier merger involving the private equity firm Carlyle, the petitioners were parties to a stockholders agreement binding the corporation and all of its stockholders that purported to waive the stockholders’ statutory appraisal rights. At the trial court level, the Court of Chancery enforced the contractual waiver and granted the company’s motion to dismiss. On appeal, alongside other contentions, the petitioners argued that statutory appraisal rights are one of the fundamental features of corporate identity and should be found nonwaivable under Delaware law and public policy. More ›

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CCLD Rejects Several Defenses to Insurance Coverage of a Settlement Paid By Investment Fund

Posted In CCLD, Insurance


Sycamore Partners Management, L.P. v. Endurance American Insurance Co., C.A. No. N18C-09-211 AML CCLD (Del. Super. Sept. 10, 2021)
Prior to the closing of a leveraged buyout of a company (the “Merger”) whereby the plaintiff investment fund sought to divest, liquidate, and resell some of the company’s high-value assets (the “Restructuring Transactions”), the company’s stockholders brought derivative claims against the company’s board relating to the voting process underlying the Merger. The company settled the Merger-related claims, the Merger closed, and the plaintiff executed the Restructuring Transactions. Shortly thereafter, company bondholders sought information from the company—which the company never provided—regarding whether the Merger and Restructuring Transactions violated an indenture between the bondholders and the company.  More ›

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Chancery Addresses Indemnification Claim Turning on the Contractual Definition of a Covered Person


GMF ELCM Fund L.P., et al. v. ELCM HCRE GP LLC, et al., C.A. No. 2018-0840-SG (Del. CH. Sept. 22, 2021)
This indemnification dispute arose out of an alternative entity dissolution proceeding involving a health care business. The claimant was a former employee of an entity within the web of entities implicated in the case. He sought indemnification from several entities for his defense of third-party claims in a separate litigation, from which he was dismissed. After the liquidating trustee objected to his claim, the claimant sought to enforce his rights in the Delaware dissolution proceeding. More ›

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Chancery Rejects Inadequate Disclosure Contentions and Grants Corwin Dismissal


Kihm v. Mott, C.A. No. 2020-0938-MTZ (Del. Ch. Aug. 31, 2021)

Under the Corwin doctrine, a fully informed and uncoerced approval of a board decision by the corporation’s disinterested stockholders can downgrade an otherwise heightened standard of review to deferential business judgment review and result in prompt dismissal of post-closing M&A litigation not involving a conflicted controlling stockholder. Kihm involved a merger breach of fiduciary duty challenge and an attempt to avoid Corwin cleansing based on alleged deficient disclosures in the target board’s recommendation statement to the stockholders. More ›

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Chancery Declines to Dismiss Narrow Claims Relating to Entity’s Dissolution In Favor of Pending Related Action


Hawkins v. Daniel, C.A. No. 2021-0453-JTL (Del. Ch. Aug. 24, 2021)
The Delaware courts utilize several doctrines to address motions to dismiss or stay in favor of related litigation, including McWane and Cryo-Maid, all of which turn on legal and practical considerations and the court’s discretion.  This decision illustrates the application of the well-established Cryo-Maid factors to a Delaware action alleging narrow claims related to an entity’s winding-up process where the parties were engaged in long-pending litigation elsewhere.  More ›

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Chancery Addresses Viability of Contractual Fraud Claims Allegedly Barred by Agreement’s Terms

Posted In Chancery, Fraud


Online Healthnow, Inc. v. CIP OCL Investments, LLC, C.A. No. 2020-0654-JRS (Del. Ch. Aug. 12, 2021)
Online Healthnow concerns “contractual fraud claims,” meaning a statement made in the agreement itself that is known to be false by the party making the statement and on which the counterparty relies to its detriment. Under a prior Court of Chancery decision in ABRY Partners V, L.P. v. F&W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006), a seller cannot contractually eliminate its liability for engaging in knowing contractual fraud through provisions regarding anti-reliance and knowledge, and cannot rely on contractual caps for indemnity to limit the recovery for contractual fraud. This decision addressed the sellers’ unsuccessful attempt to limit the reach of ABRY Partners based on the relevant agreement’s survival clause purporting to terminate the challenged contractual representations at closing and the combination of anti-reliance and non-recourse provisions involving certain defendants. More ›

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Chancery Finds LLC Managers Liable for Self-Dealing Scheme Depleting Nearly All Investment Capital


Stone & Paper Investors, LLC v. Blanch, C.A. No. 2018-0394-PAF (Del. Ch. July 30, 2021)
This post-trial opinion involves a particularly egregious set of facts. Two LLC managers were accused of breaching their contractual and fiduciary duties and of fraudulently inducing the plaintiff, Stone & Paper, to invest $3.5 million in the company, Clovis Holdings, in connection with a series of self-dealing transactions wherein the managers paid themselves large sums of money in the form of salary and purported “loans” without receiving the required approvals for interested transactions.  More ›

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Chancery Upholds Well-Pled Claims Relating to Former Fiduciaries’ Retention of Derivative Arbitration Award


Optimiscorp v. Atkins, C.A. No. 2020-0183-MTZ (Del. Ch. July 15, 2021)
In Optimiscorp, the Court upheld claims against former directors and officers of plaintiff Optimiscorp arising out of the defendants’ failure to turn over to the company an approximately $7 million derivative arbitration award. As part of a long-standing and acrimonious legal battle between warring factions of the company’s board of directors, defendants previously had brought a lawsuit in Delaware on behalf of the company asserting that the company’s sitting directors and former outside counsel had breached their fiduciary duties and engaged in legal malpractice. Stipulating to dismissal of the Delaware complaint, the parties pursued the matter in arbitration and the arbitrator ultimately found the outside counsel liable, issued an award, and ordered the payment of attorneys’ fees and costs. The financially struggling company received notice of the award and proceeded to make strategic business decisions in expectation of receiving the funds. However, asserting that certain shareholders who were accused of wrongdoing were not entitled to a pro rata portion of the award, the defendants declined to turn the award over to the company. As a result, the company was forced to take out short-term loans with unfavorable terms and faced other negative consequences. More ›

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Chancery Addresses Claims Arising Out of LLC Dispute Involving Parallel Venture

Posted In Chancery, LLCs


Largo Legacy Group, LLC v. Evens Charles, C.A. No. 2020-0105-MTZ (Del. Ch. June 30, 2021)
In this LLC dispute, an investor in a hotel development company alleged that the company principals breached the operating agreement and their fiduciary duties by implementing a fraudulent scheme whereby a parallel venture, that they owned and controlled, was provided with certain adjacent land and company funds in a manner that improperly advantaged the parallel venture and the principals while harming the plaintiff. The plaintiff also alleged that the defendants had breached their fiduciary and contractual duties by refusing to provide it with financial information that it was entitled to under the operating agreement. The defendants moved to dismiss. The Court of Chancery, finding, as an initial matter, that laches did not block the claims, held that while plaintiff had failed to plead its fraud claim with adequate particularity, it had properly pled both its breach of fiduciary duty claim in connection with the alleged scheme and its breach of contract claim in connection with the company’s refusal to provide certain financial information. In addition to dismissing the fraud claim, the Court also dismissed plaintiff’s duplicative breach of fiduciary duty claim relating to the withheld financial information.  More ›

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Chancery Dismisses Conclusory Allegations of Gross Negligence and Disloyalty Against Oracle Officers and Directors Related to Alleged Controlled, Self-Dealing NetSuite Acquisition


In re Oracle Corp. Derv. Litig., C.A. No. 2017-0337-SG (Del. Ch. June 21, 2021)
While Delaware maintains a notice pleading standard, this decision reflects that conclusory allegations of breach of fiduciary duty leveled against officers and directors of a Delaware corporation may be found insufficient to state a claim. More ›

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Chancery Holds That Claim Based on Purposeful Tanking of Merger Agreement Earnout Is Breach of Contract Claim


Shareholder Representative Services LLC v. Albertson’s Companies, C.A. No. 2020-0710-JRS (Del. Ch. June 7, 2021)

Many merger agreements include earnout provisions under which the stockholders in the acquired company are entitled to additional consideration upon the occurrence of certain financial milestones. In this case, the Court of Chancery analyzed and considered the appropriate way to plead claims that the acquirer purposefully operated the company to miss earnout milestones. 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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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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kzeberkiewicz@morrisjames.com
T 302.888.6850
Kirsten Zeberkiewicz focuses her practice on litigation involving corporations and alternative entities formed under Delaware law.   Kirsten handles corporate governance and …
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