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Kirsten A. Zeberkiewicz

Counsel

Showing 53 posts by Kirsten A. Zeberkiewicz.

Supreme Court Finds Enforceable Preliminary Agreement


Cox Communications v. T-Mobile, No. 340, 2021 (Del. Mar. 3, 2022)
Delaware courts have a “general aversion” to enforcing agreements to agree. But Delaware law also recognizes enforceable preliminary agreements that create an obligation to try to negotiate a final agreement on all material terms in good faith. Here, two companies, Cox Communications and T-Mobile, disputed whether a particular provision of a settlement agreement was enforceable and to what extent. The provision related to Cox partnering with a mobile network provider and generally obligated Cox to negotiate with T-Mobile. Those negotiations failed, Cox partnered with Verizon, and this suit resulted. The Court of Chancery entered an injunction that enforced the provision by prohibiting Cox from partnering with another provider besides T-Mobile. On appeal, the Delaware Supreme Court vacated the injunction and reversed, finding the provision left open several material terms of a future definitive agreement, was not itself an enforceable agreement, and instead was a “Type II” preliminary agreement that obligated the parties to negotiate open items in good faith. The Supreme Court remanded the case for a determination of whether the parties fulfilled that obligation.

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Chancery Finds it Lacks Discretion to Decline Jurisdiction Over a Case Where Jurisdiction Exists Under Section 111 of the DGCL


S’holders Rep. Serv. LLC v. DC Capital Partners Fund II, L.P., C.A. No. 2021-0465-KSJM (Del. Ch. Feb. 14, 2022)
While the Court of Chancery has exclusive subject matter jurisdiction over claims and remedies sounding in equity, Section 111 of the DGCL grants the Court concurrent, non-exclusive jurisdiction in cases involving the interpretation of certain corporate instruments—regardless of whether those claims or the relief sought are equitable in nature. In DC Capital Partners, the plaintiff elected to bring legal (rather than equitable) claims involving the interpretation of stock purchase agreements in the Court of Chancery pursuant to Section 111’s concurrent subject matter jurisdiction. The defendants argued that because the claims did not otherwise fall within the Court’s subject matter jurisdiction, and because Section 111 provides for concurrent rather than exclusive jurisdiction, the Court had the discretion to decline to hear the case. Specifically, the defendants noted that Section 111 provides that certain claims “may” be brought in the Court of Chancery and argued that this permissive language provided the Court with the discretion not to hear such claims. The Court rejected the defendants’ contention, finding that the discretion to bring a claim in the Court of Chancery pursuant to Section 111 belongs to the plaintiff, not the Court. Therefore, the Court held that once a plaintiff elects to bring a claim in Chancery authorized under Section 111, the Court lacks the discretion to decline to hear the case based on subject matter jurisdiction.

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Chancery Denies Petition to Appoint Custodian to Revive Abandoned Delaware Corporation for Use as Blank Check Company

Posted In Chancery, Custodians


In re Forum Mobile, C.A. No. 2020-0346-JTL (Del. Ch. Feb. 3, 2022)
In Forum Mobile, the Court of Chancery denied a petition to appoint a custodian pursuant to DGCL Section 226(a)(3). The petitioner sought to revive an abandoned and defunct Delaware corporation for use as a blank check company. Specifically, the petitioner sought to effectuate a reverse merger of the defunct company with a new business, allowing the new business to access public markets without implementing the formal IPO process. Holding that “the plain language of Section 226(b) does not contemplate that a custodian appointed under Section 226(a)(3) could revivify a corporation,” the Court denied the petition, reasoning that custodians appointed pursuant to Section 226(a)(3) are limited to “liquidating the affairs of the abandoned corporation and distributing its assets.”  More ›

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Chancery Dismisses All Claims in Stockholder Challenge to Cash-Out Merger Transaction


Harcum v. Lovoi, C.A. No. 2020-0398-PAF (Del. Ch. Jan. 3, 2022)
In Harcum, the Delaware Court of Chancery dismissed all claims brought in a stockholder suit alleging fiduciary breaches in connection with the $1 billion dollar acquisition of Roan Resources Inc. by Citizen Energy Operating, LLC. The Court found that the transaction was “cleansed” pursuant to Corwin v. KKR Financial Holdings LLC, 125 A.3d 304, 312 (Del. 2015), because the plaintiff failed to adequately plead that any alleged controllers were conflicted or that the transaction was not approved by an uncoerced, fully informed stockholder vote.  More ›

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Chancery Finds Lack of Personal Jurisdiction Over Delaware Corporate Officers Based on Due Process Considerations


In re Bam International, LLC v. The MSBA Group Inc., C.A. No. 2021-0181-SG (Del. Ch. Dec. 14, 2021)
Two officers of a Delaware corporation were sued for alleged tortious interference with an escrow agreement between the Delaware corporation employing the officers and the plaintiff (another Delaware corporation). The plaintiff also brought a breach of contract claims against the Delaware corporation and other entity defendants. The two officers moved to dismiss for lack of personal jurisdiction arguing that, other than their status as officers of a Delaware corporation, they had no relationship with Delaware. The officers further noted that they were not signatories to the contract at issue, which, in any event, was only connected to Delaware by choice of law and forum clauses. Plaintiff contended that the officer defendants, as fiduciaries of a Delaware entity, had implicitly consented to jurisdiction pursuant to 10 Del. C. § 3114(b). More ›

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Chancery Defers Substantive Arbitrability Question to Arbitrator


Hagler v. Evolve Acquisition LLC, et al., C.A. No. 2021-0431-SG (Del. Ch. Dec. 28, 2021)
A party to a purchase agreement filed an arbitration relating to certain indemnities for alleged breaches of representations and warranties in the agreement. A few months later, another party to the purchase agreement filed an action in the Delaware Court of Chancery seeking a declaratory judgment relating to the same financial figures at issue in the arbitration and seeking an injunction (and other relief). The defendant in the Court of Chancery action moved to dismiss for lack of subject matter jurisdiction, claiming that the arbitration provision in the purchase agreement deprived the Court of jurisdiction and that any questions about arbitrability were for the arbitrator. Plaintiff argued that there was a broad equity carve-out from arbitration in the purchase agreement, which indicated that substantive arbitrability was an issue for the Court, not for the arbitrator. More ›

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Chancery Dismisses Breach of Fiduciary Duty Claims Involving Bio-Tech Company Developing a COVID-19 Vaccine


In re Vaxart, Inc. Stockholder Litigation, Consol. C.A. No. 2020-0767-PAF (Del. Ch. Nov. 30, 2021)
Plaintiffs challenged amendments to warrant agreements between Vaxart and its former controlling stockholder, Armistice, alleging that the board intentionally withheld information significantly affecting the company’s share price, which permitted Armistice to engage in insider trading in violation of the board’s and Armistice’s fiduciary duties. Defendants moved to dismiss for failure to state a claim and for failure to make demand on the board. The Court granted the motion in part and dismissed derivative claims against Armistice and the board, finding that plaintiffs had failed to establish that Armistice was a controller and (relatedly) that demand on the Vaxart board would be futile.  More ›

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Chancery Denies Books and Records Inspection Brought to Advance the Stockholder’s Interests as a Creditor


Georgia Notes 18, LLC v. Net Element, Inc., C.A. No. 2021-0246-JRS (Del. Ch. Nov. 18, 2021)
Plaintiff, a stockholder and creditor of the defendant company, demanded to inspect the company’s books and records pursuant to 8 Del. C. § 220. The company objected, arguing that the plaintiff had failed to state a proper purpose for inspection and had a primary improper purpose. The Court found in the company’s favor, determining that plaintiff sought documents for the primary improper purpose of seeking pre-litigation discovery in connection to its interests as a creditor. More ›

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Chancery Dismisses Derivative Suit Involving Wayfair and Challenging Debt Issuance to Private Equity Shareholders for Failure to Make Demand


Equity-League Pension Trust Fund v. Great Hill Partners, L.P., C.A. No. 2020-0992-SG (Del. Ch. Nov. 23, 2021)
A derivative suit brought on behalf of online home goods retailer, Wayfair, challenged the issuance of $535 million in convertible debt early in the COVID-19 pandemic to certain of Wayfair’s private equity investors and their affiliates. The transaction was recommended by a transaction committee and an audit committee, and was ultimately approved by the Wayfair board. The defendants moved to dismiss under Rule 23.1 arguing that the plaintiff was required but failed to make a pre-suit demand on the Wayfair board. Plaintiff argued that demand was futile because, in addition to the four directors who were on the buy-side of the transaction and thus interested, three directors sitting on the audit committee faced a substantial likelihood of liability. Plaintiff needed to sufficiently allege that at least one of the audit committee members was conflicted to arrive at a majority of the board for demand futility purposes. Finding that plaintiff had failed to adequately plead demand futility, the Court granted the defendants’ motion to dismiss. More ›

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Chancery Dismisses Time-Barred Complaint Against Zillow


Chertok v. Zillow, Inc., C.A. No. 2019-0849-LWW (Del. Ch. Oct. 18, 2021)
Plaintiffs, a former co-founder and director of NMD Interactive (“Chertok”) and an LLC that he managed, brought a breach of contract action against Zillow seeking merger consideration and dividends in connection with Zillow’s 2013 acquisition of NMD. Over the course of six years, Zillow and plaintiffs engaged in negotiations relating to payment of consideration and dividends that Zillow continued to withhold based on plaintiffs’ alleged failure to comply with conditions in the merger agreement. Relevant to the analysis in this case, starting in 2011, NMD brought litigation unrelated to the merger against Chertok in New York federal court, which concluded in 2017. More ›

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Chancery Resolves Contingent Claim Security Dispute Between Altaba and Verizon in Altaba’s Judicial Dissolution Proceedings


In re Altaba, Inc., C.A. No. 2020-0413-JTL (Del. Ch. Oct. 8, 2021)
Petitioner Altaba (formerly Yahoo!) implemented a statutory dissolution process whereby the Delaware Court of Chancery was charged with overseeing the winding up of Altaba’s affairs, including resolving any disputes about the amount and form of security to set aside for contingent, conditional, or unmatured contractual claims. In connection with this process, claimant Verizon objected to the amount and form of security that Altaba agreed to set aside to satisfy Verizon’s conditional claim relating to indemnification rights associated with consumer class action lawsuits against Altaba. More ›

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Chancery Declines to Award Damages Equivalent to Contractual Dissociation Remedy Under Partnership Agreement

Posted In Chancery, LLCs/LLPs


In re Cellular Telephone Partnership Litigation, Coordinated C.A. No. 6885-VCL (Del. Ch. Sept. 28, 2021)
Plaintiffs held a minority interest in a partnership owned and controlled by AT&T. In 2010, AT&T implemented a transaction causing the partnership to transfer its assets to an affiliate, freezing out the plaintiffs. In connection with the freeze out, plaintiffs received $4.1 million—their pro rata share of the $219 million that AT&T paid to the partnership. Plaintiffs later brought an action in the Court of Chancery alleging that by implementing the transaction, AT&T breached the partnership agreement on a number of different bases. More ›

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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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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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