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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Photo of Delaware Business Litigation Report Patricia A. Winston
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Patricia A. Winston practices in the areas of business litigation, corporate and fiduciary litigation, alternative entity disputes, corporate governance, special committee …

Showing 10 posts by Patricia A. Winston.

Chancery Determines Appraisal “Fair Value” Below Merger Consideration, Questions Judicial Notice of Valuation Scholarship

Posted In Appraisal, M&A

In re Appraisal of Jarden Corp., Consol. C.A. No. 12456-VCS (Del. Ch. July 19, 2019).

This decision presents another cautionary tale for stockholders of a target public company who consider seeking statutory appraisal instead of accepting the merger consideration. More ›

Chancery Awards $3 Million in Attorneys’ Fees Following Invalidation of Charters’ Forum-Selection Provisions for Securities Act Claims

Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. Jul. 8, 2019).

In December 2018, the Court of Chancery held that forum-selection provisions in three corporate charters were ineffective.  The provisions had required any claim under the Securities Act of 1933 to be filed in federal court (“Federal Forum Provisions”).  The Court held them to be invalid, because federal securities claims were not “internal affairs” claims for which a Delaware corporation’s charter may choose a forum.  Seven months later, the Court granted an application for an all-in award of attorneys’ fees and expenses in the amount of $3 million under the corporate benefit doctrine.  Defendants had argued that the award should not exceed $364,723 plus expenses.  Reasoning that “the plaintiff achieved a significant and substantive result by successfully invalidating the Federal Forum Provisions,” the Court turned to Delaware precedent to determine an appropriate fee for this kind of non-monetary relief. More ›

Delaware Court of Chancery Orders Full Public Access to Confidential Filings Months After Settlement

GKC Strategic Value Master Fund, L.P. v. Baker Hughes Inc., C.A. No. 2017-0769-SG (Del. Ch. Jun. 25, 2019).

Universal public access to court filings is the default and confidentiality is the exception.  Rule 5.1 of the Court of Chancery provides for the filing of confidential information by litigants.  In this decision, the Court makes clear that a violation of Rule 5.1 may result in the loss of confidential treatment. More ›

Chancery Sustains Claims Against Special Committee Members Concerning Stock Incentive Plan

Reith v. Lichtenstein, C.A. No. 2018-0277-MTZ (Del. Ch. June 28, 2019).

As Reith explains, directors may lose the protections of the business judgment rule and expose themselves to liability if they knowingly or deliberately fail to adhere to the terms of a stock incentive plan, such as by violating a clear and unambiguous provision.  And, as Reith illustrates, Delaware courts may consider a company’s prior public disclosures about a plan’s terms in addressing that issue. More ›

Chancery Declines to Dismiss Derivative Claim Challenging Compensation of Goldman Sachs Directors

Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. May 31, 2019).

Recently, the Delaware Supreme Court held in In re Investors Bancorp, Inc. Stockholder Litigation, 177 A.3d 1208 (Del. 2017) that stockholder approval of director self-compensation plans will shift the standard of review from entire fairness to business judgment only where the stockholders approve a plan that does not involve future director discretion in setting the compensation amounts. In Stein, the Court of Chancery applies Investors Bancorp and declines to dismiss a disloyal compensation claim, notwithstanding that the terms of the challenged compensation plans sought to absolve the directors of self-dealing claims and even though the plaintiff attacked only the compensation amount, not the process by which it was determined. More ›

Delaware Supreme Court Overturns Nominal Damages Award and Explains the “Efficient Breach” Theory

Leaf Invenergy Co. v. Invenergy Renewables LLC, No. 308, 2018 (Del. May 2, 2019).

Limited Delaware case law exists on the “efficient breach” theory.  A new Delaware Supreme Court ruling examines that theory and confirms it is not a bar to recovery or an avenue for modifying damages calculations.  Rather, efficient breach is the legal concept that a party might find an intentional breach to be economically advantageous if the breach’s benefits exceed the damages it might owe.  Efficient breach aside, the task of Delaware courts is to interpret contracts to fulfill parties’ shared expectations at time of contracting.  That is a concept the Supreme Court emphasized when reversing the Court of Chancery’s nominal damages award in this case. More ›

Delaware Superior Court Ruling Provides Guidance for Pre-Trial Motion Practice and Trial Preparation

In re Bracket Holding Corp. Litig., Consol. C.A. No. N15C-02-233 WCC CCLD.

In this decision arising out of the Defendants’ Motions in Limine, the Superior Court’s Complex Commercial Litigation Division provides useful insight regarding pre-trial motion practice and trial preparation.  By way of brief background, in 2013, plaintiff purchased a pharmaceutical services provider from defendants.  The securities purchase agreement (SPA) included express representations and warranties related to financial statements.  Over the course of several months after purchase, plaintiff discovered what it alleges were improper accounting practices that constituted fraud and that had caused it to overpay for the provider to the tune of $50 million. More ›

Is Appraisal Arbitrage Past Its Prime?

Once again, some corporate lawyers are complaining that the Delaware courts are too good to stockholders or, more often, plaintiffs’ lawyers. In the more recent past, those complaints focused on merger litigation that led to disclosure-only settlements. Now the outcry is over so-called appraisal arbitrage. But, just as the Delaware courts eventually curbed disclosure-only settlements in merger litigation, the more recent appraisal decisions are making appraisal litigation much less attractive. In just five days, two Court of Chancery decisions dealt major setbacks to appraisal arbitrage. More ›

The Hidden Risks in Allocating Risk

There are always risks involved in buying a company. Until you are actually inside a company's operations, you can never be sure you know everything about it. Conversely, sellers too will bear the risk that buyer's remorse will lead to post-closing claims against the sellers when they no longer have the company assets to use to defend themselves. Two related, recent Delaware Court of Chancery decisions illustrate the hidden risks when buyers and sellers try to allocate between them the inherent risks in a deal. More ›

When Is a Manager Not Really a Manager?

Under the Delaware Limited Liability Company Act, a non-Delaware resident may be deemed to have consented to being sued in Delaware if she is a “manager” of the LLC. But who, exactly, is such a manager? That question is answered by the recent decision in In re Dissolution of Arctic Ease, C.A. No. 8932-VCMR (Del. Ch. Dec. 9, 2016). As that decision points out, all who manage are not “managers” under the Delaware LLC Act. More ›