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K. Tyler O'Connell

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Showing 169 posts by K. Tyler O'Connell.

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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Chancery Discusses Standards for Reasonable Fees in Making Fee Award for “Bad Faith” Litigation

Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. Sep. 18, 2020)

Under the American Rule, parties to lawsuits in Delaware generally are responsible for paying their own attorneys’ fees and costs incurred in the litigation. Parties can petition Delaware courts, however, to shift the fees when such a party can prove that its opponent pursued its claims in “bad faith.”  More ›

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Chancery Awards No Damages to Either Party After the Break-Up of the Anthem/Cigna Merger

In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114- JTL (Del. Ch. August 31, 2020)

This action arose out of a failed merger transaction involving the second and third largest health insurers in the United States, Anthem, Inc. and Cigna Corporation (“the Merger”). The parties had entered into a merger agreement on July 23, 2015 (“Merger Agreement”). Either party could terminate if the transaction did not close by January 31, 2017, a date later extended to April 30, 2017. The parties each agreed to covenants to cooperate and to use their best efforts to accomplish the Merger (“Efforts Covenants”). Specifically, they agreed to take all reasonable steps to consummate the Merger (the “Reasonable Best Efforts Covenant”) and to take “any and all actions” necessary to avoid impediments to the Merger from government entities (the “Regulatory Efforts Covenant”). The parties authorized Anthem to take the lead in working with government entities to facilitate the Merger, but the parties were required to cooperate to obtain regulatory approval (the “Regulatory Cooperation Covenant”). The parties’ obligations to close the Merger were subject to the condition that no governmental entity or court had acted to enjoin the consummation of the Merger (the “No Injunction Condition”).  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 Upholds Class Claims Alleging Breaches of Fiduciary Duty in Alleged Controlling Stockholder’s Tender Offer

In re Coty Inc. Stockholder Litigation, C.A. No. 2019-0336-AGB (Del. Ch. Aug. 17, 2020)  

JAB Holding Company S.à.r.l. and its affiliates (together “JAB”) completed a partial tender offer (the “Tender Offer”) for shares of Coty Inc. (“Coty”) on April 25, 2019, increasing its ownership stake from 40% to 60% of the outstanding Coty shares. At the time of the Tender Offer, Coty had a nine-member board of directors – four directors affiliated with JAB (the “JAB Directors”) and five individual directors (the “Individual Directors”). Pierre Laubies, the CEO of Coty, was one of the Individual Directors. Although Laubies was the only Individual Director with a management position at Coty, he, like all of the Individual Directors, had professional ties to JAB and its officers, with Laubies having formerly served as CEO of a JAB affiliate.  More ›

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Alleged Third-Party Beneficiary’s Contract and Alternate Unjust Enrichment Claims Survive Dismissal at the Pleadings Stage Based on Ambiguous Contract Language

CHS/Cmty. Health Sys., Inc. v. Steward Health Care Sys. LLC, C.A. No. 2019-0165-JRS (Del. Ch. Aug. 21, 2020)

A claim for unjust enrichment will not lie where there is a contract that governs the relationship between parties. Both types of claims may survive a motion to dismiss, however, if there exists a contractual ambiguity that prevents the Court of Chancery from interpreting the meaning of contract at the pleadings stage. 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 Dismisses Claim for Breach of Fiduciary Duty Where Parties’ Commercial Relationship Was One of Ordinary Care

Nieves v. Insight Building Co., LLC, C.A. No. 2019-0464-SG (Del. Ch. Aug. 4, 2020)

The Court of Chancery used an unlikely vehicle — a dispute over stormwater drainage — to further explain the limits of common law fiduciary duties. Plaintiffs/Homeowners experienced drainage issues and brought several claims against their builder, as well as the developer (“Developer”) from which the builder had purchased lots. One such claim was that Developer had breached a fiduciary duty to Homeowners, even though Plaintiffs did not purchase their lots directly from Developer or otherwise have a contractual or commercial relationship with Developer. Plaintiffs/Homeowners alleged Developer “owes a common law fiduciary duty … because Plaintiffs reposed a special trust in and reliance on the judgment of the developer.” (internal citations omitted.) More ›

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Chancery Holds That Management Does Not Have Unilateral Authority to Preclude a Director From Obtaining the Company’s Privileged Information

In Re WeWork Litig., Consol. C.A. No. 2020-0258-AGB (Del. Ch. Aug. 21, 2020)

In October 2019, The We Company’s (the “Company”) board of directors established a special committee (the “Special Committee”) to evaluate a potential transaction wherein SoftBank, the controlling shareholder, would acquire majority economic ownership and voting control of the Company. When SoftBank terminated the transaction, the Special Committee filed this action on behalf of the Company alleging that they had breached their contractual obligations to use reasonable best efforts to purchase $3 billion of the Company’s stock in a tender offer. More ›

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Chancery Holds Statutory Rights to Inspect Books and Records of a Delaware Corporation are Subject to the Internal Affairs Doctrine and Governed Exclusively by Delaware Law

JUUL Labs, Inc. v. Grove, C.A. No. 2020-0005-JTL (Del. Ch. Aug. 13, 2020)

Stockholder inspection rights are a core matter of the governance of a corporation. This decision holds that, pursuant to the internal affairs doctrine, inspection rights for a stockholder of a Delaware corporation are governed exclusively by Delaware law, not by laws of other jurisdictions, regardless of where a company’s principal place of business is located. More ›

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Chancery Rules Failure to Disclose “Intrinsic Value” Precludes Corwin Defense – But Does Not Necessarily Suggest a Breach of the Duty of Loyalty

In In re USG Corp. S’holder Litig., 2020 WL 5126671 (Del. Ch. Aug. 31, 2020), the Court of Chancery granted the director-defendants’ motions to dismiss post-closing money damages claims arising out of the sale of USG Corporation (“USG”) for less than what USG’s directors allegedly thought was its intrinsic value. Although the failure to disclose such “intrinsic value” prevented dismissal under Corwin v. KKR Financial Holdings, LLC, 125 A.3d 304 (Del. 2015), Vice Chancellor Sam Glasscock III held that, in the circumstances, that omission and the directors’ approval of the sale did not suffice to plead a breach of the directors’ fiduciary duty of loyalty.  More ›

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Chancery Denies Sellers’ Request for Dismissal, Finding That Fraud Claims Were Timely Filed and Properly Pled

Agspring Holdco, LLC v. NGP X US Holdings, L.P., C.A. No. 2019-0567-AGB (Del. Ch. July 30, 2020)

This opinion concerns a buyer’s attempt to plead fraud in connection the acquisition of a business. The Court denied in the main the defendants’ motion to dismiss the fraud claims brought in connection with private equity firm American Infrastructure Partners’ (the “Buyer”) $300 million acquisition of Agspring LLC (the “Company”), which was then almost entirely owned by NGP X US Holdings, LLP (“NGP”), another private equity firm.  More ›

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CCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims

Posted In CCLD, Fraud Claims, M&A

Infomedia Group, Inc. v. Orange Health Solutions Inc., C.A. No. N19C-10-212 AML CCLD (Del. Super. Ct. July 31, 2020)

This case is a strong reminder that Delaware will enforce anti-reliance clauses to bar claims for fraud where sophisticated parties voluntarily agree to the anti-reliance clauses. Here, plaintiff Infomedia Group, Inc., d/b/a Carenet Health Services entered into an asset purchase agreement (the “Purchase Agreement”) with defendant Orange Health Solutions, Inc. (“Citra”).  More ›

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Chancery Rejects Bid to Jettison USACafes and its Holding That, Absent Agreement to the Contrary, the Controllers of a Corporate General Partner Owe Fiduciary Duties

Fannin v. UMTH Land Development, L.P. (In re: United Development Funding III, L.P.), C.A. No. 12541-VCF (Del. Ch. Jul. 31, 2020).

The Court of Chancery has concluded that in certain situations, equity will, by default, impose fiduciary duties upon a corporate relationship. This decision rejects on stare decisis grounds an attempt to overturn longstanding precedent in this area. More ›

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Chancery Denies Books and Records Request From Indirect LLC Interest Holder That Assigned its Rights Prior to the Demand and the Action

SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. 2020-0064-JRS (Del. Ch. Jul. 24, 2020)
Describing the case as deja vu, the Court of Chancery dismissed Plaintiff’s second attempt to enforce alleged rights related to Defendant/Company. See SolarReserve CSP Holdings, LLC v.  Tonopah Solar Energy, LLC, C.A. 2019-0791-JRS (Del.  Ch. Mar. 18, 2020) (“SolarReserve I”). The Company was formed to develop a solar power plant in Nevada, but the plan never came to fruition. More ›

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toconnell@morrisjames.com
T 302.888.6892
Tyler O’Connell is a partner in the Corporate and Commercial Litigation group. He represents companies, members of management and investors in business disputes before the …
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