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K. Tyler O'Connell

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Showing 369 posts by K. Tyler O'Connell.

Plaintiffs Adequately Pled Unjust Enrichment for Materially Deficient Disclosures


Buttonwood Tree Value Partners, L.P. v. R.L. Polk & Co. Inc., C.A. No. 9250-VCG (Del. Ch. Dec. 29, 2023)
To state a claim for unjust enrichment, a plaintiff must adequately plead: (1) an enrichment; (2) an impoverishment; (3) a relation between the enrichment and impoverishment; and (4) the absence of a justification. In this Court of Chancery action, the plaintiffs claimed that the defendants were unjustly enriched because the plaintiffs were induced to tender their shares for inadequate compensation as a result of materially misleading disclosures. In response, the defendants argued that the relationship between the company’s self-tender and the benefits that the defendants received from subsequent special dividends and the sale of the company were too attenuated to plead that defendants were aware of these future developments. The Court held, however, that the plaintiffs had adequately pled their claims for unjust enrichment because defendants allegedly knew the true sale value of the company and defendants caused the company to make materially deficient disclosures to increase the defendants’ equity.

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Applying New Rule 23.1, Chancery Establishes Leadership Structure in Fox Derivative Litigation


In re Fox Corp. Deriv. Litig., C.A. 2023-0418-JTL (Del. Ch. Dec. 29, 2023).
The newly amended Court of Chancery Rule 23.1 identifies factors for a court to consider when resolving a litigation leadership dispute. In this case, which is the first decision to apply the amended Rule, the Court of Chancery carefully balanced those factors and identified the lead plaintiff and the lead counsel. More ›

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Chancery Denies Request for Mandatory Preliminary Injunction to Waive Advance Notice Bylaw and Permit Director Nominees to Stand for Election


Paragon Tech., Inc. v. Cryan, C.A. 2023-1013-LWW (Del. Ch. Nov. 30, 2023).
In Delaware, a preliminary injunction is granted “sparingly and only upon a persuasive showing that it is urgently necessary, that it will result in comparatively less harm to the adverse party, and that, in the end, it is unlikely to be shown to have been issued improvidently.” A party seeking a mandatory injunction must also show entitlement to the relief it seeks as a matter of law based on undisputed facts – akin to a summary judgment standard. In this case, “with some trepidation[,]” the Court of Chancery denied a request for preliminary mandatory injunctive relief due to factual disputes concerning whether a stockholder plaintiff complied with advance notice bylaws requiring disclosure of plans to change the corporation’s business and potential conflicts of interest.   More ›

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Chancery Finds Wholly Generic Objections to Discovery Requests Result in Waiver and Fee-Shifting


Bocock v. Innovate Corp., C.A. No. 2021-0224-PAF (Del. Ch. Dec. 6, 2023)
In this recent letter opinion, Vice Chancellor Fioravanti considered whether the plaintiffs’ failure to provide specific objections to discovery requests in a timely manner resulted in the waiver of those objections. More ›

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Chancery Finds that Non-Settling Defendants Waived their Right to Seek a Settlement Credit Under DUCATA


In re Mindbody Inc. S’holder Litig., Consol. C.A. 2019-0442-KSJM (Del. Ch. Nov 15, 2023)
The Delaware Uniform Contribution Among Tortfeasors Act (“DUCATA”) establishes the legal framework applicable when plaintiffs release only some joint tortfeasors through settlement. DUCATA creates a right of contribution among joint tortfeasors and specifies that an ultimate damages award against non-settling defendants can be reduced by amounts received in settlement from other joint tortfeasors. In this fiduciary duty action challenging the fairness of a merger, the Court ruled that, despite a settlement of claims against certain defendants, the non-settling defendants waived their right to seek a damages reduction. More ›

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Chancery Evaluates Supplemental Disclosures to Determine the Corporate Benefit and Awards Plaintiffs a Proportional Fee


Allen v. Harvey, C.A. No. 2022-0248-MTZ (Del. Ch. Oct. 30, 2023)
Delaware cases provide guidance on the standard for evaluating the “corporate benefit” from supplemental disclosures in advance of a stockholder vote – and the fees that should be awarded to plaintiffs for prompting such disclosures. This case involved supplemental disclosures of potential sources of conflicts held by a special committee’s chair and advisors in advance of a merger vote. The Court held that such disclosures were not extraordinary, but they still warranted a proportional fee award. More ›

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Chancery Decision Explains Availability of Reformation as a Targeted Remedy


AECOM, et al. v. SCCI Nat’l Hldgs., Inc., C.A. No. 2022-0727-MTZ (Del. Ch. Sept. 27, 2023)
Although the Court of Chancery frequently resolves contractual disputes, it grants contractual reformation only when “intervention [is necessary] to ensure the deal is what the parties agreed upon.” This pleadings-stage decision provides insight into the Court’s approach to reformation because the Court found that one claim supported reformation but the other did not. More ›

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Chancery Denies Advancement for Director Suspected of Leaking Confidential Financial Information


Hoffman v. First Wave BioPharma, Inc., C.A. No. 2023-0097-MTZ (Del. Ch. September 27, 2023)
A company's board of directors suspected one of its members had leaked the company's financial information to a third party and that the third party used the information to obtain a more favorable settlement with the company. In response, the board formed a board committee for discussion of confidential matters consisting of all directors other than the one suspected of having leaked information. The excluded director engaged an attorney to contest the formation of the board committee and filed an action for the advancement of his legal fees. He relied on an indemnification agreement that granted him a mandatory advancement right for fees incurred by reason of his corporate status in connection with a covered proceeding; he argued that the directors must have investigated his conduct if they had reached a conclusion that he had leaked information and that an investigation was a covered proceeding. More ›

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Spoliation of Email and Texts Leads to Adverse Inferences and Fee Shifting


Gener8 LLC v. Castanon, 2022-0246-LWW (Del. Ch. Sept. 29, 2023)
This dispute concerned a non-compete agreement that the plaintiffs alleged the defendant breached by establishing a competing business. The defendant denied the existence of relevant texts and email communications, when in fact he intentionally withheld and deleted them. In discovery, he claimed no relevant communications existed on his phone, citing that he was not a “big texter.” The defendant testified to this at trial, and pled ignorance of both the operations of the competing enterprise and any discussions or communications to that effect. However, other parties produced text messages including the defendant, making clear that he had in fact sent many texts concerning these subjects.  More ›

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Chancery Finds Defendant Officer Usurped Corporate Opportunity for His Own Competing Venture


Sorrento Therapeutics, Inc. v. Mack, C.A. No. 2021-0210-PAF (Del. Ch. September 1, 2023)
Under the corporate opportunity doctrine, an officer or director may not take a corporate opportunity for himself if "(1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimical to his duties to the corporation.” Broz v. Cellular Info. Sys., Inc., 673 A.2d 148, 154-55 (Del. 1996). In this post-trial opinion, the Court of Chancery held that a co-founder and former CEO who stayed on as President following his sale of the company to a strategic acquirer breached his fiduciary duties by usurping its corporate opportunities. While the defendant argued the company lacked the resources to pursue the opportunity, the Court reasoned that there was "no structural or situational barrier" to the company obtaining the capital needed. The Court did not credit the defendant's argument that the company was not likely to pursue the opportunities. The Court also explained that the corporate opportunity "test focuses on the company's ability to pursue the opportunity, not the board's likelihood of actually deciding to do so." The Court also found that the third prong was met because the opportunities were in the same line of business in which the company operated, but the defendant had usurped them for his own venture. It accordingly found the defendant liable and ordered supplemental briefing regarding the appropriate remedies.

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Chancery Finds That Books and Records Incorporated by Reference in Complaint Demonstrate the Lack of a Valid Caremark Claim


Joel Newman v. KKR Phorm Investors, L.P., et al. C.A. No. 2022-0310-NAC (Del. Ch. Aug. 31, 2023).
At the motion to dismiss stage, Delaware courts will consider the facts alleged in the complaint as well as the documents incorporated into and integral to it. Under Court of Chancery Rule 23.1, a derivative plaintiff is entitled only to reasonable inferences drawn from the facts asserted and the documents incorporated. Here, the Court reviewed the books and records incorporated by reference in the complaint and determined that the plaintiff failed to plead demand futility. More ›

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Chancery Declines to Defer to the Deal Price in Appraisal Proceeding Involving a Controller Squeeze-Out Subject to MFW Protections


HBK Master Fund L.P. v. Pivotal Software Inc., C.A. No. 2020-0165-KSJM (Del. Ch. Aug. 14, 2023)
The Delaware Court of Chancery engages in an independent valuation process when determining the fair value of petitioners' stock in appraisal actions. In this case, Chancellor McCormick addresses an interesting question concerning the deal price primacy under Delaware law and ultimately rejects deference to it in controlling stockholder squeeze-out transactions subject to the MFW protections. More ›

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Chancery Rejects Declining-Percentage Method, Awards $266.7 Million in Attorneys’ Fees for $1 Billion Class Action Settlement


In re Dell Techs. Inc. Class V S'holders Litig., C.A. No. 2018-0816-JTL (Del. Ch. July 31, 2023, revised Aug. 22, 2023)
Stockholders filed class actions in the Court of Chancery challenging the terms of a redemption of a special class of common stock. After years of litigation and the filing of pre-trial briefs, nineteen days before trial, the parties reached a cash settlement of $1 billion. The plaintiff's counsel submitted a fee application for 28.5 percent of the common fund. Stockholders holding more than 25 percent of the class objected to the fee application and asked that the Court instead apply the declining-percentage method used for calculating fees in federal securities litigation. More ›

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Chancery Orders Company to Produce Books and Records in Response to Section 220 Demand and Grants Stockholder Leave to Seek Fees and Costs


Myers v Academy Securities, Inc. C.A. No. 2023-0241-BWD (Del. Ch. July 27, 2023).
Under Section 220 of the Delaware General Corporation Law ("DGCL"), stockholders are entitled to corporate books and records if they make a valid demand on the company, have a proper purpose for conducting an inspection, and establish that each category sought is essential to that purpose. In this case, a Magistrate in Chancery found that the stockholder met his burden to receive books and records for the purpose of determining the value of his shares. The Court also recommended that the stockholder be permitted to seek his attorneys' fees and costs for the books and records action. More ›

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Chancery Approves Revised Class Action Settlement After Denying Initial Proposal Due to Overly Broad Release


In re AMC Entm't Holdings, Inc. S'holder Litig., Consol. C.A. No. 2023-0215-MTZ (Del. Ch. July 21, 2023)
In re AMC Entm't Holdings, Inc. S'holder Litig., Consol. C.A. No. 2023-0215-MTZ (Del. Ch. Aug. 11, 2023)
The board of directors of a company in financial distress sought to raise capital by issuing more common stock. Existing common stockholders did not approve the proposed measure. The board then issued new preferred stock with sufficient voting power to ensure the passage of board proposals to issue new common shares. Stockholders filed a class action, alleging that the board violated the Delaware General Corporation Law in creating the preferred stock and breached its fiduciary duties by diluting the common stock's voting power. More ›

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toconnell@morrisjames.com
T 302.888.6892
Tyler O'Connell represents companies, members of management, and investors in business disputes before the Delaware courts. Tyler also counsels directors, officers, and managers …
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