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Matthew F. Lintner

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Showing 59 posts by Matthew F. Lintner.

Superior Court Examines Choice of Law Principles For Mixed Contractual and Non-Contractual Claims


Arkray America, Inc. v. Navigator Business Solutions, Inc., C.A. No. N20C-12-012 MMJ [CCLD] (Del. Super. June 9, 2021)
Arkray, a Delaware corporation based in Minnesota, manufactures diabetes testing and management supplies. Arkray brought claims against Navigator, a provider of Enterprise Resource Planning software solutions based in Utah, and N’Ware, a provider of custom “add-on” software for warehouse management based in New Hampshire. Arkray had contracted with Navigator under a software and consulting services agreement (the “Agreement”), which provided that it “shall be governed by and construed under the laws of the State of Utah without reference to its conflicts of law principles.” Arkray contracted with N’Ware under a similar “License Agreement,” which provided that it “shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America, without reference to its conflicts of laws principles.”  More ›

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Chancery Upholds Fiduciary Duty Claims Arising Out Of Deal Involving an Alleged Control Group That Included Non-Stockholders and a Sale Process Managed By a Disinterested and Independent Special Committee


In re Pattern Energy Grp. Inc. Stockholders Litig., C.A. No. 2020-0357-MTZ (Del. Ch. May 6, 2021)
This decision mostly denying a motion to dismiss examines several important issues in post-closing M&A fiduciary duty litigation relevant to stating a claim and overcoming an otherwise claim-cleansing stockholder vote under the Corwin doctrine. These include what it takes to adequately plead the existence of a control group, a fraud-on-the-board theory, a bad faith breach of fiduciary duty by admittedly disinterested and independent directors charged with managing a sale process and overseeing potential conflicts, and claims against individual officers. Core to the plaintiff’s well-pled complaint in this action were allegations that the committee and certain officers favored a buyer preferred by a private equity fund, which, among other things, formed the company, controlled its upstream supplier, and held significant contractual consent rights.  More ›

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Chancery Finds No Transaction-Specific Control Where Plaintiffs Failed to Allege that a Majority of the Members of a Special Committee Were Under the Sway of a Would-Be Controller


In re GGP Inc. Stockholder Litig., C.A. No. 2018-0267-JRS (Del. Ch. May 25, 2021).
Under MFW and its progeny, if there is a conflicted controlling stockholder, then in order to receive the benefits of the business judgment rule, the transaction must be negotiated and approved by independent and disinterested directors and conditioned on an informed and uncoerced vote of a majority of the minority stockholders. A stockholder that owns less than 50% of the voting power of the corporation may be a controller if it exercises control over the business affairs of the corporation either generally or with respect to the transaction at-issue. More ›

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Implied Covenant of Good Faith and Fair Dealing Saves Employee’s Claim for Improper Termination Under Company’s LLC Agreement


Smith v. Scott, C.A. No. 2020-0263-JRS (Del. Ch. Apr. 23, 2021)
The Delaware LLC Act provides that fiduciary duties may be expanded or limited by the provisions of an LLC agreement. If the agreement is silent, then traditional corporate fiduciary duties apply. However, if the agreement unambiguously disclaims fiduciary duties, then the only duties that exist are those specified contractually in the LLC agreement and the implied covenant of good faith and fair dealing.  More ›

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Chancery Shifts Attorneys’ Fees, Reasoning Perjury Is Bad Faith Per Se


Lyons Ins. Agency Inc. v. Wilson, C.A. No. 2017-0092-SG (Del. Ch. Apr. 29, 2021).
In this action, the Court of Chancery noted that it heard “perhaps the most cogent, and certainly the briefest, argument for fee shifting under the bad faith exception I have been privileged to hear: ‘perjury is bad faith.’” Plaintiff Lyons Insurance Agency Inc. (“Lyons”) sued its former employee Howard Wilson, an insurance broker, for breach of the non-compete in his employment contract. At a hearing for a preliminary injunction, Wilson testified that he needed to follow his clients to another firm because he could not entice them to stay at Lyons. Throughout the litigation, he maintained that he had not intended to rob Lyons of business. But, before a damages hearing, Wilson submitted an affidavit repudiating his earlier testimony. At the damages hearing, he testified that he conspired with the other firm to breach his employment agreement, recanting his earlier testimony. More ›

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Chancery Lacks Jurisdiction to Grant Injunction While Superior Court Appeal Is Pending


Vama F.Z. Co. v. WS02, Inc., C.A. No. 2020-0141-JRS (Del. Ch. Mar. 29, 2021)
This case illustrates that the Court of Chancery lacks subject matter jurisdiction to issue an injunction pending appeal of another court’s rulings, and where the plaintiff has adequate remedies at law.  More ›

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Chancery Finds SEC’s Filing of an Enforcement Action Did Not Trigger Redemption Right

Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., C.A. No. 2021-0007-MTZ (Del. Ch. Mar. 19, 2021)

Plaintiff Tetragon Financial Group Limited is a shareholder of Ripple Labs, Inc., a blockchain company that uses a cryptocurrency called XRP. Tetragon had a right under a Stockholders’ Agreement to require Ripple to redeem its shares if the SEC or another government agency “determine[s] on an official basis” that XRP is a security “on a current and going forward basis.” Here, Tetragon sought a declaration that the SEC’s decisions to file an enforcement action in federal District Court, and issue a Wells Notice, each triggered the redemption right. More ›

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Chancery Confirms that the Implied Covenant Imposes a “Good Faith” Component to an Agreement to Negotiate

DG BF, LLC v. Ray, C.A. No. 2020-0459-MTZ (Del. Ch. Mar. 1, 2021)

The Operating Agreement for an LLC involved in the cannabis industry provided for a five-member board of managers, with one Independent Manager appointed by a process of negotiation between two other managers (the plaintiff in the action and one of the defendants). Under the process set forth in the Operating Agreement, either side could present various candidates until there was agreement, which was supposed to happen within a 180-day period. The parties could also mutually agree to extend the deadline. More ›

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Superior Court Finds Securities Lawsuits Do Not Fall within Relatedness Exclusion of Insurance Policy

Northrop Grumman Innovation Systems, Inc. v. Zurich American Insurance Company, C.A. No. N18C-09-210 (Del. Super. Ct. Feb. 2, 2021)

This case arises from an insurance coverage dispute between an insured and multiple insurance providers in a policy tower for defense fees and settlement costs from two securities class action lawsuits. In the Complex Commercial Litigation Division of the Superior Court, the insurers argued that they were not obligated to reimburse losses arising from the two securities lawsuits because of, inter alia, an exclusion regarding the “relatedness” of Wrongful Acts. Under Delaware law, the exception to coverage because of the “relatedness” of Wrongful Acts only applies “where the two underlying claims are fundamentally identical.” The Court held that the exception did not apply in this case simply because the securities lawsuits involved the same wrongdoers and the same transaction, among other things. Instead, the fact that there were variations in the mens rea, motive, burdens of proof, the timing and other factors, suggested that the securities lawsuits did not involve the exact same subject. Accordingly, the Court found that the two claims were not “related” and the relatedness exclusion did not apply.

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Superior Court Applies “Law Most Favorable” Choice of Law Provision and Finds Investment Fund’s Settlement of a Fraudulent Transfer Claim Was an Insurable Loss

Sycamore Partners Management, L.P. v. Endurance American Insurance Company, C.A. No. N18C-09-211 AML CCLD (Del. Super. Feb. 26, 2021)

The bankruptcy estate of Nine West accused investment firm Sycamore Partners of structuring transactions involving Nine West in such a manner as to constitute a fraudulent transfer, with too much debt burdening the entity after Sycamore Partners sold off certain prime assets. Sycamore Partners settled such claims for a payment of $120 million to the bankruptcy estate, and then sought coverage for the settlement from its carriers. More ›

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Chancery Grants Access to Facebook Board Emails in Books and Records Action

Employees’ Retirement System of Rhode Island v. Facebook, Inc., C.A. No. 2020-0085-JRS (Del. Ch. Feb. 10, 2021)

In this opinion, the Court of Chancery confirms that it will grant access to emails in a books and records action where the corporation’s board minutes and other materials are insufficient for the plaintiff’s purposes. Here, a stockholder of Facebook, Inc. requested books and records to investigate Facebook’s $5 billion settlement with the Federal Trade Commission for the unauthorized sale of customer information to Cambridge Analytica and other data breaches. The plaintiff sought to investigate whether Facebook overpaid in its settlement to shield its chief executive Mark Zuckerberg from personal liability.  More ›

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Chancery Applies Unclean Hands Doctrine to Prevent a Trustee from Rescinding the Decanting of a Trust

In the Matter of: The Niki and Darren Irrevocable Trust and the N and D Delaware Irrevocable Trust, C.A. No. 2019-0302-SG (Del. Ch. Feb. 4, 2021)

Delaware’s decanting statute allows a trustee to “decant” a trust by “pouring” the corpus out into a new modified trust. But, to do so, a trustee must have been able to invade the trust principal under the original trust’s terms, and the second trust’s terms must be substantially the same in its treatment of beneficiaries. More ›

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Delaware Supreme Court Adopts Post-Merger Derivative Standing Framework From In re Primedia, Inc. Shareholders Litigation

Morris v. Spectra Energy Partners (DE) GP, LP, No. 489, 2019 (Del. Jan. 22, 2021)

In Delaware corporate law, “the standing inquiry has assumed special significance,” especially in the post-merger context. The Delaware Supreme Court in Morris v. Spectra Energy holds that a plaintiff has post-merger standing if she brings a claim disputing the fairness of a merger and satisfies the three-part framework set forth in In re Primedia, Inc. Shareholders Litigation, 67 A.3d 455 (Del. Ch. 2013), even if the underlying claim seems unlikely to succeed on the merits. More ›

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Delaware Choice of Law Provision in Stock Purchase Agreement Does Not Eliminate Claim for Fraud under California Securities Act

Swipe Acquisition Corp. v. Krauss, C.A. No. 2019-0509-PAF (Del. Ch. Jan. 28, 2021)

This decision concerned a motion to dismiss a claim for fraud under the California Securities Act, which the defendants argued was waived by a choice of law provision in the parties’ stock purchase agreement (“SPA”) indicating that “all claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement … shall be governed by, and enforced in accordance with, the internal laws of the State of Delaware, including its statutes of limitations.” More ›

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Chancery Finds That Delaware’s Trade Secrets Statute Preempts Unjust Enrichment Claim for Same Alleged Misconduct

250ok, Inc. v. Message Sys., Inc., C.A. No. 2020-0588-JRS (Del. Ch. Jan. 22, 2021)

This decision clarifies the scope of preemption of common law claims under the Delaware Uniform Trade Secret Act (“DUTSA”). Plaintiff asserted both a claim under the DUTSA and a claim for unjust enrichment, where both claims arose from the same alleged misconduct. The Court of Chancery concluded that a trade secret claim under the DUTSA “occupies the field” and preempts a claim for common law unjust enrichment. Applying Delaware precedent on the issue, the Court explained that preemption applies not just to tort-based claims, but to any “alternative common law claims.” And, as previous decisions have held, preemption applies at the dismissal stage even though the Court may later find that the DUTSA does not protect the information at issue. Accordingly, the Court of Chancery dismissed the unjust enrichment claim.

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mlintner@morrisjames.com
T 302.888.6828
Matt Lintner has extensive experience litigating complex corporate, commercial, and fiduciary matters. Matt represents corporations, directors and officers, and investors in …
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