About This Blog

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

Morris James Blogs

Links

Showing 683 posts in Case Summaries.

Court Of Chancery Stays Control Dispute Involving Kentucky Retirement Systems In Favor of Kentucky Plenary Action

Posted In Case Summaries

In Re Bay Hills Emerging Partners I L.P., C.A. No. 2018-0234-JRS (Del. Ch. July 2, 2018) 

This decision deals with the oft encountered problem of a race to different courthouses by counterparties.  What makes this decision readworthy is the context: a summary control dispute involving a Delaware alternative entity, one invested in by a Kentucky state agency (Kentucky Retirement Systems).  While the Court of Chancery may choose to not stay its hand in favor of even an earlier-filed plenary action in the control dispute context, that is by no means a blanket rule.  This is an instance where the Court of Chancery cited its inherent discretionary authority to issue a stay sua sponte in the interests of comity and the orderly and efficient administration of justice.  Among the factors supporting the Court’s decision to stay its hand in favor of a contemporaneously-filed plenary action involving the same parties and issues in Kentucky state court were Kentucky consent-to-forum and choice of law clauses in the parties’ contract.

Court of Chancery Explains Difference Between Experts and Arbitrators Under Delaware Law

Posted In Case Summaries

Penton Business Media Holdings LLC v. Informa PLC, C.A. No. 2017-0847-JTL (Del. Ch. July 9, 2018)

This decision explains the difference between agreeing to have a dispute decided by an expert rather than an arbitrator.  The distinction is important because it may determine what the third-party adjudicator can review before reaching a decision, what questions it may address, and what role a court might play.  For example, an expert may be confined to reviewing only a selected set of documents without resort to extrinsic types of evidence.  That might not be what one party expected or desires.  But it is a possible result under Delaware law, where the distinction is recognized, unlike in some other jurisdictions.  In short, it is best to be specific about the exact type of adjudicator you want in your contract’s alternative dispute resolution provisions if your contract is governed by Delaware law.

Court Of Chancery Provides Definitive Guidelines On Judicial Sale Process

Posted In Case Summaries

In re: TransPerfect Global Inc., C.A. 9700-CB (February 15, 2018)

In what it is hoped is the final act in the TransPerfect case, this decision upholds the sale process used by the Custodian to sell TransPerfect. While certainly a unique case, the decision does provide guidance on the discretion of a Court-appointed custodian in selling a deadlocked corporation.

Delaware District Court Finds Duty to Defend Under Homeowner’s Insurance Policy

Posted In Case Summaries, Coverage

Liberty Ins. Corp. v. Korn, Civ. No. 15-332-LPS (D. Del. Sept. 27, 2016)

The backdrop to this decision is an interesting and unfortunate one involving a divorce, allegations of illegal obscene material possessed by the former husband, followed by a civil lawsuit between the former spouses after the former husband was acquitted.  Under the facts of this case, the Court finds the homeowner insurance provider has a duty to defend the former wife given the allegations of intentional and negligent conduct in her providing a harddrive and statements to the authorities about her former husband, which allegedly led to his physical injury.

Delaware's Court of Chancery Clarifies Scope of Inspection Under Books and Records Demands

Posted In Access to ESI, Business Law, Case Summaries

In Amalgamated Bank v. Yahoo!, Inc., C.A. No. 10774-VCL (Del. Ch. Feb. 2, 2016), Plaintiff Amalgamated Bank’s Section 220 books and records demand sought, among other things, the emails of certain Yahoo officers and directors.  Yahoo objected to the request as overly broad, but the Court found differently.  Continuing the trend from Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Trust Fund IBEW, 95 A.3d 1264, 1271 (Del. 2014), which first permitted access beyond board materials, the Court ordered inspection of certain Yahoo director and officer documents and communications.  In addition, the Court found that the directors’ and officers’ personal email accounts were subject to inspection if they were used to conduct business.  This development signals to corporate officers and directors’ that personal emails may be discoverable in a 220 Action if the emails are essential to fulfilling a plaintiff’s proper purpose. More ›

Court Of Chancery Determines That Advancement Claim Is A General Creditor Claim

Posted In Case Summaries

Andrikopoulos v. Silicon Valley Innovation Company LLC, C.A. 9899-VCP (July 30, 2015) and Henson v. Sousa, C.A. 8057-VCG (August 4, 2015)

These two decisions hold that an advancement claim should be treated as a claim of a general creditor by a company in liquidation. Hence, those claims do not get priority in payment along with administrative expenses of the receivership.

Court of Chancery Addresses Application of Fee-Shifting Bylaw

The Rites of Spring are upon us: budding flowers, warmer temperatures, and a Delaware court issuing an important decision just before the annual Tulane Corporate Law Institute begins. This year the honor of issuing that decision fell to Chancellor Bouchard who issued his opinion in Strougo v. Hollander, C.A. No. 9770-CB (Del. Ch.) on March 16, 2015. The opinion addressed plaintiff’s motion for partial judgment on the pleadings that a fee-shifting bylaw adopted after the challenged transaction did not apply to him. The Court found that the fee-shifting bylaw did not apply to the plaintiff in this case, and in reaching this conclusion, made some interesting comments that will undoubtedly further the debate over the proposed legislation to eliminate fee-shifting bylaws and regulate forum selection bylaws. More ›

Court Of Chancery Explains Rule 23.1 Standards

Posted In Case Summaries, Derivative Claims
In Re Sanchez Energy Derivative Litigation, C.A. 9132-VCG (November 25, 2014) This decision is another helpful explanation of what is required to meet Rule 23.1 requirements to plead a derivative case.  Mere personal friendships or employment by a company that is a subsidiary of a company where the alleged controller is on the board are not enough to show a director is under the control of others. Indeed, merely being in management does not establish control over an entity because you must show control over its board.

Court Of Chancery Explains Bad Faith Claim

Posted In Case Summaries, Directors, Fiduciary Duty
In Re Novell Shareholders Litigation, C.A. 6032-VCN (November 25, 2014) When does a board act in bad faith so as to not be entitled to exculpation under a corporate charter? As this decision explains, mere mistakes in complicated negotiations do not come close to supporting a bad faith claim.

Court Of Chancery Explains Third Party Beneficiary Standing

Posted In Case Summaries
United Health Alliance LLC v. United Medical LLC, C.A. 7710-VCP (November 20, 2014) This decision has a good explanation of when a non-party to a contract may seek to enforce its terms as a third party beneficiary.

Court Of Chancery Explains The Implied Covenant Rules

Posted In Breach of Contract, Case Summaries
NAMA Properties LLC v. Related WMC LLC, C.A. 7934-VCL (November 17, 2014) This is a virtual treatise on the implied covenant of good faith and fair dealing.  As it points out, the covenant is a gap filler that is to be used rarely and is considered part of the contract. Hence, it does not require a showing of bad faith for it to be violated. Here the court dealt with the duties of an escrow agent. The opinion is also very good at explaining what is required to find a tortious interference with a contract by the parent of a subsidiary. It is often wrongly thought that members of the same corporate family cannot be held liable for the breach of contract by another member of the family for a contract they did not sign. As this decision shows, that may not be so and a parent can be on the hook when it wrongly causes a subsidiary to breach its contract.

Court Of Chancery Explains The Conspiracy Theory Of Jurisdiction

Posted In Case Summaries, Jurisdiction
Reid v. Siniscalchi, C.A. 2874-VCN (November 20, 2014) Under the conspiracy theory of jurisdiction, a non-resident may still be subject to Delaware court jurisdiction if a co-conspirator commits an act in Delaware in furtherance of the conspiracy. While that is a simplified version of the law, this decision explains the theory in detail.

Court Of Chancery Explains Pleading Standard For Claims Against Disinterested Directors

Posted In Case Summaries, Directors
In Re Cornerstone Therapeutics Inc. Stockholder Litigation, C.A. 8922-VCG (September 10, 2014)  This is a great decision to read to understand the pleading standard that applies to a complaint that alleges a controlling stockholder transaction. Even in such a transaction, the disinterested directors are not liable absent proof of a breach of a non-exculpated breach of duty. However, that rule will only apply after a full record is made at trial [or possibly at the summary judgment stage]. At the initial motion to dismiss stage, all the complaint need allege is that entire fairness review is required because of the control the majority stockholder had over the transaction. On September 26, 2014, the Court certified an interlocutory appeal to the Delaware Supreme Court.

Court Of Chancery Holds Corporation Does Not Owe Fiduciary Duty

Posted In Case Summaries, Fiduciary Duty
Buttonwood Tree Value Partners L.P. v. R.L. Polk & Co. Inc., C.A. No. 9250-VCG (August 7, 2014) A Delaware corporation does not itself owe a fiduciary duty to its stockholders and may not be charged with aiding and abetting a breach of that duty by its directors.  This holding has ample precedent and is important because it may avoid the expansion of the company's disclosure obligations beyond the duty to avoid fraudulent disclosures.

Chancery Court Rejects Trading Restriction as Condition of Receipt

Posted In Case Summaries

This article was originally published in the Under 8 Del. C. Section 220, stockholders of Delaware companies are entitled to inspect certain books and records of the company upon stating a proper purpose. A long-recognized proper purpose for a books-and-records demand is an interest in valuing one's stock. In The Ravenswood Investment L.P. v. Winmill & Co., C.A. No. 7048-VCN (Del. Ch. May 30, 2014), the Court of Chancery decided the "novel" issue of whether a company, in response to a books-and-records demand, may condition the provision of nonpublic financial information on a trading restriction. Finding that the trading restriction would "inappropriately frustrate a fundamental stockholder right" to value its stock, the court held that the company could not require an agreement on the part of the requesting stockholder not to trade its stock for a certain period of time after receipt of the requested information. More ›