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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 694 posts in Case Summaries.
This decision explains when to stay a Delaware litigation in favor of litigation in a foreign country. As it notes, when the law of that other country is not well explained to the Court with respect to the enforcement of a forum selection clause, it will apply Delaware law to decide that issue.
As this decision points out, if a non-compete agreement conditions its enforcement on the employer’s performance of its end of the bargain, then a failure to do so renders the non-compete unenforceable.
This is a good decision for its explanation of when a non-compete agreement will be enforced when it does not have a geographical limit. If the agreement speaks to not engaging “in competition with” the former employer, that provides a limit based on what customers the old employer had and is enforceable as a result.
Stock preferences are in derogation of the common law and thus strictly construed. Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated. But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.
A claim for tortious interference with a contractual relationship must include an allegation that the conduct complained about was itself wrongful. This decision explains what is such “wrongful” conduct and concludes that the use of confidential information to contact a party to a contract to dissuade it from going forward is such wrongful conduct.
Court of Chancery Validates Cure of Defective Corporate Acts Affecting Herman Miller’s Acquisition of DWR
Sections 204 and 205 of the DGCL permit corporations to cure and validate defective corporate acts under the right circumstances. This is another decision explaining when the Court will validate an attempted cure under Section 204. The opinion explains, among other things, that there is no set time limit to seek validation of a cure under Section 205. It further explains what sort of defective acts may be addressed in Section 205 proceedings. More ›
This is an important decision because it upholds the right of an insurance company to recover defense costs it advanced when it is later determined there was no insurance coverage for the underlying litigation. While the opinion applies Tennessee law, some parts of the opinion suggest that the Court would reach the same result if Delaware law applied. That is so even though the Court recognized that permitting such a recovery is the minority positon in the United States. The opinion is also useful for its explanation of how an insurer may preserve its right to recover those advances by making it clear that it is advancing the costs subject to its right to recover them later if a court decides there was no insurance coverage.
It is not always clear when two agreements are to be read as one. This is because incorporating one agreement into a second agreement may not be explicit. This decision sets out the principles under Delaware law that govern how to decide if two agreements should be read together, including that there must be an “explicit manifestation of intent” to incorporate one document into another.
This is an interesting decision because it dismisses a counterclaim that is contradicted by the claimant’s answer to the complaint. Thus it goes beyond the normal rule that requires a factual pleading to be accepted as true when considering a motion to dismiss.
Contracts often use the word “including” as part of a definition of a term. But is that to limit or enlarge what that term means? This decision holds that “including” is a term of enlargement or extension when used that way and grants a partial summary judgment based on that interpretation.
Supreme Court of Delaware, Applying New York Law, finds that Settlement Amounts were not Uninsurable Disgorgement Under D&O Policies
The Supreme Court of Delaware affirmed the Superior Court’s finding that under the relevant D&O policies at issue, the settlement amounts TIAA-CREF paid to class action plaintiffs did not represent uninsurable disgorgement. In doing so, the Supreme Court distinguished certain cases from New York relied upon by the insurance companies that held settlements represented uninsurable disgorgement. Unlike the cases cited by the defendants, the settlement amounts at issue in the underlying cases here did not represent the return of ill-gotten gains. After this decision, whether or not a claim will be treated as uninsurable disgorgement should be an important consideration by defendants when deciding whether to settle merger objection litigation with a payment to the class.
Court Of Chancery Stays Control Dispute Involving Kentucky Retirement Systems In Favor of Kentucky Plenary Action
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.
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.
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.
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.