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Showing 62 posts in Chancery.

Chancery Rejects Conspiracy Jurisdiction Over Foreign Defendant

Posted In Chancery, Personal Jurisdiction

Lacey v. Mota-Velasco, C.A. No. 2019-312-SG (Del. Ch. Oct. 6, 2020)

Under Istituto Bancario, a foreign defendant alleged to be part of a conspiracy may be subject to personal jurisdiction in Delaware, but only if the plaintiff alleges, among other requirements, and consistent with the Delaware long-arm statute and due process, an act in Delaware in furtherance of the conspiracy. Conspiracy jurisdiction is not an independent basis of jurisdiction but rather provides a framework by which the Delaware courts evaluate whether there are sufficient minimum contacts to justify the exercise of personal jurisdiction.  More ›

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Chancery Finds Warrant Issuance Triggered Stockholder Preemption Rights

Posted In Chancery

L-5 Healthcare Partners, LLC v. Alphatec Holdings, Inc., C.A. No. 2019-0412-KSJM (Del. Ch. Oct. 12, 2020)

Pursuant to a share purchase agreement, a plaintiff stockholder had preemption rights that entitled the stockholder to participate on a pro-rata basis if the defendant company issued common stock equivalents to a third-party buyer. Defendant issued warrants convertible into common stock to a nonparty. In consideration of plaintiff’s preemption rights, defendant made a proposal for plaintiff to provide the company with a loan in exchange for acquiring warrants, based on a blended version of the prices and other terms of the issuance to the nonparty. The proposal was, however, subject to approval by defendant’s board and the nonparty, and contingent upon defendant drawing down on the loan provided by plaintiff. Plaintiff filed suit in the Delaware Court of Chancery, seeking to enforce its preemption rights, and moved for partial judgment on the pleadings. More ›

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Chancery Applies Contractual Shortening of Limitations Period for Breaches of Representations, Finds it Inapt to Fraud Claims and Enforces Clear Anti-Reliance Clause

Posted In Breach of Contract, Chancery, Fraud, M&A

Pilot Air Freight, LLC v. Manna Freight Systems, Inc., C.A. No. 2019-0992-JRS (Del. Ch. Sept. 18, 2020)

In a familiar fact pattern, an acquirer of a business brought suit against sellers claiming, inter alia, that the representations and warranties in the asset purchase agreement were untrue and, indeed, fraudulent when made. The sellers moved to dismiss on the basis of a provision they claimed shortened the limitations period for breaches of representations and warranties and an anti-reliance clause they claimed eliminated any potential claims for misrepresentations or omissions outside of the written agreement. More ›

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Chancery Addresses Contract and Fraud Claims Relating to M&A Post-Closing Price Adjustments

Posted In Chancery, M&A

Roma Landmark Theaters, LLC v. Cohen Exhibition Co., LLC, C.A. No. 2019-0585-PAF (Del. Ch. Sept. 30, 2020)

In Roma Landmark Theaters, the parties’ purchase agreement contained a framework for post-closing price adjustments and set forth the pre-closing duties of the buyer (but not the sellers) relating to certain calculations and financial information. The agreement included a dispute mechanism, which provided for an independent accounting firm to make a binding determination as to the distribution of escrowed funds in connection with a dispute over post-closing price adjustments. The accounting firm decided the dispute largely in sellers’ favor. Sellers then filed suit in the Court of Chancery to confirm the accounting firm’s decision, and require buyer to release the escrowed funds. Buyer filed counterclaims, alleging that the sellers committed financial disclosure misrepresentations amounting to fraud and bad faith. More ›

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Chancery Confirms that, Without More, Threat of Proxy Contest from Activist Investor is Insufficient to Render Director Defendants Conflicted in Sale Transaction

Posted In Chancery, Fiduciary Duty, M&A

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

Posted In Attorneys’ Fees, Chancery

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

Posted In Breach of Contract, Chancery, M&A

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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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

Posted In Breach of Contract, Chancery, M&A

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 Addresses Statutes of Limitations Issues Arising Out Employment-Related Claims

Posted In Chancery, Statute of Limitations

Weik, Nitsche & Dougherty, LLC, v. Pratcher, C.A. No. 2018-0803-MTZ (Del. Ch. Aug. 26, 2020)

Following an employment dispute between former employers and employees of a Delaware limited liability company, the employers (“Plaintiffs”) filed an action in the Delaware Court of Chancery seeking rescission of a contract recently executed by the parties. The contract at issue governed the percentage of fees to which the employees (“Defendants”) were entitled for any business the employees originated for the LLC. According to Plaintiffs, Defendants breached the contract by engaging in “self-marketing campaigns” through which Defendants failed to recognize any affiliation with the LLC and which caused a disparity in the amount of fees each party believed Defendants were entitled to.  In a series of counterclaims, Defendants argued that Plaintiffs owed Defendants certain sums of money pursuant to the contractual relationship. Defendants asserted that Plaintiffs owed those sums based on the Defendants’ “expectancy in the contracts” which were lost after Plaintiffs purportedly breached the contract and forced Defendants to “resign and lose their expected profits from [the contract].” More ›

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Chancery Provides Guidance on Agency and Joint Venture Theories of Vicarious Liability

Posted In Agency Law, Chancery, 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

Posted In Chancery, Fiduciary Duty

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

Posted In Books and Records, Chancery, Choice of 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 Dismisses Caremark Claims Against Metlife Board

Posted In Breach of Fiduciary Duty, Caremark, Chancery

In re Metlife Inc. Derivative Litigation, Consol. C.A. No. 2019-0452-SG (Del. Ch. Aug. 17, 2020)

Shareholders seeking relief for alleged harm to a Delaware corporation must comply with Delaware’s pre-suit demand requirement by either making a demand on the board of directors to take action respecting the potential claims, or initiating suit themselves and adequately pleading facts excusing pre-suit demand as futile. More ›

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