Posts in Delaware Supreme Court

Delaware Supreme Court Affirms Decision Declining to Order Stockholder Meeting Under Section 211 of the DGCL

Spanakos v. Pate, C.A. No. 532, 2019 (Del. July 31, 2020)
The Court of Chancery may summarily order a stockholder meeting to be held to elect directors of a Delaware corporation, if one has not been held for more than thirteen months. 8 Del. C. § 211. The rule’s purpose is to ameliorate situations in which a Delaware corporation’s normal democratic functions are impaired, for example, if “by reason of death or resignation or other cause, a corporation should have no directors in office ….” 8 Del. C. § 223. The stockholder meeting to elect directors is a cornerstone of Delaware corporate law, and “stockholders’ entitlement to such a meeting is paramount.” Newcastle P’rs, L.P. v. Vesta Ins. Gp., Inc., 887 A.2d 975, 979 (Del. Ch. 2005).  More ›

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Delaware Supreme Court Holds That Limited Partnership Agreement That Includes Certain Books and Records Language From Section 17-305 of Limited Partnership Act Does Not Automatically Incorporate Judicial Interpretations of Section 17-305

Murfrey v. WHC Ventures, LLC, App. No. 294, 2019 (Del. Supr. Jul. 13, 2020)

Drafters of alternative entity agreements frequently cite to, or quote, statutory language to describe the parties’ obligations. But, the Delaware Supreme Court has concluded that when drafters do so, the drafters should be explicit in whether they also intend to incorporate judicial interpretations of that language, too. Here, because the governing limited partnership agreements (the “Agreements”) did not include an express requirement limiting books and records rights to those “necessary and essential” to a proper purpose, the Supreme Court declined to imply one. More ›

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Delaware Supreme Court Affirms Use of Unaffected Market Price to Determine Public Corporation’s “Fair Value” in Appraisal Proceeding

Fir Tree Value Master Fund, L.P. v. Jarden Corp., No. 454, 2019 (Del. July 9, 2020)

Adding to its appraisal jurisprudence, the Supreme Court of Delaware recently affirmed the use of the unaffected trading price of a public corporation’s stock to determine its “fair value” in the circumstances presented, while clarifying that “it is not often that a corporation’s unaffected market price alone could support fair value.” More ›

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Delaware Supreme Court Reverses Chancery in Dispute Involving Dueling Transfer Restrictions

Borealis Power Holdings Inc. v. Hunt Strategic Utility, LLC, No. 68, 2020 (Del. May 22, 2020)

The Delaware Supreme Court, reviewing the purportedly conflicting provisions of two agreements de novo, reversed the judgment of the Court of Chancery regarding which of the transfer restrictions in the agreements applied to a proposed sale of shares. The Court’s opinion provides important guidance on the interpretation and construction of contractual restrictions on transfer. More ›

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Delaware Supreme Court Explains That Litigants Seeking Application of Foreign Law Have Burden To Establish its Substance

Germaninvestments AG v. Allomet Corp., No. 291, 2019 (Del. Jan. 27, 2020). 

In reversing the Court of Chancery’s decision that Austrian law applied to the interpretation of whether a forum selection clause was permissive or mandatory, the Delaware Supreme Court ruled that, to the extent prior decisions were unclear on the issue, a party seeking the application of foreign law in a Delaware court has the burden not only of raising the issue of the applicability of foreign law under court rules, but also, of establishing the substance of the foreign law to be applied.    More ›

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Supreme Court Affirms Dismissal of Uber Derivative Action for Failure to Plead Demand Futility

Mcelrath v. Kalanick, No. 181-2019 (Del. Jan. 13, 2020). 

This case exemplifies the Delaware courts’ approach to examining demand futility. In 2016, Uber Technologies, Inc. (“Uber”) acquired Ottomotto LLC (“Otto”), a company started by a contingent of employees from Google’s autonomous vehicles group, in order for Uber to gain expertise in developing autonomous vehicles. The shareholder-plaintiff brought a claim, on behalf of Uber, against some of Uber’s directors. The plaintiff alleged that Uber’s directors ignored the risks presented by Otto’s alleged theft of Google’s intellectual property, which eventually led to Uber paying a settlement of $245 million to Google and terminating its employment agreement with Otto’s founder. More ›

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Delaware Supreme Court Provides Additional Guidance on Pleading Direct Claims Against Controllers and Control Groups

Sheldon v. Pinto Technology Ventures, L.P., No. 81, 2019 (Del. Oct. 4, 2019).

The Delaware Supreme Court affirmed the Court of Chancery’s dismissal of an alleged direct claim for dilution of the voting and economic interests of plaintiff stockholders because they failed to adequately plead that several venture capital firms constituted a “control group.”  The Court began its analysis with a review of the standard for a controller or control group under Delaware law.  In Gentile v. Rossette, 906 A.2d 91 (Del. 2006), the Court ruled that multiple stockholders can constitute a control group if they are connected in some legally significant way, such as by contract or other agreement, or working together towards a shared goal.  The Court noted the guideposts that define a “control group” established by In re Hansen Medical, Inc. Stockholders Litigation, 2018 WL 3025525 (Del. Ch. June 18, 2018) and van der Fluit v. Yates, 2017 WL 5953514 (Del. Ch. Nov. 30, 2017). More ›

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Delaware Supreme Court Reminds Counsel of Obligation to Prevent Clients’ Abusive Deposition Misconduct

In re: Shorenstein Hays-Nederlander Theatres LLC Appeals, Consol. C.A. Nos. 596, 2018 and 620, 2018 (Del. Jun. 20, 2019).

 “Depositions are court proceedings, and counsel defending the deposition have an obligation to prevent their deponent from impeding or frustrating a fair examination.”  After reversing and remanding a contractual dispute involving  popular Broadway shows back to the Court of Chancery on unrelated grounds, the Delaware Supreme Court included an Addendum to its opinion reprimanding an out-of-state attorney for permitting his client to engage in abusive deposition misconduct.  During the deposition, Carole Shorenstein Hays, a prominent theater producer, repeatedly provided answers characterized by the Supreme Court as ridiculous, problematic, flagrantly evasive, nonresponsive, and flippant.   Among other things, Hays claimed not to know whether she earned a university degree, claimed not to measure time in hours, refused to answer myriad straightforward questions, and made unprompted speeches in which she likened herself to Judy Garland and the deposition to a “piece of theatre that’s being recorded.”  While no Delaware attorney for Hays attended the deposition, the two attorneys representing her were both admitted pro hac vice and made no attempt to stop her misconduct.  The Court of Chancery had previously awarded attorneys’ fees and costs for this bad faith misconduct, and that ruling was not challenged on appeal.  The Supreme Court felt compelled, however, to address the situation.  The Supreme Court reasoned that, faced with such conduct, the deponent’s counsel “cannot simply be a spectator and do nothing.”  In addition, “Delaware counsel moving the admission of out of state counsel pro hac vice also bear responsibility in such a situation.  They must ensure that the attorney being admitted reviews the Principles of Professionalism for Delaware Lawyers, but they must also ensure that the out-of-state counsel understands what is expected of them in managing deposition proceedings outside the courthouse so that the litigation process is not abused.”  In light of restrictions Delaware court rules and precedent impose on conferring with a client-deponent during the deposition, the Supreme Court advised that these points “should be addressed beforehand in the deposition preparation.”

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