Posts in Delaware Supreme Court

Supreme Court Finds Enforceable Preliminary Agreement

Cox Communications v. T-Mobile, No. 340, 2021 (Del. Mar. 3, 2022)
Delaware courts have a “general aversion” to enforcing agreements to agree. But Delaware law also recognizes enforceable preliminary agreements that create an obligation to try to negotiate a final agreement on all material terms in good faith. Here, two companies, Cox Communications and T-Mobile, disputed whether a particular provision of a settlement agreement was enforceable and to what extent. The provision related to Cox partnering with a mobile network provider and generally obligated Cox to negotiate with T-Mobile. Those negotiations failed, Cox partnered with Verizon, and this suit resulted. The Court of Chancery entered an injunction that enforced the provision by prohibiting Cox from partnering with another provider besides T-Mobile. On appeal, the Delaware Supreme Court vacated the injunction and reversed, finding the provision left open several material terms of a future definitive agreement, was not itself an enforceable agreement, and instead was a “Type II” preliminary agreement that obligated the parties to negotiate open items in good faith. The Supreme Court remanded the case for a determination of whether the parties fulfilled that obligation.

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Delaware Supreme Court Permits Substitution of Bankruptcy Trustee as Plaintiff to Resolve “Procedural Conundrum”

Lenois v. Lawal, No. 33, 2021 (Del. Dec. 9, 2021)
A company’s bankruptcy filing during an appeal of a dismissal of a derivative action presents questions of who, if anyone, has the standing to pursue the company’s potential claims. As this case shows, Delaware is loathe to permit such claims to abate merely because the procedural path forward is unclear. More ›

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Delaware Supreme Court Affirms that Seller’s Change of Business Operations in Response to the COVID-19 Pandemic Excused Buyer’s Obligation to Close

AB Stable VIII LLC v. Maps Hotels and Resorts One LLC, No. 71-2021 (Del. Dec. 8, 2021)
This Supreme Court decision affirms the Court of Chancery’s decision below (reported here) that a buyer’s obligation to purchase a $5.8 billion group of hotel properties was excused due to the seller’s failure to comply with a covenant that, between signing and closing, it would operate “only in the ordinary course of business, consistent with past practice in all material respects.”  More ›

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Delaware Supreme Court Overrules Gentile, Resolving Tension in Legal Test To Determine Whether a Claim Is Direct or Derivative

Brookfield Asset Mgmt., Inc. v. Rosson, No. 406, 2020 (Del. Sept. 20, 2021)
Seeking to bring clarity to the issue of whether a claim is direct or derivative—a potentially outcome-determinative issue—the Delaware Supreme Court overturned its own precedent in Gentile v. Rossette, 906 A.2d 91 (Del. 2006). More ›

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Delaware Supreme Court Upholds Contractual Waiver of Statutory Appraisal Rights

Manti Holdings, LLC, et al. v. Authentix Acquisition Co., Inc., No. 354, 2020 (Del. Sept. 13, 2021)
This decision arose out of the acquisition of Authentix Acquisition Company, Inc. and a subsequent appraisal proceeding brought by dissenting stockholders under 8 Del. C. § 262. As a condition of an earlier merger involving the private equity firm Carlyle, the petitioners were parties to a stockholders agreement binding the corporation and all of its stockholders that purported to waive the stockholders’ statutory appraisal rights. At the trial court level, the Court of Chancery enforced the contractual waiver and granted the company’s motion to dismiss. On appeal, alongside other contentions, the petitioners argued that statutory appraisal rights are one of the fundamental features of corporate identity and should be found nonwaivable under Delaware law and public policy. More ›

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Delaware Supreme Court Concludes Out-of-Pocket Damages Are the Default Remedy for Fraudulent Misrepresentation Absent an Enforceable Agreement

LCT Capital, LLC v. NGL Energy Partners, LLP, App. Nos. 565,2019 & 568,2019 (Del. Jan. 28, 2021)

Delaware law recognizes both benefit-of-the-bargain damages and out-of-pocket damages as remedies for fraudulent misrepresentation, but the law was unsettled whether benefit-of-the-bargain damages were available absent an enforceable agreement. Here, the Delaware Supreme Court confirms that out-of-pocket damages are the default remedy in the absence of an agreement. 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 Supreme Court Finds that Court of Chancery Had Jurisdiction To Enjoin a Collateral Attack on a Prior Arbitration Award Under the Federal Arbitration Act

Gulf LNG Energy, LLC v. ENI USA Gas Mktg., LLC, No. 22, 2020 (Del. Nov. 17, 2020)

This decision confirms that the Court of Chancery has jurisdiction to enjoin a collateral attack on a prior arbitration award. The Delaware Supreme Court also reasons that the determination of whether a second arbitration collaterally attacks a prior arbitration does not depend on the res judicata or collateral estoppel effect of claims raised or decided in the prior arbitration, but rather whether the claimant asserts irregularities in the prior arbitration or seeks to rectify the harm it suffered, which are issues subject to exclusive review under the post-award procedure in the Federal Arbitration Act (“FAA”). More ›

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Delaware Supreme Court Affirms CCLD Ruling Relying on Expert’s “Dual Hypothetical World” Damages Model for Measuring Business-Interruption Loss

XL Ins. Am., Inc., et al. v. Noranda Aluminum Holding Corp., No. 444, 2019 (Del. Oct. 2, 2020)
An aluminum manufacturer (the “Insured”) decided not to rebuild and resume operations at its facility following two operation-disabling accidents. The Insured made a claim pursuant to its “all risks” property-insurance policy (the “Policy”) to recoup certain amounts including business-interruption losses. The insurers (the “Insurers”) and the Insured each hired expert forensic accountants who, relying on different damages models, rendered widely divergent calculations of the Insured’s loss. Following a seven day trial in Superior Court wherein both parties’ experts presented their methodologies for calculating the business-interruption losses, the jury found in favor of the Insured. More ›

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High Court Affirms Deal Price Was Reliable Indicator of Fair Value Despite Flawed Process

Brigade Leveraged Capital Structures Fund Ltd. v. Stillwater Mining Co., C.A. No. 427, 2019 (Del. Oct. 12, 2020)

This case illustrates that, notwithstanding a flawed process for the sale of a company, the deal price may still provide a reliable indicator of the fair value of shares in an appraisal action. Petitioners had contended that the Court of Chancery abused its discretion in upholding a rushed sale process and in failing to make an upward adjustment to the deal price based on an increase in the company’s value post-signing. More ›

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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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