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Showing 39 posts in Dissolution.

Chancery Discharges Custodian in TransPerfect Litigation, Denies Contempt Motion, and Rules on Fee Dispute

Posted In Attorneys’ Fees, Chancery, Dissolution


In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)


In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 30, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 30, 2021)
After seven years of multi-jurisdictional litigation stemming from an irreconcilable deadlock among the three stockholders of a profitable company, TransPerfect Global, Inc. (“TransPerfect”), the Court of Chancery discharged the court-appointed custodian of TransPerfect and denied a motion for contempt and sanctions against TransPerfect and its owner Philip Shawe. The Court subsequently granted the custodian’s fee petitions in the amount of approximately $3.2 million. More ›

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Chancery Finds It Reasonably Conceivable that Judicial Dissolution May Be Warranted When LLC’s Deadlock Provision Failed

Posted In Chancery, Dissolution, LLC Agreements, LLCs


Seokoh, Inc. v. Lard-PT, LLC, C.A. No. 2020-0613-JRS (Del. Ch. Mar. 30, 2021)
On application from a member or manager of an LLC, the Court of Chancery may dissolve an LLC whenever it is not reasonably practicable for the LLC to carry on the business in conformity with the LLC agreement. Several factors may suggest a lack of reasonable practicability, including that the members are deadlocked at the board level, the operating agreement gives no means for navigating around the deadlock, and due to the financial conditions of the LLC, there is effectively no business to operate. In this case, the Court held that the petitioner adequately pled board deadlock and ongoing negative financial performance due to the parties’ inability to agree. In rejecting the respondent’s argument that the parties’ “I cut; you choose” deadlock procedure precluded a judicial decree of dissolution, based on the pleaded facts, the Court found that it was reasonably conceivable that the deadlock procedure had broken down irretrievably. Because the contractual procedure did not mandate a price, pricing formula, or a closing timeline and the plaintiff adequately alleged that the parties were not dealing with each other in good faith and in a commercially reasonable manner, it was reasonably conceivable that judicial dissolution might be warranted. The Court therefore denied the respondent’s motion to dismiss.

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Court of Chancery Stays Action for Violation of Rule against Claim Splitting Pending Resolution of a Duplicative Federal Action

Posted In Chancery, Dissolution


Goureau v. Lemonis, C.A. No. 2020-0486-MTZ (Del. Ch. Mar. 30, 2021)
Delaware follows the modern “transactional” view of claim splitting, which bars a plaintiff from bringing duplicative proceedings in different courts simultaneously based on different causes of action arising from the same transaction or from a common nucleus of operative facts. The rule against claim splitting is intended to avoid burdening defendants with the defense of duplicative suits in different courts, and to prevent a plaintiff from obtaining “two bites at the apple” or a potential double recovery. A plaintiff who violates this rule may face dismissal or a stay pending resolution of the duplicative action. More ›

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Chancery Holds That a Deadlock Warranting Dissolution Can Be Genuine Even If the Circumstances Giving Rise to the Deadlock Were Contrived

Posted In Chancery, Dissolution, LLCs

Mehra v. Teller, C.A. No. 2019-0812-KSJM (Del. Ch. Jan. 29, 2021)

In a dispute over the validity of the dissolution of a limited liability company, the Court of Chancery held in a post-trial opinion that a deadlock between LLC managers was genuine and deserving of legal effect, even though the circumstances giving rise to the deadlock were contrived. More ›

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Chancery Defers to Liquidating Trustee in Approving a Sale of LLC Assets

Posted In Dissolution, Receiverships

Acela Invs. LLC v. DiFalco, C.A. No. 2018-0558-AGB (Del. Ch. Apr. 27, 2020).  

This case affirms that, absent an abuse of discretion, the Court of Chancery will defer to a sale agreement proffered and negotiated by a Court-appointed liquidating trustee. In this case, the Court had appointed the liquidating trustee (the “Trustee”) after granting judicial dissolution of a Delaware LLC due to member deadlock. At the last minute, and following a six-month sale process, a bidder that was owned by two of the LLC’s members made an offer that the Trustee rejected as untimely and inadequate. The bidder challenged the Trustee’s judgment in rejecting its bid. The Court upheld the Trustee’s decision to reject the bid, finding no evidence of an abuse of discretion.   More ›

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Chancery Denies Non-Member, Non-Manager’s Bid for Equitable Dissolution of LLC

Posted In Dissolution, LLC Agreements

SolarReserve CSP Holdings, LLC v.  Tonopah Solar Energy, LLC, C.A. 2019-0791-JRS (Del. Ch. Mar. 18, 2020).

While the Court of Chancery has recognized the concept of equitable standing to seek judicial dissolution, this case shows that equity is not a tool to rewrite the plain language of an operating agreement or to help a party regain the rights it bargained away. More ›

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Delaware Supreme Court Finds Limited Liability Partnership Agreement Chose the “Aggregate Model” and Partner Withdrawal Caused Dissolution

Posted In Dissolution, Partnerships, Receiverships

United States v. Sanofi-Aventis U.S. LLC, No. 256, 2019 (Del. Mar. 17, 2020).  

In this case, the Delaware Supreme Court answered three certified questions from the United States Third Circuit Court of Appeals concerning the effect of a partner’s withdrawal from a Delaware limited liability partnership formed to prosecute a qui tam action. The Court ruled that unambiguous language in the Partnership Agreement opting out of the “entity model” of partnership provided in the Delaware Revised Uniform Partnership Act meant that the partner’s withdrawal dissolved the partnership (Question 1). The Court also held that the entity that was continuing litigation through an amended complaint after the partner’s withdrawal was a new and different partnership (Question 2). Moreover, because the old entity dissolved at such an early point in the litigation, and because the partners had formed it solely to prosecute the litigation, the old partnership could not continue the litigation because to do so was inconsistent with the agreement’s requirements for a prompt liquidation (Question 3).  More ›

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Court of Chancery Dissolves Limited Partnership Upon Finding General Partner Unable To Achieve Its Business Purpose

Posted In Dissolution, LP Agreements

GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, C.A. No. 2018-0840-SG (Del. Ch. Aug. 7, 2019).

The equitable remedy of dissolution is extraordinary.  Given the extraordinary record before it, and the abundance of evidence that the general partner could not operate the business, the Court granted plaintiffs’ petition for dissolution. More ›

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Chancery Permits Receiver to Tax Petitioner for Costs of Receivership

Posted In Dissolution, Receiverships

Longoria v. Somers, C.A. No. 2018-0190-JTL (Del. Ch. May 28, 2019).

The Court of Chancery may appoint a receiver to wind up a deadlocked corporate entity.  When that happens, the corporation normally pays the receiver’s fees and expenses.  Here, however, the entity was insolvent and unable to pay, and the Petitioner (a 50% owner) opposed contributing to the payment of certain expenses.  More ›

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Court of Chancery Explains What Is A Proper Claim Reserve When Dissolving

Posted In Dissolution, LLC Agreements

Capone v. LDH Management Holdings LLC, C.A. No. 11687-VCG (April 25, 2018)

Under the LLC Act, as with the DGCL, an entity planning to dissolve and distribute its assets is required to set aside some reserve of assets to pay all known claims.  Failure to set aside sufficient assets may result in revocation of the entity’s certificate of cancellation, thereby reviving the entity, as happened in this case.  This decision explains when claims are “known” by the entity (i.e., the entity has actual knowledge of the claims) and how the entity may value those claims for purposes of retaining sufficient assets to potentially satisfy them.  Importantly, the reserve need not match all potential damages dollar-for-dollar.  The value of claims may be discounted based on their lack of merit, for example.

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Court Of Chancery Explains When To Appoint Corporate Custodian

Posted In Dissolution

Kleinberg v. Aharon , C.A. 12719-VCL (February 13, 2017)

On the same day the Delaware Supreme Court affirmed the widely-reported TransPerfect decision, which ordered the sale of a successful company by custodian under Section 226 of the DGCL in order to break deadlock, the Court of Chancery issued this decision appointing a custodian of a Delaware corporation with limited powers to break a deadlock. The decision carefully explains the reason why a custodian should be appointed and why the custodian’s powers should be limited. In that sense, this is a “normal” custodian case not involving the very unusual circumstances the Court of Chancery had to deal with in TransPerfect.

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Delaware Supreme Court Affirms The TransPerfect Decision

Posted In Dissolution

Shawe v. Elting, No. 423, 2016 (February 13, 2017)

The Supreme Court has affirmed the Court of Chancery decision that Section 226 of the DGCL permits the Court to appoint a custodian to sell a Delaware corporation when the board of directors and stockholders are deadlocked and the company is suffering as a result.

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Court Of Chancery Dismisses Dissolution Case In Favor Of Ongoing California Litigation

Posted In Dissolution

Zebala v. Aminopterin LLC, C.A. No. 12186-VCS (September 28, 2016) (TRANSCRIPT) 

An issue of some debate is whether a non-Delaware court has the power to dissolve a Delaware entity.  Here, the Court of Chancery was asked to dismiss a later-filed dissolution action in Delaware based on a California forum selection clause in the parties’ LLC agreement, and in deference to a long-pending first-filed action in California where the court had already issued an injunction restricting the LLC’s assets that the Court of Chancery was being asked to wind up.  The Court thus had the opportunity to address the important power to dissolve question, but under the circumstances found it appropriate to defer to the California court relying on principles of comity and a McWane analysis to dismiss the dissolution action.  In other words, the Court of Chancery would not step on the California court’s toes under the circumstances, and the California court could decide for itself if it has the power to dissolve a Delaware entity should the parties present that issue there.

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Court Of Chancery Grants Dissolution On Conditions

Posted In Dissolution

Abelmann v. Granum, C.A. 12041-VCMR (November 15, 2016)

This is an interesting decision in a small case. The Court granted the request to dissolve a Delaware entity in deadlock, but conditioned that dissolution on an agreement not to use the fact of dissolution in another proceeding between the parties to defeat a party’s standing. What other conditions might be imposed in other cases remains to be seen.

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Court Of Chancery Orders Dissolution Despite LLC Agreement Bar

Posted In Dissolution, LLC Agreements

Meyer Natural Foods LLC v. Duff, C.A. 9703-VCN (June 4, 2015)

This decision may answer the question of whether an LLC Agreement’s bar of dissolution without a member’s consent trumps the statutory remedy of court-ordered dissolution when the entity’s purpose cannot be achieved any longer. It concludes that dissolution is proper under the facts presented where the objecting member really had no good reason to object.

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