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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 2 posts in Equity.
Chancery Declines to Modify Status Quo Order to Allow Partial Performance of Pending Settlement
In re AMC Entertainment Holdings, Inc. Stockholder Litigation, Consol. C.A. No. 2023-0215-MTZ (Del. Ch. Apr. 5, 2023)
In various contexts, upon request or stipulation, the Court of Chancery will impose status quo orders, which typically restrain corporate action pending the Court’s adjudication of disputed rights. A party seeking to modify or vacate such an order bears the burden of establishing good cause for the change. Here, following a settlement agreement between the parties, the plaintiffs sought to lift a status quo order to permit the defendant, AMC, to partially effectuate the settlement. The proposed action would alter the company’s capital structure. The litigation involved class claims, implicating Court of Chancery Rule 23, and the requirement that any class action or derivative settlement be approved by the Court following notice to the stockholders and the opportunity to object. The Court had not yet considered or approved the proposed settlement. In these circumstances, with little more than a desire for speed offered in support of the motion, the Court declined to lift the status quo order, citing the Court’s gatekeeping role in Rule 23 settlements.
Equitable Fraud Claim Sufficient to Support Court of Chancery Jurisdiction
Trust Robin, Inc. v. Tissue Analytics, Inc., C.A. No. 2021-0806-SG (Del. Ch. Sep. 29, 2022)
After initially questioning its own subject matter jurisdiction in a dispute involving allegations of breach of contract and tort in connection with a services agreement, the Court of Chancery concluded that the plaintiff’s equitable fraud claim was not “simply a makeweight equitable hook” attached to its legal claims. The plaintiff sufficiently alleged a special relationship between the plaintiff and defendant, and it was possible that the plaintiff could recover for equitable, but not legal, fraud. The Court’s reasoning cited the alignment of the parties’ interests, the defendant’s control over the parties’ joint purpose by virtue of controlling certain intellectual property and other proprietary information belonging to the plaintiff, and the defendant’s alleged use of that control to engage in self-dealing. Therefore, the Court permitted the matter to proceed.
