Posts in Preliminary Injunction

Chancery Issues Preliminary Injunction To Bar Arbitration on the Grounds that no Agreement was Formed

Hologram, Inc. v. Caplan, C.A. No. 2021-0736-KSJM (Del. Ch. Dec. 14, 2021)
The Court of Chancery issued a preliminary injunction barring arbitration because the parties had never reached an agreement that included arbitration. By way of background, two former high-school classmates agreed in principle to begin a company. One would own ninety percent of the shares and serve as president and CEO, and the other would own ten percent of the shares in exchange for providing ideas and business opportunities. The president sent paperwork to his former classmate via email, including a restricted stock purchase agreement that proposed a vesting period for shares, required specific terms for acceptance, and included an arbitration provision. The former classmate responded with a request to change the shares to non-vesting. Over the ensuing months, the two could not agree on final terms, and the specific terms of acceptance (including in-person execution and payment) were never met. Nearly eight years later, as the company raised a $65 million Series B investment, the former classmate suddenly reached out to inquire about his ownership status. He subsequently filed a private arbitration demand against the company in Illinois. The company responded by filing a Delaware action seeking a declaration that the arbitration was improper because no agreement had been reached between the parties in connection with the claims made by the former classmate. The company moved for a preliminary injunction to prevent the continuation of the Illinois arbitration. More ›

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Court of Chancery Permits Targeted Jurisdictional Discovery to Seek Proof to Support Non-Frivolous Claim of Personal Jurisdiction

HM Life Ins. Co. v. Wilmington Sav. Fund Soc’y, FSB, C.A. No. 2018-0649-SG (Del. Ch. Apr. 9, 2020).

If a plaintiff has pled facts in its complaint to support a non-frivolous claim of personal jurisdiction over a defendant, the Court of Chancery may allow targeted jurisdictional discovery to seek proof that the Court has personal jurisdiction over a defendant in response to a motion to dismiss for lack of personal jurisdiction. More ›

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Court of Chancery Grants Preliminary Injunction Based on Insider’s Stock Issuances to Himself

Applied Energetics, Inc. v. Farley, C.A. No. 2018-0489-TMR (Del. Ch. Jan. 23, 2019).

This opinion addresses two bedrock issues of Delaware corporate law, specifically, proper board authorization under 8 Del. C. § 141 and directors’ fiduciary duty of loyalty.  Following other directors’ resignations, defendant George Farley was the only director as of February 2016 of plaintiff Applied Energetics (the “Company”).  Shortly after becoming the sole director, Farley executed a written consent to issue himself twenty million shares of Applied Energetics stock for $.001 per share.  No contemporaneous valuation was performed, and Farley made no attempts to ensure a fair process.  Faced with a request to enjoin Farley from selling the shares at issue, the Court of Chancery held that it was reasonably probable that Farley could not cause the Company to validly issue stock, because he was the only remaining director of a three-person board.  The Court also held it was reasonably probable that Farley will be unable to meet his burden at trial of proving the share issuances were entirely fair.  Accordingly, the Court enjoined Farley from trading the shares pending a final adjudication of their validity.  This decision also provides helpful analysis, as did prior decisions in this matter, regarding how the Court will determine the amount of bond when granting preliminary injunctive relief.

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Court Of Chancery Limits Contractual Right To An Injunction

AM General Holdings LLC v. The Renco Group Inc.,  C.A. Nos. 7639-VCN and 7668-VCN (December 29, 2015)

Practitioners often assume that if they provide a contractual right to an injunction for breach of contract, that the Court is obligated to find such a breach constitutes the irreparable harm that warrants an injunction. Not so fast, holds this decision. More ›

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