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Court Of Chancery Explains Nontransactional Damage Claims

Posted In Fiduciary Duty

OTK Associates LLC v. Friedman, C.A. 8447-VCL (February 5, 2014)

This interesting decision deals with 3 aspects of fiduciary litigation in Delaware. First, under the Supreme Court's CERBCO decision, even if a transaction is called off, a fiduciary who proposed the invalid deal may be held liable for the company's expenses. This happens so rarely that it is not clear how to apply CERBCO.  Well, this decision explains how it applies. The decision also explains when demand is not excused before filing an amended complaint when the composition of the board has changed since the original complaint was filed. Briefly, the Court looks to see if the new complaint is really a new claim and if it is, then the new board's independence is tested to see if demand is excused.   Finally, the decision explains when a forum selection clause is not enforceable to remove the court's power to decide a breach of fiduciary duty claim.  When the forum selection clause deals with the parties' contract claims, it does not preclude a Delaware court from dealing with fiduciary duty claims.

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