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Court of Chancery Imposes Over $20 Million in Damages on Investment Fund and Its Manager

Posted In Fiduciary Duty

Basho Technologies Holdco B LLC v. Georgetown Basho Investors LLC, C.A. No. 11802-VCL (Del. Ch. July 6, 2018)

This notable decision issued by the Court of Chancery holds an investment fund and its manager liable for over $20 million essentially for destroying a Delaware entity’s value.  The litigation arises out of a once promising technology company’s downfall into liquidation.  The facts involved an investor that leveraged a series of preferred investments into negative control and used that control to secure a self-dealing financing unfavorable to the company, while simultaneously turning away much needed financing opportunities threatening its control.  The investor hoped to position the company for a prompt sale in which it would reap the benefits, but that did not pan out, and the company went under.  More ›

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Supreme Court Upholds Expectation Damages Award For Breach of A Preliminary Agreement

SIGA Technologies Inc. v. Pharmathene Inc.,  Del., No. 20, 2015 (December 23, 2015)

This is an important decision, particularly if it is a precedent that will be followed in other contexts. Basically, the Court has held that expectation damages may be awarded for the breach of even a preliminary agreement when the agreement is sufficient to include an obligation to negotiate any remaining terms. As the dissenting opinion points out, other jurisdictions have confined the award in such cases to only reliance damages. Here, however, the bad faith of the defendant warranted greater damages, under the “wrongdoer rule” that excuses less proof of the actual damages when there is adequate proof of some damages and the wrongdoer's actions have made the amount of damages harder to prove.

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