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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 2 posts in Preliminary Injunction.
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.
Arising out of the highly-publicized dispute over the proposed transaction involving CBS and Viacom, each controlled by the Redstones, this decision is both front-page newsworthy and legally significant. CBS and Viacom used to be one entity but split. The Redstones retained voting control in each through a dual-class voting structure. Later, the Redstones began pushing to merge the entities once again and both entities formed special committees to consider the proposal. More ›