Photo of Delaware Inside & Out Albert H. Manwaring, IV
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amanwaring@morrisjames.com
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Albert H. Manwaring, IV is a partner of Morris James LLP and concentrates his practice in corporate governance, fiduciary, and business litigation.  He represents special committees …

Showing 6 posts by Albert H. Manwaring, IV.

Del. Supreme Court Finds Emails May Be Subject to Production in Books-and-Records Actions

Section 220 of the Delaware General Corporation Law permits a stockholder to inspect the books and records of a corporation, provided that the demand for inspection meets certain form and manner requirements, and the inspection is sought for a proper purpose—e.g., one reasonably related to the interests of stockholders. Plaintiff stockholders bear the burden of proving that each category of documents sought is essential to accomplish the stockholders’ purpose for the inspection. Section 220 inspections of books and records are not intended to produce a comprehensive set of documents that would likely be produced under discovery rules in a plenary action. Rather, the goal in a 220 action is to provide stockholders with a discrete set of documents sufficient or necessary to accomplish their purpose. More ›

Delaware Corporate and Commercial Case Law Year in Review - 2018

This top ten list summarizes significant decisions of the Delaware Supreme Court and the Delaware Court of Chancery over the past calendar year 2018. The article was originally published in Transaction Advisors.

The cases selected either meaningfully changed Delaware law or provided clarity or guidance on issues relevant to corporate and commercial litigation in Delaware. 

One: City of North Miami Beach General Employees’ Retirement Plan v. Dr. Pepper Snapple Group Inc., 189 A.3d 188 (Del. Ch. June 1, 2018) (Bouchard, Chancellor)

This decision arose out of a merger involving the Dr. Pepper and Keurig companies. In a reverse triangular merger, a parent company uses a subsidiary to acquire a target, with the target absorbing that subsidiary. That is how Dr. Pepper and Keurig structured their deal. The result was Dr. Pepper stockholders getting cash but retaining their stock, and Keurig’s stockholders getting a controlling interest in Dr. Pepper. Certain Dr. Pepper stockholders sued in the Court of Chancery, asserting that they had appraisal rights to a judicially-determined fair value in connection with the deal under Section 262 of the Delaware General Corporation Law (DGCL), which were being violated. More ›

Extraordinary Circumstances MAE Allow a Buyer to Break a Bad Deal

The State of Delaware’s policy is to give maximum effect to the principle of freedom of contract. Delaware courts seek to enforce the language in an agreement negotiated by the parties and will not rewrite the agreement after the fact to reallocate risks, especially in an agreement between sophisticated parties that was bargained for at arm’s length. This includes risks allocated through “material adverse effect” (MAE) provisions in a merger or acquisition agreement. The Delaware Court of Chancery’s recent decision in Akorn, Inc. v. Fresenius Kabi AG, No. 2018-0300-JTL, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018) (Laster, V.C.), illustrates how the court applies Delaware’s policy of freedom of contract. While this is the first time that the court has found that an MAE on the seller’s business justified a buyer’s termination of a merger agreement, this decision presented an exceptional set of facts regarding the utter deterioration of Akorn’s business and widespread company regulatory compliance issues affecting its pipeline of new generic drugs. Accordingly, the court’s ruling merely represents the application of a well-known principle to enforce the language of a merger agreement, allocating the risks bargained for by sophisticated parties, to an egregious set of facts. More ›

Chancery Rejects Merger Price as Indicator of Fair Value in Appraisal Based on Flaws in Sales Process

Appraisal is a limited statutory remedy that provides a Delaware general corporation’s stockholders, who dissent to the sufficiency of the merger price, with the right to have the Delaware Court of Chancery determine the “fair value” of their shares, 8 Del. C. Section 262. In determining fair value, the court must consider all relevant factors. While a single or multiple factors may be considered in the valuation, the court’s determination of the relevant factors must be grounded in the evidentiary record and “accepted financial principles.”  More ›

Self-Dealing Conduct Supporting Fiduciary-Duty Claims Was Covered by Contractual Duties Imposed in the LLC Agreement

The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements. The act permits parties to eliminate common-law fiduciary duties, and replace them with contractual duties that are often more limited in scope than default common-law fiduciary duties. While parties may not eliminate the implied covenant of good faith and fair dealing in an operating agreement, the implied covenant only operates to imply terms essential to fill gaps necessary to meet the reasonable expectations of the parties as reflected in the express terms of the operating agreement. More ›

Guidance Provided to Evaluate the Implied Covenant of Good Faith and Fair Dealing

The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements. While the act permits parties to eliminate fiduciary duties that members or managers would otherwise owe to one another, an operating agreement may not eliminate the implied covenant of good faith and fair dealing that inheres in every LLC operating agreement under Delaware law. The implied covenant operates to imply terms to address developments or contractual gaps that neither party anticipated in the operating agreement, but which are necessary to fill gaps essential to meeting the reasonable expectations of the parties as reflected in the express terms of the operating agreement. More ›