Delaware Business Litigation Report: Litigation

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Litigation

Delaware Business Litigation Report

Provides business-related litigation information which has been summarized by attorneys currently practicing in Delaware's courts. Searchable Case Summary Database contains summaries of court opinions released since January 2005. Provides links to other resources such as the Delaware Code and administrative rules.
By Morris James LLP

Post Frequency: 5/day

Last Entry: March 29, 2011 at 12:53:19

Court of Chancery Approves Option Back Dating Case Settlement

Posted on January 02, 2009
Ryan v. Gifford, C.A. 2213-CC (Del. Ch. Jan. 2, 2009) In this decision the Court approves the settlement of a stock option back dating case. The opinion carefully goes through all the analysis of when to approve a settlement, particularly when the recovery is adequate under the circumstances...

Court of Chancery Approves Opt Out Settlement

Posted on December 19, 2008
Marie Raymond Revocable Trust v. MAT Five LLC, C.A. 3843-VCL (Del. Ch. Dec. 19, 2008) This decision has a good summary of the law governing certification of a class and when to approve a class settlement. Here the settlement permitted class members to opt out without the loss of any rights to pursue other related litigation...

Court of Chancery Upholds Post Merger Arbitration

Posted on December 11, 2008
Aveta Inc. v. Bengoa, C.A. 3598-VCL (Del. Ch. Dec. 11, 2008) It is now common to provide for post merger payouts and the arbitration of any disputes about those payouts. This case illustrates the problem of what happens when one party feels it does not have enough information to go into arbitration where discovery may be limited...

Court of Chancery Interprets LLC Exculpation Clause

Posted on December 11, 2008
Kahn v. Portnoy, C.A. 3515-CC (Del. Ch. Dec. 12, 2008) This important decision illustrates how hard it is to make an LLC agreement cover all future events. While there is a growing school of thought that advocates letting the parties make their own bed in the form of the LLC agreement, that approach fails to appreciate how hard it is to do that well...

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Court of Chancery Refuses To Impose Costs on Proxy Loser

Posted on December 05, 2008
TravelCenters of America v. Brog, C.A. 3751-CC (Del. Ch. Dec. 5, 2008) In this unusual case, the LLC sought to require the loser of a proxy contest to pay the costs. The LLC Agreement had a provision that imposed costs on those members who violated any of their obligations in the agreement...

Court of Chancery Rejects Settlement

Posted on November 26, 2008
Off v. Ross, C.A. 3468-VCP (Del. Ch. Nov. 26, 2008) The Court of Chancery rejected the proposed settlement of this derivative suit for two reasons. First, the transaction under attack in the litigation was completed after a modification favorable to stockholders before the settlement was presented for approval, the modification was considered by the board before suit was filed, and the transaction was not dependent on approval of the settlement...

District Court Awards Punitive Damages Based in Part on Discovery Abuse, Denies Attorneys' Fees for Inadequate Proof

Posted on November 24, 2008
Christ v. Cormick, 2008 WL 4889127 (D. Del. Nov. 10, 2008) In this opinion the Court sanctioned the defendant’s conduct, including discovery abuse, by awarding punitive damages. The Court first entered default judgment against the defendant after his “repeated dilatory discovery conduct and his refusal to appear for deposition...

Court of Chancery Denies Jurisdiction Over Stock Appreciation Rights Suit

Posted on November 21, 2008
Testa v. Nixon Uniform Service, Inc., C.A.3886-VCS (Del. Ch. Nov. 21, 2008) In a novel attempt to invoke the jurisdiction of the Court of Chancery, the plaintiff tried to rely upon Section 111(a)(2) of the Delaware General Corporation Law that provides the Court of Chancery jurisdiction in disputes over stock...

Court of Chancery Clarifies Statutory Trust Law

Posted on November 07, 2008
Cargill, Incorporated v. JWH Special Circumstance LLC, C.A. 3234-VCP (Del. Ch. Nov. 7, 2008) In this major opinion, the Court of Chancery held that a manager of a Delaware Statutory Trust has a fiduciary duty to the Trust absent a clear exclusion of that duty in the trust instrument...

Court of Chancery Denies Stay in Merrill Lynch Case

Posted on October 28, 2008
County of York Employees Retirement Plan v. Merrill Lynch & Co., Inc., C.A. 4066-VCN (Del. Ch. Oct. 28, 2008) In this decision, the Court of Chancery again affirms it disinclination to stay proceedings in Delaware just because a federal securities case was filed first elsewhere...

The Delaware "Bad Faith" Dilemma: The Problem And A Possible Solution

Posted on October 22, 2008
Introduction A recent Delaware Court of Chancery decision has generated much discussion over whether disinterested directors may be held liable for approving a transaction that appeared reasonable to them and their advisors. Indeed, by holding that the directors may have acted in “bad faith,” the decision seemed to some to be a threat to the core principles embodied in the business judgment rule...

Court of Chancery Applies Statute of Frauds to LLC Agreement

Posted on October 22, 2008
Brian T. Olson v. O. Andreas Halvrosen, C.A. 1884-VCL (Del Ch. Oct. 22, 2008) This decision invalidates a provision in an unsigned LLC agreement for violating the statute of frauds. The Delaware LLC Act permits an oral LLC agreement; however, when the promise in that oral agreement cannot be performed within a year, the promise must be in writing...

District Court Finds Indemnity Provision Repugnant to Delaware Public Policy, Refuses to Enforce

Posted on October 21, 2008
Kempski v. Toll Bros., Inc., 2008 WL 4642633 (D. Del. Oct. 21, 2008) In this opinion, the District Court reinforced Delaware’s law that indemnity provisions that require one party to indemnify another party for the second party’s own negligence are void as against Delaware’s public policy...

Court of Chancery Affirms Limitations Period for Dissolved Entity

Posted on October 14, 2008
In the Matter of Dow Chemical International Inc. of Delaware, C.A. 3972-CC (Del. Ch. Oct. 14, 2008) This decision has a good outline of when the right to sue a Delaware corporation expires after it is dissolved. The basic rule is that after three years no suit may be filed...

Court of Chancery Upholds Merger Agreement

Posted on September 29, 2008
Hexion Specialty Chemicals Inc. v Huntsman Corp., C.A. 3841-VCL (Del. Ch. Sept. 29, 2008) This ninety-one page opinion is must reading on how to interpret a merger agreement and on the parameters of the obligation to proceed in good faith to close a deal...

Court of Chancery Refuses Dissolution of LLC

Posted on September 23, 2008
In re Seneca Investment LLC, C.A. 3624-CC (Del. Ch. Sept. 23, 2008) This decision applies the corporate law rule that the Court of Chancery will not dissolve a solvent entity except for extraordinary reasons. Merely acting as a holding company without an active business is not even close to good enough to warrant dissolution.

Court of Chancery Denies Application for Receiver

Posted on September 23, 2008
Weir v. JMACK Inc., C.A. 3263-CC (Del. Ch. Sept. 23, 2008) This decision repeats the settled Delaware law that the Court of Chancery will not appoint a receiver for a solvent Delaware corporation absent extraordinary circumstances. Of course, having a court tell the world that your tax evasion is not "extraordinary" justification for a receiver may have been punishment enough.

Superior Ct Employs Objective Contract Principles, Grants SJ To Builder

Posted on September 22, 2008
Capano Homes, Inc. v. Syed, 2008 WL 4182039 (Del. Super. Ct. Sept. 8, 2008). This decision implements the objective theory of contracts adopted by the Delaware courts. The dispute involved a homebuyer who refused to proceed to settlement, claiming that the builder breached their written agreement and that the buyer should therefore be excused from performing...

Superior Court Employs Objective Contract Principles, Grants SJ To Builder

Superior Court Denies SJ, Leaves For Jury Whether Agent Had Authority

Posted on September 11, 2008
Jack J. Morris Assoc. v. Mispillion Street Partners, LLC, 2008 WL 3906755 (Del. Super. Ct. Aug. 26, 2008). This decision briefly reviews the three types of authority by which an agent may bind a principal: actual authority, implied authority, and apparent authority...

Superior Court Addresses Allocation Of Defense Costs Across Multiple Towers

Posted on September 11, 2008
HLTH Corp. v. Agricultural Excess and Surplus Ins. Co., 2008 WL 3413327 (Del. Super. Ct. July 31, 2008). When one company acquires several other companies, which carry their own D&O liability coverage, the resulting entity then holds multiple towers of coverage...

Court of Chancery Establishes Procedures for Contested Advancement Claims

Posted on September 10, 2008
Duthie v. CorSolutions Medical, Inc., C.A. 3048-VCN (Del. Ch. Sept. 10, 2008) When advancement is sought, the amounts are often objected to as too large. While the Court of Chancery in the past has not wanted to monitor fees in such cases (leaving the amounts to be finally determined at the indemnification stage), here the Court agreed to appoint a special master to review the advancement requests...

Court of Chancery Permits Settlement of Suit with Suit To Be Filed Against Insurers

Posted on September 04, 2008
In re Electronics for Imaging Inc. S’holders Litig., C.A. 2797-VCL (Del. Ch. Sept. 4, 2008) It is common for the settlement of a derivative suit to be funded by the D&O insurers. Here, however, in a twist to that common event, the Court upheld a settlement where the company is permitted to sue the D&O insurers, with counsel for the stockholder plaintiff as its attorneys, to force the insurers to fund...

Court of Chancery Dismisses Derivative Suit for Bad Conduct and Lack of Standing

Posted on September 04, 2008
Parfi Holding A.B. v. Mirror Image Internet Inc., C.A. 18507-VCS (Del. Ch. Sept. 4, 2008) In this highly unusual case, the Court of Chancery dismissed the complaint because the plaintiff had not told the truth as to why it was not proceeding promptly and because the named plaintiff had lost standing by conveying away any economic interest in the stock it held in the company...

Court of Chancery Permits Discovery for a Settlement Hearing

Posted on September 03, 2008
In re Countrywide Corp. S'holders Litig., C.A. 3464-VCN (Del. Ch. Sept. 3, 2008) In this admittedly unusual case, the Court of Chancery has expanded the limited discovery available to an objector of a proposed settlement of a derivative case. The discovery includes the valuation of the derivative claims' value to the company...

Court of Chancery Upholds Director Decision Rejected by Stockholders

Posted on September 02, 2008
In re Lear Corp. S'holder Litig., C.A. 2778-VCS (Del. Ch. Sept. 2, 2008) In this decision the court dismissed claims against directors whose decision to approve a merger was rejected by the stockholders and the company then had to pay a termination fee...

Court of Chancery Defines Bad Faith, Again

Posted on August 29, 2008
McPadden v. Sidhu, C.A. 3310-CC (Del Ch. Aug. 29, 2008) This decision again affirms that bad faith is not the same a gross negligence and explains the difference. That distinction is important because usually directors are immunized from decisions made in good faith, even if negligent...

Court of Chancery Permits Reasonable Time To Invoke MAC Clause

Posted on August 26, 2008
Henkel Corp. v. Innovative Brands Holdings LLC, C.A. 3663-VCN (Del. Ch. Aug. 26, 2008) Merger agreements frequently permit a merger to be terminated in the event of a materially adverse change to the business of the company to be acquired. When the right to invoke such a MAC clause is not set by the agreement, this decision holds that it must be invoked within a reasonable time...

Superior Court Holds D&O Insurer's Consent Was Required For Settlement

Posted on August 21, 2008
Federal Ins. Co. v. Hilco Capital, LP, 2008 WL 3021109 (Del. Super. Ct. Aug. 5, 2008). This coverage dispute arises out of the settlement of an underlying breach of fiduciary duty action. The plaintiffs and defendants (insureds) in that underlying action, along with the first-layer D&O carrier, reached a settlement agreement without the consent of the excess liability carrier, despite the settlement implicating that policy...

Court of Chancery Answers its Critics of the Ryan Decision

Posted on August 20, 2008
Ryan v. Lyondell Chemical Company, C.A. 3176-VCN (Del Ch. Aug. 29, 2008) The recent decision in this case denying summary judgment has set off a storm of protest that the Court of Chancery is ignoring the business judgment rule and the director exculpation statute...

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