Duthie, et al. v. CorSolutions Medical, Inc., et al., C.A. No. 3048-VCN, Noble, V.C. (Del. Ch. September 10, 2008)
After Plaintiffs were awarded advancement of litigation fees, Defendant corporation stalled payments in light of several objections. The Court held that the Plaintiffs were entitled to advancement for an affirmative claim asserted as part of a defensive strategy involving the same dispute because such action was broadly authorized under the advancement provisions and might be necessary to serve a defensive purpose. Likewise, fees paid to retain additional counsel on a standby basis to guard against the risk that current counsel would be subject to a disqualifying conflict were subject to advancement as funding a prudent and reasonable measure under the circumstances. Lastly, the court refused to review the substantive amounts of fees, providing instead for procedures under a Special Master to resolve any discrepancies between the parties.
Parfi Holding AB, et al. v. Mirror Image Internet, Inc., et al., C.A. No. 18507-VCS, Strine, V.C. (Del. Ch. Sept. 4, 2008)
Plaintiffs attempted to have the Court reverse a Stay Order in favor of arbitration determination based on false pretenses, claiming that it was impossible for them to fund arbitration and they were unaware of the size of the required arbitration filing fee. A voluminous factual record proved otherwise and the Court accordingly granted the Defendants’ motion to dismiss the Plaintiffs’ claims with prejudice finding that when a party knowingly misleads the Court in order to secure an unfair tactical advantage, the Court must regard that party as “forfeit[ing] its right to equity’s aid”
In re Lear Corp. Shareholder Litigation, Cons. C.A. No. 2728-VCS, Strine, V.C. (Del. Ch. Sept. 2, 2008)
Stockholders brought suit for breaches of fiduciary duty in connection with the Defendant corporation’s agreement to pay a bidder a termination fee payable upon a no vote on a merger in exchange for that bidder increasing its bid. Plaintiffs claimed that the directors approved the revised merger agreement knowing that it was improbable that the stockholders would agree to the enhanced deal. The Court dismissed Plaintiffs’ complaint for failing to state with particularity a non-exculpated claim, as the directors acted in good faith and could not be faulted because the stockholders did not agree with their recommendation. As the board was independent, used an adequate process, relied on reputable experts and had a substantial basis to conclude that the merger was financially fair, Plaintiffs’ complaint did not even create an inference of mere negligence.
McPadden v. Sidhu, et al. & i2 Tech., C.A. No. 3310-CC, Chandler, C. (Del. Ch. August 29, 2008)
Document: McPadden v. Sidhu, et al. & i2 Tech., C.A. No. 3310-CC, Chandler, C. (Del. Ch. August 29, 2008)
Plaintiff brought suit against officers and directors of i2 Technologies (“i2”) for their conduct surrounding the sale of Trade Services Corporation (“TSC”), a wholly-owned subsidiary of i2. The board placed Defendant Dubreville, a TSC officer, in charge of selling TSC with knowledge that he was personally interested in acquiring the subsidiary through a management buyout. Dubreville’s team subsequently acquired TSC at a bargain price after very limited efforts to market the company, relying on valuations conducted by Dubreville himself. Thereafter, Dubreville’s team flipped TSC for a price 2.7 times larger than they had paid. The Court held that, although the Plaintiffs’ allegations supported a finding that the board was grossly negligent for not considering material and reasonably available information regarding the sale, they were not sufficient to establish that the board acted in bad faith. The Court granted the Director Defendants’ motions to dismiss breach of fiduciary claims, as they were protected by an exculpatory provision in i2’s certificate of incorporation applying to breaches of the duty of care. However, the Court allowed claims of breach of fiduciary duty and unjust enrichment to proceed against Defendant Dubreville, as he was an officer and could not claim the benefits of the exculpatory clause.
Henkel Corp. v. Innovative Brands Holdings, LLC, C.A. No. 3663-VCN, Noble, V.C. (Del. Ch. August 26, 2008)
Plaintiff corporation brought suit to compel Defendant corporation to complete its acquisition of Plaintiff. Defendant claimed that Plaintiff failed to satisfy a condition precedent to performance, namely that there not be a Material Adverse Effect (“MAE”). As per the terms of the Asset Sale and Purchase Agreement, Defendant had neither terminated the agreement nor closed it, but sought to hold Plaintiff to the Agreement’s no-shop clause. The Agreement did not specify a date by which the transaction must close or a time by which Defendant must decide whether to claim a MAE or waive any such claim. In order to avoid Plaintiff being constrained indefinitely, the Court allowed the case to proceed so that a factual analysis could be conducted to set a reasonable deadline for Defendant’s decision.
Hexion Specialty Chemicals, Inc., et al. v. Huntsman Corp., C.A. No. 3841-VCL, Lamb, V.C. (Del. Ch. August 22, 2008)
The Court granted the plaintiff’s motion to compel the defendant’s financial advisor’s presentation documents, and meeting minutes showing discussions of the advisor’s personnel, where the information was “not acquired in preparation for trial, but rather because he was an actor or viewer with respect to transactions or occurrences that are part of the subject matter of the lawsuit” as stated in the advisory notes to Rule 26(b)(4)(B) of the Federal Rules of Civil Procedure.
R&R Capital, LLC, et al. v. Buck & Doe Run Valley Farms, LLC, et al., C.A. No. 3803-CC, Chandler, C. (Del. Ch. August 19, 2008)
The Court granted the respondents’ motion to dismiss based on the waiver of rights by petitioners, by virtue of the language in the LLC agreements along with Delaware’s strong policy of freedom of contract. The Court also ruled that two of the petitioners lacked standing to petition for dissolution because they were neither members nor managers. However, the Court held that the member could petition for appointment of a receiver.
Steel Partners II, L.P. v. Point Blank Solutions, Inc., C.A. No. 3695-CC, Chandler, C. (Del. Ch. August 12, 2008)
The Court denied defendant’s motion to postpone its annual stockholder meeting after it had already postponed the meeting four months earlier, and entered into a stipulation which set a date for the meeting and provided another postponement was acceptable only if good cause was shown. The Court reasoned that the company failed to provide adequate basis for further impingement of the shareholder franchise.
Hexion Specialty Chemicals, Inc. v. Huntsman Corp., C.A. No. 3841-VCL, Lamb, V.C. (Del. Ch. August 12, 2008)
The Court denied the plaintiff’s motion to compel an email between two of the defendant’s attorneys and their financial advisor, because the email was plainly subject to the attorney-client privilege, the financial advisor was working on the same project, and the defendant had not taken any knowingly false positions in the litigation.
In re William Lyon Homes Shareholder Litigation, C.A. No. 2015-VCN, Noble, V.C. (Del. Ch. August 8, 2008)
The Court denied the plaintiff’s motion to compel the production of three emails between the defendant and his attorneys. The defendant was challenging the plaintiff’s presumption of causation, but was exclusively relying on objective non-privileged facts, rather than advice from his attorneys, which would have placed the advice directly “at issue” in the case, thereby waiving the attorney-client privilege.
In re SS&C Technologies, Inc. Shareholders Litigation, Cons. C.A. No. 1525-VCL, Lamb, V.C. (Del. Ch. August 8, 2008)
The Court concluded that the defendant’s fee petition of nearly $1,000,000 in fees and expenses for one fifty-page brief, preparation for and presentation at, a two hour oral argument and a motion to unseal and for sanctions was too high, and that a reasonable award would be $250,000 since a substantial portion of the brief merely restated the background of the dispute, and most of the information for the motions to unseal and for sanctions was gathered previously.
Encite LLC v. Soni, et al., C. A. No. 2476-CC, Chandler, C. (Del. Ch. August 1, 2008)
Document: Encite LLC v. Soni, et al., C. A. No. 2476-CC, Chandler, C. (Del. Ch. August 1, 2008)
he Court ruled on several motions to dismiss by third party defendants. The plaintiff corporation alleged tortious conduct by the defendant, who had several claims against the third party defendants, former directors and shareholders of a company whose assets the plaintiff had purchased. The Court ruled that the defendant clearly alleged tortious interference against one third party defendant whose actions were allegedly taken on his own behalf, as an independent competing bidder and not as part of the company, but dismissed the claim against the other third party defendant since it was alleged only that he sought to enjoin the sale of assets, which was insufficient to state an ulterior purpose. The Court also dismissed the civil conspiracy claims. The breach of the implied covenant of good faith claim was similarly dismissed because the Court found no contract existed from a letter in which the third party defendant confirmed expectations that the board would continue to search for a new CEO.
Sun-Times Media Group, Inc. v. Black, et al., C.A. No. 3518-VCS, Strine, V. C. (Del. Ch. July 30, 2008)
The Court, after considering the language of the plaintiff’s by-laws, § 145(e) of the Delaware General Corporation Law, both parties’ course of performance, and the common definition of the language “final disposition of such action, suit, or proceeding”, concluded that such language meant the final non-appealable conclusion to the proceeding at issue, and that plaintiff had to advance defendants’ fees and expenses of litigation under an advancement provision in its by-laws until such time.
Ryan v. Lyondell Chemical Corp., et al., C.A. No. 3176-VCN, Noble, V.C. (Del. Ch. July 29, 2008)
Document: Ryan v. Lyondell Chemical Corp., et al., C.A. No. 3176-VCN, Noble, V.C. (Del. Ch. July 29, 2008)
The Court denied two of Defendant Lyondell Chemical Company’s (“Lyondell”) motions for summary judgment with regard to a class action suit challenging its cash for shares merger with Defendant Basell AF (“Basell”). The Court allowed the suit to proceed on the claim of failure to satisfy Revlon duties based on the allegations that Lyondell’s board of directors did not take affirmative steps to confirm a better deal could not be obtained and hastily completed the deal with Basell in less than seven days. As it never conducted any type of market check, the Lyondell board could not show at this stage of the proceedings that it was knowledgeable about the value of the company. In addition, the Lyondell board did not establish it satisfied the Unocal test because it could not establish why the several deal protection devices granted were appropriate under the circumstances. The Court then dismissed Plaintiff’s claim against Lyondell for breach of loyalty because the Lyondell board was not motivated by self-interest to approve the merger and the Plaintiff did not challenge the board’s independence. The Court also dismissed Plaintiff’s claim against Lyondell for breach of disclosure duties because the proxy materials disclosed the material information in a full and accurate manner.
In re TD Banknorth Shareholders Litigation, C.A. No. 2557-VCL, Lamb, V.C. (Del. Ch. July 29, 2008)
Document: In re TD Banknorth Shareholders Litigation, C.A. No. 2557-VCL, Lamb, V.C. (Del. Ch. July 29, 2008)
The Court granted the plaintiffs’ motion for certification as class representatives in a class action brought by former investors who claim that the defendants improperly initiated a transaction in violation of a stockholders agreement. The Court reasoned that the plaintiffs satisfied the adequacy requirement of Court of Chancery Rule 23(a)(4) because both plaintiffs had sufficient knowledge of, and participation in the litigation, and there was no evidence of improper conduct of counsel.
E.I. DuPont de Nemours & Co. v. Bayer CropScience L.P., C.A. No. 3741-VCL, Lamb, V. C. (Del. Ch. July 29, 2008)
The Court denied preliminary injunctive relief to the plaintiff, DuPont, in a breach of contract case dealing with a supply and license agreement between the two chemical companies. The Court reasoned that DuPont, which sought specific performance of a supply agreement, could not establish by “clear and convincing evidence” its entitlement to the relief sought and that the balance of hardships did not warrant preliminary injunctive relief.
CA, Inc. v. AFSCME Employees Pension Plan, No. 329, 2008, Jacobs, J. (Del. July 17, 2008)
CA, Inc. v. AFSCME Employees Pension Plan, No. 329, 2008, Jacobs, J. (Del. July 17, 2008)
The United States Securities and Exchange Commission (the “SEC”) sought certification of two questions of law pursuant to Article IV, Section 11(8) of the Delaware Constitution and Delaware Supreme Court Rule 41. The SEC asked the Court to apply Delaware law to a proposed stockholder bylaw submitted by the AFSCME Employees Pension Plan (“AFSCME”) for inclusion in the proxy materials of CA, Inc.’s (“CA”) annual stockholders’ meeting, assessing whether the provision was a proper subject for stockholder action. The proposed bylaw would provide for reimbursement of proxy expenses to stockholders “in connection with nominating one or more candidates in a contested election of directors.” The Court held that the proposed bylaw was an appropriate subject for shareholder action but would violate Delaware law if enacted by CA’s shareholders because the bylaw mandated reimbursement of election expenses and did not reserve to CA’s directors the full discretion necessary to ensure fulfillment of their fiduciary duties. The Court stated that the shareholders could either amend the Certificate of Incorporation to include the underlying substance of the proposed bylaw provision or seek recourse from the Delaware General Assembly in the form of revised fiduciary duty standards.
Salvatore F. Sodano v. American Stock Exchange LLL & Financial Industry Regulatory Authority, Inc., C.A. No. 3418-VCS, Strine, V.C. (Del. Ch. July 15, 2008)
The Court held that the Plaintiff preserved his right to advancement under a separation agreement with the NASD regarding his employment with AMEX. The separation agreement provided for indemnification but did not mention advancement. The Court upheld a broad interpretation of “indemnification,” thereby requiring advancement, because such interpretation was consistent with language in the NASD certificate of incorporation, supported by use of the term in other facets of transactions surrounding Plaintiff’s separation agreement, and consistent with prevalent case law. However, as AMEX was primarily obliged to advance Plaintiff’s legal fees, the Court held that the NASD was only secondarily liable for advancement and would only be liable in the event that AMEX became unable to meet its advancement obligation.
Pharmalytica Services, LLC v. Agno Pharmaceuticals, LLC, C.A. No. 3343-VCN, Noble, V.C. (Del. Ch. July 9, 2008)
The Court entered a status quo order to prohibit, pending final resolution of the merits, a director of the Plaintiff limited liability company from representing or taking any action on behalf of the company. The Court held that the director, by covertly usurping business opportunities and interfering with the Plaintiff’s foreign joint venture, acted inconsistent with the reasonable expectations of the majority members of the company. The Court noted that, in the absence of interim relief, the company would likely suffer irreparable harm.
Elizabeth Maloney-Refaie v. Bridge at School, et al., C.A. No. 3446-VCL, Lamb, V.C. (Del. Ch. July 9, 2008)
The Court dismissed Plaintiff’s complaint for want of personal jurisdiction over the Defendant non-profit corporation because the contract unambiguously required arbitration of all disputes arising from it, rejecting the Plaintiff’s interpretation of the clause as permissive and not mandatory. The Court also rejected jurisdiction over a related charitable trust fund because the Plaintiff was unable to show that it was a parent, subsidiary or affiliate of or somehow owned or controlled the defendant non-profit corporation. While the Plaintiff’s paychecks were drawn from the trust’s account and plaintiff regularly obtained approvals and provided updates to the trust, such acts were insufficient to establish a basis for personal jurisdiction.