Delaware Transactional Law Updates

Document: Psilos Group Partners, L.P. v. Towerbrook Investors L.P., C.A. No. 1479-N, Strine, V.C. (Del. Ch.  Jan. 17, 2007)

The Court granted summary judgment to the defendant because the terms of a contract that provided the plaintiffs the right to invest in an entity, if the defendants led the financing of the acquisition of that entity, were not met where the defendants participated in the acquisition, but did not lead the financing.

Document: Lillis v. AT&T Corp., C.A. No. 717-N, Lamb, V.C. (Del. Ch.  Dec. 21, 2006)

The Court denied cross motions for summary judgment where material issues of fact existed relating the interpretation of a stock option plan.

Document: ATR-KIM ENG Financial Corp. v. Araneta, C.A. No. 489-N, Strine, V.C. (Del. Ch. Dec. 21, 2006)

The Court held that a director and majority stockholder of a holding corporation breached his fiduciary duties to the minority stockholders by transferring assets of the corporation to his family members.  Other directors were held to have breached their fiduciary duties by failing to monitor whether the holding company retained its primary assets.

Document: In re William Lyon Homes S’holders Litig., C.A. No. 2015-N, Noble, V.C. (Del. Ch. Dec. 21, 2006)

Documents: Midland Interiors Inc. v. Burleigh, C.A. No. 18544, Parsons, V.C. (Del.Ch. Dec. 19, 2006)

The Court pierced the veil of a corporation in favor of a judgment creditor, where the Court found the stockholder had acted fraudulently with respect to the existence of the corporation.

Document: Bryan v. Doar, No. 469, 2006, Holland, J. (Del. Nov. 6, 2006)

The Court dismissed the appeal, for lack of standing, by a bankruptcy trustee where the trustee was not a party to the Court of Chancery action that was the subject of the appeal.

Document: Stone v. Ritter, No 93, 2006, Holland, J. (Del. Nov. 6, 2006)

The Court affirmed the Court of Chancery’s dismissal, for failure to adequately plead demand futility, where the plaintiffs alleged that directors breached their duty of good faith by failing to implement information and reporting systems required by law. The Court reached its decision on the basis that the fiduciary duty of good faith was a subset of the duty of loyalty, and thus the directors were required to know that they were neglecting a duty before personal liability could be imposed.

Document: JW Acquisitions, LLC v. Shulman, C.A. No. 1712-N, Lamb, V.C. (Del. Ch. Oct. 25, 2006)

The Court of Chancery dismissed a claim seeking registration of a transfer of stock under the UCC, where the defendants sought to avoid litigation by consenting to an order essentially the granting relief sought by the plaintiff under the statute, and to preserve the issue of the wrongfulness of the transfer of the stock for later litigation.

Document: Franklin Balance Sheet Investment Fund v. Crowley, C.A. No. 888-N, Parsons, V.C. (Del. Ch. Oct. 19, 2006)

The Court of Chancery granted plaintiffs’ motion to amend the complaint where defendants raised new issues in their reply to the plaintiffs’ response to the defendants’ motion to dismiss, and granted an additional stockholder’s motion to intervene as a plaintiff where it was neither moot nor barred by laches.

Documents: Bakerman v. Sidney Frank Importing Co. Inc., C.A. No. 1844-N, Chandler, C. (Del. Ch. Oct. 16, 2006)

The Court dismissed claims of unjust enrichment and tortious interference with contract by a minority member of an LLC relating to a sale of the LLC, but allowed claims to go forward for breach of fiduciary duties, breach of the LLC operating agreement, and breach of the implied covenant of good faith and fair dealing.

Document: Smith v. McGee, C.A. No. 2101-S, Chandler, C (Del. Ch. Oct 16, 2006)

The Court of Chancery granted the defendant’s partial motion for summary judgment on claims of shareholder oppression and breach of fiduciary duties, where plaintiff could not establish a basis to toll the three-year statute of limitations.

Documents: Polygon Global Opportunities Master Fund v. West Corp., C.A. No. 2313-N, Lamb, V.C. (Del. Ch.  Oct. 12, 2006)

A DGCL § 220 information request made by an arbitrage hedge fund on a public company on the verge of a going-private transaction was denied because the Court found that the public filings of the company were sufficient to value the fund’s shares.

Documents: Berger v. Intelident Solutions, Inc., C.A. No. 1527-N, Lamb, V.C. (Del. Ch. Oct. 12, 2006)

Applying Florida law, the Court refused to dismiss fiduciary duty claims under a Florida statute which sets forth that absent fraud or a breach of statutory protocol, appraisal is the exclusive method for stockholders to challenge a merger, where the company gave minority stockholders only four business days notice, and the proxy statement allegedly omitted material facts.

Documents: Energy Partners, Ltd. v. Stone Energy Corp., C.A. Nos. 2402-N and 2374-N, Parsons, V.C. (Del. Ch. Oct. 11, 2006)

In an expedited, consolidated dispute over the validity of an alleged no-talk or no-shop clause in a merger agreement, the Court granted a declaration that the clause did not prevent the company from exploring other offers.

Documents: In re Tele-Communications, Inc. S’holders Litig., C.A. No 16470, Chandler, C. (Del. Ch. Oct. 11, 2006)

The Court of Chancery denied the plaintiff’s motion to substitute the estate of a defendant director for the deceased director where the plaintiffs failed to file the motion for substitution within the period provided by court rules.

Documents: Abbey v. Skokos, C.A. No. 2207-N, Chandler, C. (Del. Ch. Oct. 10, 2006)

The Court stayed a dispute relating to a limited partnership in favor of a prior filed action in Federal Court.

Document: Cornerstone Brands, Inc. v. O’Steen, C.A. No. 1501-N, Chandler, C. (Del.  Sept. 20, 2006)

The Court denied a motion to dismiss for lack of subject matter jurisdiction as to claims based on an agreement which granted stock options to a former employee, because DGCL § 111 grants the Court of Chancery jurisdiction over agreements by which a corporation sells stock or creates rights respecting its stock.

Documents: Abrons v. Marée, C.A. No.1893-N, Lamb, V.C. (Del. Ch. Sep. 20, 2006)

The Court refused to preliminarily enjoin a tender offer based on allegations of disclosure violations, because the plaintiff failed to show a reasonable probability of success on the merits.

Document: Superior Vision Services, Inc. v. Reliastar Life Ins. Co., C.A. No. 1668-N, Noble, V.C. (Del. Ch. Aug. 25, 2006)

Complaint against 44% stockholder, who refused to consent to waiver of contractual ban on company’s distribution of dividends, failed to state a claim for breach of fiduciary duties because non-controlling minority stockholders do not owe fiduciary duties to the corporation or other stockholders, or a claim for breach of the implied covenant of good faith and fair dealing.