Articles Posted in Delaware Court of Chancery

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In a letter opinion, the Delaware Court of Chancery denied a motion for reargument regarding the court's decision on HC's motion for partial summary judgment. The court held that Myers failed to demonstrate that the court misapprehended the law or facts because its arguments rehashed arguments it raised in its opposition to HC's motion; raised entirely new arguments; or raised arguments that reflected a misapprehension of the court's decision. The court rejected Myers' argument that the court "inexplicably" and incorrectly concluded that Myers' objection to HC's first claim did not apply to items that overlap in HC's first and second claim notices; that once Myers objected to an indemnification claim, HC could not "override" Myers' objection by making another claim; and that even if Myers "irrevocably waived the right to contest distribution" of the escrow property, it may still raise "defenses" to prevent "distribution of the entire escrow amount." View "The HC Companies, Inc. v. Myers Industries, Inc." on Justia Law

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Plaintiff filed a verified complaint against West to inspect its books and records under Section 220 of the Delaware General Corporation Law (DGCL). The Delaware Court of Chancery held in this post-trial opinion that plaintiff has demonstrated, by a preponderance of the evidence, a credible basis from which the court can infer that wrongdoing related to the merger may have occurred. The court rejected West's argument that the Corwin doctrine would stand as an impediment to an otherwise properly supported demand for inspection under Section 220. The court explained that any contrary finding would invite defendants improperly to draw the court into adjudicating merits defenses to potential underlying claims in order to defeat otherwise properly supported Section 220 demands. Furthermore, the court should not prematurely adjudicate a Corwin defense when to do so might deprive a putative stockholder plaintiff of the ability to use Section 220 as a means to enhance the quality of his pleading. Therefore, the court ordered a judgment entered in favor of plaintiff and directed West to allow inspection of the books and records at issue. View "Lavin v. West Corp." on Justia Law

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In a memorandum opinion, the Delaware Court of Chancery held that the Stock Purchase Agreement allowed Vestcom to claim the full amount of the transaction tax deductions (TTDs) pre-closing. The TTDs in this case arose from the sale of a manufacturer of retail shelving labels between sophisticated financial actors. After reviewing the evidence presented at trial, the court held that the Agreement allowed only one objectively reasonable meaning, namely that Vestcom was free to claim 100% of the TTDs to reduce pre-closing taxable income, but VPH would have to remit 50% of the value of any post-closing refunds or reductions in taxable income to LSVC. View "LSVC Holdings, LLC v. Vestcom Parent Holdings, Inc." on Justia Law

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The Court of Chancery dismissed Plaintiff’s complaint for failure to state a claim for relief in this action arising out of a reclassification of the shares of NRG Yield, Inc. A stockholder of the company filed this action asserting that members of the company’s board members breached their fiduciary duties in connection with their approval of the reclassification and that NRG Energy, Inc. breached its fiduciary duty as a controlling stockholder by causing the company to undertake the reclassification. In dismissing the case, the Court of Chancery held (1) the reclassification was a conflicted transaction subject to entire fairness review; (2) the analytical framework articulated in Kahn v. M&F Worldwide, Corp., 88 A.3d 635 (Del. 2014), a squeeze-out merger case, applied to the reclassification; and (3) that framework was satisfied in this case from the face of these pleadings. View "IRA Trust FBO Bobbie Ahmed v. Crane" on Justia Law

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The Court of Chancery granted Defendants’ motion to dismiss Plaintiff’s claims for breach of fiduciary duty, waste, and unjust enrichment and dismissed the complaint with prejudice as to the named plaintiff because the claims were released as a part of a settlement agreement. Plaintiff brought these claims derivatively on behalf of Viacom Inc. challenging Viacom’s payment of approximately $13 million of compensation to its founder and then-chairman from 2014 to 2016 when Viacom’s directors purportedly knew that he was incapacitated and incapable of doing his job. The Court of Chancery held that the plain terms of the release in the settlement agreement entered into by Viacom in 2016 barred litigation of the derivative claims asserted in this case. View "Feuer v. Dauman" on Justia Law

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The Court of Chancery denied the appeal of Philip Gentile from the determination that Gentile’s claim for $497,739 against Fund.com Inc. (the Company) was time-barred. After a Receiver was appointed for the Company, it commenced a process for marshaling the Company’s assets, determining its liabilities, and winding up its affairs. Gentile, the Company’s former CEO, contended that he was entitled to recover the amount sought as a result of various breaches of his employment agreement with the company. The Receiver rejected the claim as time-barred. The Court of Chancery adopted the Receiver’s determination as a decision of the court, holding that the Receiver correctly determined that Gentile’s claim was barred by the statute of limitations. View "B.E. Capital Management Fund LP v. Fund.com Inc." on Justia Law

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Plaintiff, a stockholder of Kaazing Corporation (Defendant), filed this 8 Del. C. 220 action seeking to inspect certain books and records of Defendant. Plaintiff argued that his proper purposes seeking inspection of twenty-six categories of documents were to value his membership interest in Defendant and the investigation of mismanagement, waste or wrongdoing. The Court of Chancery held (1) Plaintiff adequately demonstrated a credible basis to suspect wrongdoing that justified further investigation into mismanagement, and therefore, Plaintiff demonstrated proper purposes; and (2) Plaintiff was entitled to inspect some, but not all, of the books and records he sought. View "Mehta v. Kaazing Corp." on Justia Law

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The Court of Chancery dismissed a case brought by Plaintiff, a stockholder in The Fresh Market, alleging a breach of fiduciary duty by the Market’s directors and that Brett Berry, a former CEO and former vice chairman of the company’s board, aided and abetted that breach of fiduciary duty. The Market was acquired by an entity controlled by a private equity firm, and the founder of the Market rolled his equity ownership in the Market into the acquirer as part of the deal. The court held that because there was no coercion applied to the fully informed vote of the common stockholders ratifying the decision of the directors that the merger was in the stockholders’ best interest and the vote was adequately informed so as to serve as a ratification of the board’s decision, the matter must be dismissed. View "Morrison v. Berry" on Justia Law

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Plaintiffs alleged insider-trading side deals in connection with the sale of a small aerospace manufacturing company, Kreisler, and insufficient disclosure to stockholders regarding the sales process. Before the sale, Kreisler was offered to dozens of potential acquirers. Several bidders emerged. A fairness opinion was rendered and a special committee ultimately recommended the sale. The transaction was approved by written consent of a majority of the shares outstanding. A block of shares of just over 50 percent executed a stockholder support agreement providing for approval of the transaction, so there was no stockholder vote. An Information Statement was provided to stockholders to permit them to decide whether to seek appraisal. A majority of Kreisler’s board of directors are independent and disinterested, and its charter contains an exculpation provision. The Delaware Court of Chancery dismissed the complaint, finding that even accepting the well-pled allegations as true and drawing all reasonable inferences in the Plaintiff’s favor, the Complaint fails to state a claim on which relief may be granted. View "Kahn v. Stern" on Justia Law

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In this consolidated class action, former stockholders of Martha Stewart Living Omnimedia, Inc. (MSLO) brought claims against Martha Stewart, MSLO’s former controlling stockholder and namesake, for breach of fiduciary duty and against Sequential Brands Group, Inc., (Sequential), a third-party buyer, for aiding and abetting that breach. The claims arose from a transaction whereby MSLO was acquired by Sequential in a merger. At issue was whether Stewart leveraged her position as controlling stockholder to secure greater consideration for herself than was paid to the other stockholders as a result of the merger. Stewart and the Sequential defendants brought motions to dismiss. The Court of Chancery granted the motions, holding that the complaint failed to state a claim for breach of fiduciary duty against Stewart, and therefore, the court need not reach the question of whether the complaint adequately pleaded the other elements of aiding and abetting a breach of fiduciary duty. View "In re Martha Stewart Living Omnimedia, Inc. Stockholder Litigation" on Justia Law