Articles Posted in Delaware Court of Chancery

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In this action arising out of a reclassification of the shares of NRG Yield, Inc. (“Yield”), a stockholder alleged that members of the Yield board breached their fiduciary duties by approving the reclassification and that NRG Energy, Inc. (“NRG”), which managed Yield’s daily affairs, breached its fiduciary duty by causing Yield to undertake the reclassification. The Court of Chancery dismissed the complaint for failure to state a claim for relief, holding (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), applied to the reclassification; and (3) that framework was satisfied in this case from the face of the pleadings. View "IRA Trust FBO Bobbie Ahmed v. Crane" on Justia Law

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In this case, the plaintiff, a stockholder of C&J Energy Services, Inc. (“C&J”), was precluded from targeting a particular stockholder to pay a fee award when the alleged benefit redounded to the benefit of all stockholders. Here, Plaintiff sought an award of attorneys’ fees for Plaintiff’s alleged role in reducing the amount of cash that C&J needed to pay Nabors Industries Ltd. in connection with a certain transaction. The beneficiary of the price reduction was C&J and, indirectly, all of its stockholders. Plaintiff asked the court to require that the estate of Joshua Comstock, who was C&J’s CEO and chairman of the board, to pay the full amount of any fee award. The Court of Chancery denied Plaintiff’s application because (1) Defendants successfully rebutted the presumption that Plaintiff’s litigation efforts caused the price reduction; and (2) Plaintiff’s demand that Comstock’s estate - or any of C&J’s other directors - pay a fee award would be inequitable and was inconsistent with the rationale of the corporate benefit doctrine. View "City of Miami General Employees' & Sanitation Employees' Retirement Trust v. C&J Energy Services, Inc." on Justia Law

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In this case, the plaintiff, a stockholder of C&J Energy Services, Inc. (“C&J”), was precluded from targeting a particular stockholder to pay a fee award when the alleged benefit redounded to the benefit of all stockholders. Here, Plaintiff sought an award of attorneys’ fees for Plaintiff’s alleged role in reducing the amount of cash that C&J needed to pay Nabors Industries Ltd. in connection with a certain transaction. The beneficiary of the price reduction was C&J and, indirectly, all of its stockholders. Plaintiff asked the court to require that the estate of Joshua Comstock, who was C&J’s CEO and chairman of the board, to pay the full amount of any fee award. The Court of Chancery denied Plaintiff’s application because (1) Defendants successfully rebutted the presumption that Plaintiff’s litigation efforts caused the price reduction; and (2) Plaintiff’s demand that Comstock’s estate - or any of C&J’s other directors - pay a fee award would be inequitable and was inconsistent with the rationale of the corporate benefit doctrine. View "City of Miami General Employees' & Sanitation Employees' Retirement Trust v. C&J Energy Services, Inc." on Justia Law

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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