Justia Business Law Opinion SummariesArticles Posted in Delaware Court of Chancery
Deluxe Entertainment Services Inc. v. DLX Acquisition Corp.
The Court of Chancery granted Defendants' motion for judgment on the pleadings in this action seeking to draw or claw back several million dollars in cash, holding that Defendants were entitled to the motion.Seller sold all outstanding shares of its wholly owned subsidiary (together, with its subsidiaries, Target) to Buyer (together with Target, Defendants). All of Target's assets, except for those excluded by the parties' purchase agreement, were transferred in the stock transaction (the disputed cash). After the transaction closed, millions of dollars in cash remained in Target's bank accounts. Seller asked Buyer to return the disputed cash but Buyer refused. Seller then brought this complaint. Defendants sought judgment on the pleadings in their favor. The Court of Chancery granted the motion, holding that no material issue of fact existed and that Defendants were entitled to judgment as a matter of law. View "Deluxe Entertainment Services Inc. v. DLX Acquisition Corp." on Justia Law
Tetragon Financial Group Limited v. Ripple Labs Inc.
In this expedited contractual dispute, the Court of Chancery granted summary judgment in favor of defendant Ripple Labs, Inc., holding that Ripple was entitled to summary judgment.Ripple, an enterprise blockchain company, executed a stockholders' agreement with Tetragon Financial Group, Ltd., an investment company that held a majority of Ripple's Series C preferred stock, memorializing Tetragon's investment and status as "Lead Purchaser." Pursuant to the agreement Tetragon had a reception right that was triggered upon a "Securities Default," upon which Tetragon may demand redemption of its shares via a "Redemption Request." At issue was whether certain actions by the SEC constituted a "Securities Default" under the agreement. The Court of Chancery granted summary judgment for Ripple, holding that certain SEC processes satisfied the definition of "Securities Default." View "Tetragon Financial Group Limited v. Ripple Labs Inc." on Justia Law
Wood v. U.S. Bank National Ass’n
The Court of Chancery granted Plaintiffs' motion to compel the production of documents and denied Defendants' motion for a retroactive extension in the time to respond, holding that Defendants are required to product all documents responsive to the requests for production of documents within fourteen days.Through Heartland Family Group, LLC, Alexander Burns controlled Southport Lane, L.P. and its affiliates (the Southport Entities). Plaintiffs sued Burns and Heartland, arguing that certain transactions rendered two companies acquired by the Southport Entities insolvent. Plaintiffs served requests for production of documents on Defendants. In response, Defendants invoked the Fifth Amendment. Plaintiffs then moved to compel the production of documents and responses to interrogatories. Defendants moved for a retroactive extension. The Court of Chancery granted Plaintiffs' motion to compel and denied the motion for a retroactive extension, holding that Defendants' invocation of the Self-Incrimination Clause is overruled. View "Wood v. U.S. Bank National Ass'n" on Justia Law
Roccia v. Mugica
The Court of Chancery granted summary judgment to Plaintiffs in this case involving the removal of one plaintiff from an LLC's board of managers, holding that Plaintiffs were entitled to summary judgment and that Defendants were not entitled to summary judgment.Plaintiffs filed a complaint under 6 Del. C. 18-110 seeking an injunction preventing Lorenzo Roccia's removal from the Skyline Renewables LLC board of managers and a declaration that his purported removal was void. Defendants argued that the removal of Roccia was valid and binding. Both parties filed motions for summary judgment. The Court of Chancery granted summary judgment for Plaintiffs, holding that the individual who removed Roccia was not authorized to do so. View "Roccia v. Mugica" on Justia Law
Franco v. Avalon Freight Services LLC
The Court of Chancery granted Defendants' motion to dismiss Harley Franco's action filed under 6 Del. C. 18-110 and 6 Del. C. 18-111 seeking a declaration that because Franco no longer agreed to Doug Houghton's continued service on the Avalon Freight Services LLC Board of Directors, Houghton must be removed from the Board, holding that section 3.1 of the Avalon LLC Agreement did not empower Franco to unilaterally remove Houghton from the Board.Franco interpreted section 3.1's requirement that the fifth director of the Avalon Board - Houghton - be mutually agreement upon and appointed by Franco and one other director to mean that if Franco no longer agreed to houghton's continued service, Houghton must be removed from the Board. The Court of Chancery dismissed the action, holding that that Franco may not unilaterally remove Houghton from the Avalon Board. View "Franco v. Avalon Freight Services LLC" on Justia Law
United Food & Commercial Workers Union v. Zuckerberg
The Court of Chancery granted Defendants' motion to dismiss this derivative action under Rule 23.1 on the grounds that Plaintiff failed to demand that the Facebook board of directors (the Board) pursue the litigation and did not establish that demand was futile.At the request of Mark Zuckerberg, the Board pursued a reclassification of Facebook's shares, the result of which would be to shift two-thirds of Facebook's economic value to the non-voting stock and enable Zuckerberg to transfer the bulk of his economic ownership in Facebook without giving up voting control. After a lawsuit, the Board withdrew the reclassification. Plaintiff then filed a derivative action against Zuckerberg and Board members that approved the reclassification, claiming that the pursuit of the reclassification constituted a breach of duty and that Facebook was harmed as a result. Plaintiff chose not to make a pre-suit demand. Defendants moved to dismiss the action under Rule 23.1. The Court of Chancery granted the motion, holding that demand was not excused on the grounds that the directors were incapable of making an impartial decision regarding whether to institute such litigation. View "United Food & Commercial Workers Union v. Zuckerberg" on Justia Law
In re Altaba, Inc.
In this litigation in which Altaba, Inc. (the Company) sought dissolution under the framework established by Sections 280 and 281(a) of the Delaware General Corporation Law the Court of Chancery held that the Company may make an interim distribution using its proposed amounts of security on the condition that it reserve funds for lawsuits pending in Canada resulting from data breaches that the Company disclosed in 2016 (the Canadian Actions Claim).As to all but two claims, in which the Company agreed to hold back the full amount of security requested by respective claimants, the Court of Chancery held that there was no obstacle to an interim distribution based on the amounts of security. For two claims, however, the Company sought to hold back less than the full amount of security requested by the claimants. The Court of Chancery held (1) as to the Canadian Actions Claim, if the Company wished to make an interim distribution to its stockholders it must reserve $1.05 billion Canadian; and (2) as to the second claim, the Company made a convincing showing that the amount it proposed to reserve was likely to be sufficient to provide compensation for claims that had not been made known to the Company or that had not yet arisen. View "In re Altaba, Inc." on Justia Law
JUUL Labs, Inc. v. Grove
The Court of Chancery granted Plaintiff JUUL Labs, Inc.'s motion for judgment on the pleadings in this action regarding Defendant Daniel Grove's right to inspect Plaintiff's books and records, holding that Defendant did not waive his right to seek an inspection of books and records under California law but that, under the internal affairs doctrine, Defendant did not have the right to seek an inspection of books and records under California law.Plaintiff was a privately held Delaware corporation with its principal place of business in San Francisco, California. Defendant stated that he might sue Plaintiff in California state court to enforce his right to inspect Plaintiff's books and records under Cal. Corp. Code 1601. Plaintiff filed this action, arguing that Defendant waived his inspection rights and that, to the extent that Defendant did not waive all of his inspection rights, Defendant could not seek inspection under California law. The Court of Chancery held (1) Delaware law governed Plaintiff's internal affairs, and because the scope of Defendant's inspection rights was a matter of internal affairs, Delaware law applied and Defendant could not rely on section 1601 to obtain books and records; and (2) because Defendant did not make a demand for inspection under Delaware law, this decision did not address whether he validly waived his inspection rights. View "JUUL Labs, Inc. v. Grove" on Justia Law
Applied Energetics, Inc. v. Farley
The Court of Chancery granted in part and denied in part the motion for partial summary judgment filed by Applied Energetics, Inc. (the Company) on its claims against George Farley, the Company's former director and principal executive officer, and AnneMarieCo, LLC, holding that Farley lacked authority to issue himself twenty-five million shares and grant himself an annual salary of $150,000 per year but that the Company was not entitled to summary judgment on Farley's counterclaims.The Company asserted several claims based on Farley's actions. Farley filed counterclaims against the Company for breach of contract, for unjust enrichment, and to validate his actions under section 205 of the Delaware General Corporation Law. The Company moved for partial summary judgment. The Court of Chancery granted the motion in part and denied it in part, holding (1) because Farley was the Company's sole remaining director when he issued himself stock and granted himself compensation, Farley's actions were invalid; (2) because the Company had the corporate power to issue shares and compensate its officers and directors Farley's acts could be validated under section 205; (3) the Court had the power to validate Farley's decision to grant himself a salary; and (4) evidence could support Farley's claim for compensation under a theory of quantum merit. View "Applied Energetics, Inc. v. Farley" on Justia Law
Burkhart v. Genworth Financial, Inc.
In this class action complaint brought under the Delaware Uniform Fraudulent Transfer Act (DUFTA) alleging that Genworth Life Insurance Company (GLIC) engaged in both actual and constructive fraudulent transfers the Court of Chancery granted in part and denied in part GLIC's motion to dismiss, holding that Plaintiffs' attempts to reverse some of GLIC's dividends were time barred.Plaintiffs, a class of insureds who held long-term care insurance policies and insurance agents who alleged that they were entitled to commission payments for selling such payments, alleged that on the brink of its failure, GLIC's owners engaged in an intentional plan to syphon off GLIC's assets. In their class action complaint Plaintiffs asked the Court of Chancery to restore to GLIC the value of the assets that were syphoned away from 2012 to 2014. In response, Defendants filed a motion to dismiss. The Court of Chancery granted the motion in part and denied it in part, holding (1) any challenge to the $395 million in dividends GLIC paid from 2012 to 2014 was untimely under 6 Del. C. 1309; and (2) Plaintiffs had standing to bring this lawsuit. View "Burkhart v. Genworth Financial, Inc." on Justia Law