Justia Business Law Opinion Summaries

Four stockholders of Trulia, Inc. filed class action complaints alleging that Trulia’s directors had breached their fiduciary duties in approving the Zillow Inc.’s acquisition of Trulia in a stock-for-stock merger at what Plaintiffs alleged was an unfair exchange ratio. The parties eventually reached an agreement-in-principle to settle under which Trulia agreed to supplement materials provided to its stockholders that would include additional information that theoretically would allow the stockholders to be better informed in exercising their franchise rights. The Court of Chancery declined to approve the proposed settlement, holding that the terms of this proposed settlement were not fair or reasonable because the proposed settlement did not afford Trulia’s stockholders any meaningful consideration to warrant providing a release of claims to the defendants. View "In re Trulia, Inc. Stockholder Litig." on Justia Law

Plaintiff brought his derivative action on behalf of a Corporation against the Corporation’s CEO. The parties entered into a settlement agreement that embodied much of the relief sought by Plaintiff. Under the settlement agreement, however, the Corporation committed to buy Plaintiff’s corporate stock at the price Plaintiff paid fifteen years ago. This opportunity was not available to other Corporation stockholders. Other Corporation stockholders objected to the settlement. The Court of Chancery refused to approve the settlement, holding that Plaintiff’s achievements for the benefit of the Corporation were significantly outweighed by the concerns raised by the unique benefits accruing solely to Plaintiff. View "Smollar v. Potarazu" on Justia Law

Plaintiff filed this action against three outside directors of nominal defendant EXCORP, Inc., alleging breach of fiduciary duty, among other claims. The directors filed a motion to dismiss. Recognizing that he had not pled a non-exculpated claim against the directors, Plaintiff proposed a dismissal without prejudice. The directors, in turn, sought a dismissal with prejudice that would bind all potential plaintiffs. The Court of Chancery dismissed the claims against the outside directors with prejudice as to the named plaintiff only, holding (1) Plaintiff failed to establish good cause for a without-prejudice dismissal; and (2) the Due Process Clause prevents a judgment in a derivative action that is entered before the stockholder plaintiff acquires authority to litigate on behalf of the corporation from binding anyone other than the named stockholder plaintiff. View "In re EZCORP INC. Consulting Agreement Derivative Litig." on Justia Law

VTB Bank, a Ukranian bank and company, brought this lawsuit against Development Max, LLC, a Delaware limited liability company, and Navitron Projects Corp., a Panamanian corporation and managing member of Development Max, alleging fraudulent transfer, constructive fraudulent transfer, and unjust enrichment. Development Max and Navitron filed a motion to dismiss on the grounds of forum non conveniens, among other theories. The Court granted the motion with respect to VTB’s claim against Navitron but denied the motion with respect to VTB’s claim against Development Max. On reconsideration, the Court granted, without prejudice, Development Max’s motion to dismiss on grounds of forum non conveniens, holding that Ukraine, as opposed to Delaware, was the proper forum in which to litigate this dispute. View "VTB Bank v. Navitron Projects Corp." on Justia Law

Plaintiffs were members of New Media Investors II-B, LLC, which was established as a vehicle for investing in Jenzabar, Inc. In 2004, Jenzabar was recapitalized, and New Media received junior preferred stock and warrants. In 2013, the warrants lapsed. That same year, efforts to dissolve New Media were initiated, although Plaintiffs did not cash their distribution checks. Instead, they made a books and records request demanding valuation of their holdings of New Media to investigation into misconduct by the managing member of New Media and the CEO of Jenzabar and others in the course of operating New Media. The Court of Chancery granted the request in part, holding (1) Plaintiffs failed to demonstrate that investigating misconduct or wrongdoing is their proper purpose; and (2) Plaintiffs demonstrated that valuation is a proper purpose, but the inspection rights should not extend to Jenzabar, and Plaintiffs may inspect only the books and records for the years 2010 forward. View "In re New Media Books and Records Action" on Justia Law

In 2010, El Paso Corporation (“El Paso Parent”) sold member interests in three limited liability companies to El Paso Pipeline Partners, LP (“El Paso MLP”). At the time of the sale, El Paso Parent controlled El Paso MLP through its ownership of El Paso Pipeline GP Company, LLC, the sole general partner of El Paso MLP (“El Paso GP”). In 2015, the Court of Chancery issued a post-trial decision concluding that El Paso GP breached the limited partnership agreement governing El Paso MLP by causing El Paso MLP to buy the member interests (the “Fall Dropdown”). In 2012, Plaintiff brought this action challenging the Fall Droptown. While the litigation was pending, Kinder Morgan, Inc., acquired El Paso Parent and therefore indirectly owned and controlled El Paso GP. After trial, Kinder Morgan, El Paso Parent, El Paso MLP, and El Paso GP consummated a merger that ended El Paso MLP’s separate existence as a publicly traded entity. El Paso GP moved to dismiss this litigation, arguing that because Plaintiff styled his claim as derivative the closing of the merger meant that this case must be dismissed. The Court of Chancery denied El Paso GP’s motion to dismiss, holding that the merger did not extinguish Plaintiff’s standing to pursue the claim, and therefore, this Court can implement the liability award. View "In re El Paso Pipeline Partners, L.P. Derivative Litig." on Justia Law

In this case, the parties contested control of certain assets. Plaintiffs brought this action against Defendants for breach of a partnership agreement, breach of the covenant of good faith and fair dealing, equitable rescission, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, fraud, and civil conspiracy to commit fraud. Defendants sought implementation of a status quo order permitting a defendant-corporation to disburse funds for two distinct purposes: for payment of “administration fees” and for payment of legal fees to defend itself in this case. Plaintiffs sought implementation of a status quo order preventing these additional disbursements. The Court of Chancery (1) approved Defendants’ request to pay administration fees, holding that the administration fees were necessary to maintain the assets in the defendant-corporation’s control; and (2) rejected Defendants’ request to pay their legal fees with the disputed assets. View "Capital Link Fund I, LLC v. Capital Point Mmgt., LP" on Justia Law

Plaintiffs - George Polk, Tulum Management USA LLC, and RED Capital Investments LP - brought this action on behalf of nominal defendant RED Parent LLC against Defendants - certain members of the RED Parent Board of Managers, Recycled Energy Development LLC and RED Investment LLC - alleging breach of fiduciary duty and breach of contract. Earlier, RED Parent filed an action in Illinois in regard to essentially the same facts upon which the Delaware action claims were brought. In the Delaware action, Plaintiffs sought advancement, indemnification, and fees on fees incurred in both the Illinois action and the case at bar. The Court of Chancery denied Defendants’ motion to dismiss in favor of the Illinois action but granted Defendants’ motion to stay in favor of the Illinois action as to the valuation and fiduciary duty claims and retained jurisdiction over the Delaware action, holding (1) the parties and issues in the Delaware and Illinois actions are functionally identical; and (2) the Illinois court is capable of rendering prompt and complete justice. View "Tulum Mgmt. USA LLC v. Casten" on Justia Law

At issue in this case was the sale of a portfolio company, Double E Parent LLC, by Prairie Capital III, LP and Prairie Capital III, private equity funds. The buyer was Double E Holding Corp. (“Buyer”), an acquisition vehicle formed by Incline Equity Partners, III, LP (“the Incline Fund”). A Stock Purchase Agreement (“SPA”) governed the transaction. Prairie Capital III, which served as the Sellers’ Representative under the SPA, later sued Buyer to compel the release of funds from escrow. The Incline Fund intervened. Thereafter, Incline Fund and Buyer asserted counterclaims and cross-claims for, inter alia, fraud and aiding and abetting fraud against the Prairie Funds and related individuals and two claims for indemnification under the SPA against the Sellers’ Representative. The counterclaim defendants filed a motion to dismiss the fraud-related claims and one of the two counts seeking indemnification. The Court of Chancery (1) granted the motion to dismiss to the extent that the Buyer and the Incline Fund grounded their fraud-related claims on omissions outside of the SPA and certain representations within the SPA; (2) granted the motion as to one aspect of the challenged indemnification claim; and (3) otherwise denied the motion to dismiss. View "Prairie Capital III, LP v. Double E Holding Corp." on Justia Law

Plaintiffs filed a complaint alleging that Merrill Lynch aided and abetted Director Defendants in the breach of their fiduciary duty of care. The Court of Chancery issued a memorandum opinion denying Merrill Lynch’s motion to dismiss the complaint. Merrill Lynch subsequently moved for reargument, contending that its motion to dismiss should be granted based on a Delaware Supreme Court decision issued one day after the memorandum opinion in this case was issued. The Court of Chancery granted Merrill Lynch’s motion for reargument, and dismissed the complaint with prejudice as to the aiding and abetting claim against Merrill Lynch, holding (1) the Court incorrectly applied the Revlon enhanced scrutiny standard of review rather than the business judgment rule standard of review when it reviewed the complaint to determine whether it adequately alleged that the Director Defendants breached their fiduciary duties; and (2) upon reconsideration, Plaintiffs had not alleged sufficient facts to make it reasonably conceivable that the Director Defendants breached their duty of care. View "In re Zale Corp. Stockholders Litig." on Justia Law