Justia Business Law Opinion Summaries

In this derivative action, Plaintiff, a Facebook, Inc. stockholder, challenged the 2013 decision of Facebook’s board of directors to approve compensation for its outside, non-management directors, who comprised six of the eight directors on Facebook’s board. Plaintiff brought claims against the directors ("Defendants”) for breach of fiduciary duty, unjust enrichment, and waste of corporate assets. After the lawsuit was filed, Mark Zuckerberg, who controlled over sixty-one percent of the voting power of Facebook’s common stock and did not receive the 2013 compensation, expressed his approval in a deposition and an affidavit of the disputed compensation for the non-management directors. Defendants sought summary judgment against the fiduciary duty and unjust enrichments claims, arguing that because Zuckerberg ratified the compensation, the standard of review governing that transaction shifted from the entire fairness standard of review to the business judgment presumption. The Court of Chancery denied Defendant’s motion for summary judgment with regard to the fiduciary duty and unjust enrichment claims, holding (1) the entire fairness standard applies to the directors’ approval of the 2013 compensation; and (2) Defendants failed to demonstrate that the board’s compensation decisions were entirely fair. However, because Plaintiff failed to state a reasonably conceivable claim for waste, that claim was dismissed. View "Espinoza v. Zuckerberg" on Justia Law

This was an advancement proceeding based on related litigation before the Court of Chancery under 8 Del. C. 205 and 225 and an action in California. At issue in this matter was whether a former director and officer of a corporation was entitled to summary judgment on his request for advancement of fees and expenses from the corporation incurred in the 205/225 action and the California litigation. The Court granted the motion for summary judgment, holding that the former director and officer was entitled to advancement from the corporation as to the 205/225 action and the California action. View "In re Genelux Corp." on Justia Law

In this action under 8 Del. C. 205 and 225, the Court of Chancery was asked to determine the outcome of an annual election of directors based on its resolution of disputes over whether certain shares of stock were validly issued or lacked consideration. Plaintiffs were the company, which issued the stock, and a director-stockholder, who invested in the company and participated in executing a plot to remove the intervenor as CEO. Plaintiffs asked the Court to set aside the Intervenor’s election of Defendants, two directors, at the company’s most recent annual meeting. The Court of Chancery concluded that Defendants were validly elected and entitled to the declaratory relief they sought, holding (1) section 205 does not permit an enumerated party to petition the Court to declare invalid and defective any corporate act or stock; (2) some of Plaintiffs’ arguments were waived or time-barred; and (3) none of the grounds advanced by Plaintiffs provided a sufficient basis to grant them the requested relief. View "In re Genelux Corp." on Justia Law

This action arose from Selling Source, LLC’s acquisition of assets from Interpid Investments, LLC. Intrepid sought an order requiring Selling Source to pay it thirty percent of the aggregate distributions disbursed in several fiscal quarters preceding an “earn-out adjustment.” The Court of Chancery entered summary judgment in favor of Selling Source and against Intrepid, except that Selling Source’s motion was denied to the limited extent that Interpret sought recovery based on cash distributions, holding that that there was no dispute of material fact and that controlling contractual provisions were not ambiguous and must be read as Selling Source argued. View "Intrepid Invs., LLC v. Selling Source, LLC" on Justia Law

After Occam Networks, Inc. merged with Calix, Inc., Plaintiffs filed an action contending that Defendants, Occam directors and others, breached their fiduciary duties by making decisions during Occam’s sale process that fell outside the range of reasonableness and by issuing a proxy statement for Occam’s stockholder vote on the merger that contained materially misleading disclosures and material omissions. Defendants moved for summary judgment. The Court of Chancery (1) granted the director defendants’ motion for summary judgment, holding that a provision in Occam’s certificate of incorporation exculpated them from liability; and (2) denied summary judgment as to the disclosure claims because genuine issues of material fact existed as to these claims. View "Chen v. Anderson" on Justia Law

When Rural/Metro Corporation (“Rural”) merged with an affiliate of Warburg Pincus LLC, each publicly held share of Rural common stock was converted into the right to receive $17.25. Plaintiff-stockholders initiated this action, contending (1) the members of the Rural board of directors breached their fiduciary duties by approving the merger and by failing to disclose material information in Rural’s definitive proxy statement; and (2) RBC Capital Markets, LLC aided and abetted the directors’ breaches of fiduciary duty. The directors settled with Plaintiffs, and the case proceeded to trial against RBC. The Court of Chancery ruled in favor of Plaintiffs, holding that RBC was liable for aiding and abetting the directors’ breaches of the duty of care and the duty of disclosure. View "In re Rural Metro Corp. Stockholders Litig." on Justia Law

Since 2007, Dimensional Associates, LLC, a private equity fund, had controlled Orchard Enterprises, Inc., a Delaware corporation. In 2010, Dimensional squeezed out the minority stockholders of Orchard. The merger consideration was $2.05 per share, but in 2012, the then-Chancellor determined that the fair value of the common stock at the time of the merger was $4.76 per share. Plaintiffs subsequently filed this breach of fiduciary action, contending that Dimensional and the directors who approved the merger should be held liable for damages. Plaintiffs also named Orchard as a defendant. Plaintiffs and Defendants filed cross motions for summary judgment. The Court of Chancery (1) denied Plaintiffs’ motion except in two respects: one of Plaintiffs’ claimed violations of Defendants' duty of disclosure was a material misrepresentation, and entire fairness was the operative standard of review with the burden of persuasion on Defendants; and (2) denied Defendants’ motions except in two respects: one of the alleged disclosure violations was factually accurate, and Orchard could not be held liable for breach of fiduciary duty or for aiding and abetting. View "In Re Orchard Enters., Inc. Stockholder Litig." on Justia Law

Anthony Pacchia brought an action challenging a transaction through which Activision Blizzard, Inc. and an entity controlled by Activision’s two senior officers acquired more than fifty percent of Activision’s outstanding shares from Vivendi S.A., its controlling stockholder. Several of the individual defendants who served on the Activision board of directors and approved the transaction were senior officers of Vivendi (“Vivendi Directors”). Vivendi objected to the document requests that Plaintiff served on the grounds that French law generally barred the production of discovery, noting that all of its electronic documents were housed on servers in Paris, France, and could not be produced. Plaintiff filed a motion to compel seeking an order requiring Vivendi and the Vivendi Directors to produce documents in their custody and control, wherever located, in accordance with the Court of Chancery Rules and without regard to any contrary provisions of French law. The Court of Chancery largely granted the motion and directed that discovery proceed in the manner described in this decision. View "In re Activision Blizzard, Inc. Stockholder Litig." on Justia Law

The parties in this dispute were Koninklijke Philips N.V. (“Philips N.V.”), a Netherlands holding company, and Carlo Vichi, an Italian businessman who had a longstanding business relationship with Philips N.V. Philips N.V. was a participant in a joint venture, LG.Philips Displays Holdings B.V. (LPD), that did business with Vichi and other entities. LPD approached Vichi for a substantial loan, which Vichi agreed to make. The joint venture eventually defaulted on the loan. Vichi filed a complaint against Philips N.V., claiming that Philips N.V. committed fraud by misrepresenting the joint venture’s financial condition and prospects and by falsely promising that it would stand behind LPD to ensure it could meet its financial obligations. The Court of Chancery held that Philips N.V. was not liable to Vichi on any of the claims he presented at trial and that Philips N.V. should not be held responsible for the loss Vichi suffered on the loan he made to LPD. View "Vichi v. Koninklijke Philips Elecs., N.V." on Justia Law

In 2013, the Board of Directors of Morgans Hotel Group Co. (the Company) approved a two-part recapitalization involving the Yucaipa Companies, LLC. Stockholder OTK Associates filed a complaint alleging that Yucaipa, three affiliated entities, the investor who controlled Yucaipa, and the directors who approved the recapitalization breached their fiduciary duties and engaged in acts of wrongdoing when pursuing and approving the recapitalization. Counts I-VIII of the complaint sought to recover from Defendants the damages the Company suffered, and Count IX sought a declaration that the agreements governing the recapitalization were invalid. Several defendants filed motions to dismiss. The Court of Chancery held (1) the motion to dismiss on the basis that Counts I-VIII were moot was denied because OTK could recover damages on the Company’s behalf; (2) Count IX was dismissed pursuant to Rule 23.1 to the extent it contended that Yucaipa and its affiliates repudiated the transaction agreements; and (3) two of the defendant directors’ motions to dismiss in reliance on an exculpatory provision in the Company’s certificate of incorporation was denied, as the Court could not apply the exculpatory provision summarily at the pleadings stage to enter judgment in their favor. View "OTK Assocs., LLC v. Friedman" on Justia Law