Justia Business Law Opinion Summaries

Caris Life Sciences, Inc. operated three business units: Caris Diagnostics, TargetNow and Casrisome. The Diagnostics unit was consistently profitable. TargetNow generated revenue but not profits, and Carisome was in the developmental stage. To secure financing for TargetNow and Carisome, Caris sold Caris Diagnostics to Miraca Holdings. The transaction was structured using a "spin/merge" structure: Caris transferred ownership of TargetNow and Carisome to a new subsidiary, then spun off that subsidiary to its stockholders. Owning only Caris Diagnostics, Caris merged with a wholly owned subsidiary of Miraca. Plaintiff Kurt Fox sued on behalf of a class of option holders of Caris. Fox alleged that Caris breached the terms of the Stock Incentive Plan because members of management as Plan Administrator, rather than the Board of Directors, determined how much the option holders would receive. Regardless of who made the determination, the $0.61 per share attributed to the spun off company was not a good faith determination, and resulted from an arbitrary and capricious process. The Court of Chancery found that fair market value was not determined, and the value received by the option holders was not determined in good faith and that the ultimate value per option was determined through a process that was "arbitrary and capricious." Caris appealed, arguing the Court of Chancery erred in arriving at its judgment. Finding no reversible error in the Court of Chancery's judgment, the Delaware Supreme Court affirmed. View "CDX Holdings, Inc. v. Fox" on Justia Law

The plaintiffs were all affiliates of Arthur and Angela Williams, who owned stock in Citigroup. The defendants were Citigroup and eight of its officers and directors. In 1998, Citicorp and Travelers Group, Inc. merged, forming Citigroup. At that point, Arthur Williams's shares in Travelers Group were converted into 17.6 million shares of Citigroup common stock, which were valued at the time of the merger at $35 per share. In 2007, the Williamses had these shares transferred into AHW Investment Partnership, MFS Inc., and seven grantor-retained annuity trusts, all of which the Williamses controlled. In 2007, the Williamses sold one million shares at $55 per share. But, the Williamses halted their plan to sell all of their Citigroup stock because, based on Citigroup's filings and financial statements, they concluded that there was little downside to retaining their remaining 16.6 million shares. The Williamses allegedly held those shares for the next twenty-two months, finally selling them in March 2009 for $3.09 per share. After selling their 16.6 million shares, the Williamses sued Citigroup in the U.S. District Court for the Southern District of New York, arguing that their decision not to sell all of their shares in May 2007, and their similar decisions to hold on at least three later dates, were due to Citigroup‘s failure to disclose accurate information about its true financial condition from 2007 to 2009. The Second Circuit certified a question of Delaware law to the Delaware Supreme Court arising from an appeal of a New York District Court decision. The Second Circuit asked whether the claims of a plaintiff against a corporate defendant alleging damages based on the plaintiff‘s continuing to hold the corporation's stock in reliance on the defendant's misstatements as the stock diminished in value properly brought as direct or derivative claims. The Delaware Court answered: the holder claims in this action were direct. "This is because under the laws governing those claims [(]those of either New York or Florida[)] the claims belong to the stockholder who allegedly relied on the corporation's misstatements to her detriment. Under those state laws, the holder claims are not derivative because they are personal to the stockholder and do not belong to the corporation itself." View "Citigroup Inc., et al. v. AHW Investment Partnership, MFS, Inc., et al." on Justia Law

In this case, a large Georgia corporation that properly registered to do business in Delaware was sued in Delaware over claims having nothing to do with its activities in Delaware. Adhering to the interpretation given to Delaware's registration statutes, the Superior Court held that, notwithstanding the U.S. Supreme Court's decision in "Daimler AG v. Bauman," the foreign corporation consented to Delaware's general jurisdiction merely by registering to do business in Delaware. After review, the Delaware Supreme Court concluded that after "Daimler," it was "not tenable to read Delaware's registration statutes" in the same way as the Superior Court did in "Sternberg v. O'Neil … Delaware cannot exercise general jurisdiction over it consistent with principles of due process. Furthermore, the plaintiffs concede that they cannot establish specific jurisdiction over the nonresident defendant under the long-arm statute or principles of due process. Therefore, the plaintiffs' claim must be dismissed for lack of personal jurisdiction. Accordingly, we reverse the Superior Court‘s judgment." View "Genuine Parts Co. v. Cepec, et al." on Justia Law

This litigation arose from the construction of a "Johnny Janosik" furniture store in Laurel. The Plaintiff-appellant LTL Acres Limited Partnership (LTL) was the owner of the Janosik Building. Defendant-appellee Butler Manufacturing Company (Butler) provided pre-engineered components which were used to build the roof and exterior walls. Defendant-appellee Dryvit Systems, Inc. (Dryvit) supplied a product used on the exterior finish of the walls, to protect and seal them. Dryvit warranted its product for ten years from the "date of substantial completion of the project." The building was completed in 2006. Unfortunately, the building had issues with water infiltration from the beginning. By February 2012, cladding began to crack and buckle. The water infiltration and delamination persisted through 2013 despite attempts to fix the issues. LTL brought this action in 2013, alleging breach of warranty, breach of contract, and negligence claims against Butler; and breach of warranty and breach of contract claims against Dryvit. The Superior Court granted summary judgment to both Butler and Dryvit on the grounds that the actions against both were barred by the applicable statute of limitations. It held that the action against Butler was barred by 10 Del. C. sec. 8127,which is a six year statute of limitations relating to alleged defective construction of an improvement to real property. After review, the Supreme Court concluded that summary judgment in favor of Butler was proper. The Superior Court ruled that LTL’s action against Dryvit was barred by a four year statute of limitations set forth in 6 Del. C. sec. 2-725. Dryvit gave LTL a ten year express warranty. The Superior Court described the warranty as a “repair and replacement warranty” and reasoned that such a warranty cannot be one that extended to future performance. It therefore concluded that the statute of limitations for an action on the warranty expired not later than four years after the Dryvit product was tendered and applied to the building; that is, not later than four years after 2006. The Supreme Court concluded that grant of summary judgment in favor of Dryvit was inappropriate, and had to be reversed. The case was remanded for further proceedings. View "LTL Acres Limited Partnership v. Butler Manufacturing Co." on Justia Law

Canadian resident Marc Hazout was the President, CEO, Principal Financial and Accounting Officer, and a director of a Delaware corporation, Silver Dragon Resources, Inc. He was sued for acts taken in his official capacity on behalf of the corporation based in Canada. As alleged in the complaint, Hazout was the lead negotiator for Silver Dragon in negotiating a capital infusion from a group of affiliated investors including Tsang Mun Ting and other residents of Hong Kong. That capital infusion when consummated would have required a change of control of Silver Dragon from Hazout and certain others to Tsang and his fellow investors, who would have achieved the right to control Silver Dragon‘s board. Hazout and two other Silver Dragon directors signed the agreement, but a fourth refused. Rather than return $1 million to Tsang, however, Hazout not only caused Silver Dragon to keep it, but also had Silver Dragon send $750,000 of it to Travellers International, Inc., a corporation that Hazout controlled. Tsang therefore brought this suit in the Superior Court of Delaware against Silver Dragon, Hazout, and Travellers for unjust enrichment, fraud, and fraudulent transfer in violation of the Delaware Uniform Fraudulent Transfer Act. Hazout moved to dismiss on the ground that there was no basis for the exercise of personal jurisdiction over him in Delaware because Tsang was not suing Hazout as a stockholder of Silver Dragon for breach of any fiduciary or other duty owed to Silver Dragon as an entity or Tsang as a stockholder. The Superior Court disagreed and found Delaware law provided a proper basis for personal jurisdiction. The Delaware Supreme Court accepted a certified interlocutory appeal on the personal jurisdiction question from the Superior Court and affirmed: “there is no rational argument that the terms of [10 Del C. sec.] 3114(b) are not satisfied.” View "Hazout v. Ting" on Justia Law

The United States Court of Appeals for the Eleventh Circuit certified a question of law arising out of an appeal of a decision by the United States District Court for the Southern District of Florida to the Delaware Supreme Court. Paulson Advantage Plus, L.P. (the “Investment Fund”) was a Delaware limited partnership that invested in corporate securities. Paulson Advisers, LLC, a Delaware limited liability company, and Paulson & Co., a Delaware corporation (the Investment Fund Managers) were the general partners and managers of the Investment Fund. One of the Investment Fund’s limited partners was HedgeForum Paulson Advantage Plus, LLC, (the “Feeder Fund”). The Feeder Fund was managed and sponsored by Citigroup Alternative Investments, LLC. AMACAR CPO, Inc. was the Feeder Fund’s managing member. Along with other investors, Plaintiff-appellant Hugh Culverhouse was a member of the Feeder Fund, not a limited partner in the Investment Fund. Culverhouse filed a putative class action against the Investment Fund Managers in the United States District Court for the Southern District of Florida. The first amended complaint alleged that between 2007 and 2011, the Investment Fund invested about $800 million in a Chinese forestry company. Following another investment firm’s report claiming that the forestry company had overstated its timber holdings and engaged in questionable related-party transactions, the Investment Fund sold its holdings for about a $460 million loss. On appeal of the dismissal for lack of standing, the United States Court of Appeals for the Eleventh Circuit determined that resolution of the appeal depended on an unsettled issue of Delaware law. The Eleventh Circuit posited the question to the Delaware Supreme Court on whether the diminution in the value of a limited liability company, serving as a feeder fund in a limited partnership, provides a basis for an investor’s direct suit against the general partners when the company and the partnership allocated losses to investors’ individual capital accounts and did not issue transferrable shares and losses were shared by investors in proportion to their investments. The Delaware Court answered in the negative. View "Culverhouse v. Paulson & Co., Inc." on Justia Law

In the first appeal, the Supreme Court upheld the Court of Chancery’s finding that SIGA Technologies, Inc. in bad faith breached its contractual obligation to negotiate a license agreement consistent with the parties’ license agreement term sheet, known throughout this litigation as the “LATS.” The Supreme Court also held that where parties have agreed to negotiate in good faith, and would have reached an agreement but for the defendant’s bad faith conduct during the negotiations, the plaintiff could recover contract expectation damages, so long as the plaintiff can prove damages with reasonable certainty. Because the Court of Chancery ruled out expectation damages in its first decision, the case was remanded for consideration of damages to SIGA ("SIGA I”). On remand, the Court of Chancery reevaluated the evidence, and held that PharmAthene, Inc. met its burden of proving with reasonable certainty expectation damages and awarded PharmAthene $113 million. The parties once again appealed to the Supreme Court. SIGA raised two claims of error in this appeal: (1) the Court of Chancery was not free to reconsider its prior holding that lump-sum expectation damages were too speculative; and (2) if reconsideration was permitted, the expectation damages awarded following remand were too speculative. After careful consideration of SIGA’s arguments, the Supreme Court found that the law of the case doctrine did not preclude the Court of Chancery from reconsidering its earlier determination that lump-sum expectation damages were too speculative. The Court also found that the court did not abuse its discretion when it awarded PharmAthene lump-sum expectation damages, and its factual findings supporting its new damages determination were not clearly erroneous. Accordingly, the Court affirmed the judgment of the Court of Chancery. View "SIGA Technologies, Inc. v. PharmAthene" on Justia Law

The Court of Chancery issued four opinions which were appealed to the Delaware Supreme Court. In sum, the appeal and cross-appeal in this case centered on the Chancery Court’s final judgment finding that RBC Capital Markets, LLC aided and abetted breaches of fiduciary duty by former directors of Rural/Metro Corporation ("Rural" or the "Company") in connection with the sale of the Company to an affiliate of Warburg Pincus LLC, a private equity firm. RBC raised six issues on appeal, namely: (1) whether the trial court erred by holding that the board of directors breached its duty of care under an enhanced scrutiny standard; (2) whether the trial court erred by holding that the board of directors violated its fiduciary duty of disclosure by making material misstatements and omissions in Rural’s proxy statement, dated May 26, 2011; (3) whether the trial court erred by finding that RBC aided and abetted breaches of fiduciary duty by the board of directors; (4) whether the trial court erred by finding that the board of directors’ conduct proximately caused damages; (5) whether the trial court erred in applying the Delaware Uniform Contribution Among Tortfeasors Act ("DUCATA"); and (6) whether the trial court erred in calculating damages. After careful consideration of each of RBC’s arguments on appeal, the Supreme Court found no reversible error and affirmed the "principal legal holdings" of the Court of Chancery. View "RBC Capital Markets, LLC v. Jervis" on Justia Law

ATP Tour, Inc. (ATP) operates a global professional men’s tennis tour. Its members include professional men’s tennis players and entities that own and operate professional men’s tennis tournaments. Two of those entities are Deutscher Tennis Bund (DTB) and Qatar Tennis Federation. ATP is governed by a seven-member board of directors, of which three are elected by the tournament owners, three are elected by the player members, and the seventh directorship is held by ATP’s chairman and president. In 2007, ATP’s board voted to change the Tour schedule and format. Under the board’s “Brave New World” plan, the Hamburg tournament, which the Federations owned and operated, was downgraded from the highest tier of tournaments to the second highest tier, and was moved from the spring season to the summer season. Displeased by these changes, the Federations sued ATP and six of its board members in the United States District Court for the District of Delaware, alleging both federal antitrust claims and Delaware fiduciary duty claims. After a ten-day jury trial, the District Court granted ATP’s and the director defendants’ motion for judgment as a matter of law on all of the fiduciary duty claims, and also on the antitrust claims brought against the director defendants. The jury then found in favor of ATP on the remaining antitrust claims. Four questions of Delaware law were certified to the Supreme Court from the U.S. District Court for the District of Delaware when the Federations appealed. The questions centered on the validity of a fee-shifting provision in a Delaware non-stock corporation’s bylaws. The provision, which the directors adopted pursuant to their charter-delegated power to unilaterally amend the bylaws, shifts attorneys’ fees and costs to unsuccessful plaintiffs in intra-corporate litigation. The federal court found that the bylaw provision’s validity was an open question under Delaware law and asked under what circumstances such a provision was valid and enforceable. Although the Delaware Supreme Court could not directly address the bylaw at issue, it held that fee-shifting provisions in a non-stock corporation’s bylaws could be valid and enforceable under Delaware law. In addition, bylaws normally apply to all members of a non-stock corporation regardless of whether the bylaw was adopted before or after the member in question became a member. View "ATP Tour, Inc., et al. v. Deutscher Tennis Bund, et al." on Justia Law

Appellant T.A.H. First, Inc. had a default judgment entered against it because it failed to answer appellee Clifton Leasing Company, Inc., t/a Delmarva Kenworth's complaint in a timely manner. T.A.H. First moved the Superior Court to vacate the default judgment. The Superior Court denied that motion, and specifically held that not only was T.A.H. First not entitled to defend the claims brought by Clifton against it, but T.A.H. First also was prohibited from pressing counterclaims against Clifton because those counterclaims were not filed in a timely manner. The Superior Court agreed to hold an inquisition hearing to quantify the amount of the default judgment against T.A.H. First. But Clifton eventually concluded that T.A.H. First was likely judgment proof and that it did not want to waste further resources or those of the Superior Court by holding an inquisition hearing. Clifton sought to dismiss the case with prejudice as to all claims that any party to the case was required to have raised in a timely pleading in the case. The Superior Court granted Clifton’s request and dismissed the case. T.A.H. First appealed, arguing that the Superior Court abused its discretion by denying the motion to vacate the default judgment. Because Clifton had dismissed the case without seeking to quantify the default judgment and impose a duty upon T.A.H. First to pay a sum certain, the Supreme Court was concerned that it was addressing a moot point and that there might not be proper grounds for appeal. After receiving supplemental submissions, the Court entered an order that, "in candor, was confusing and can be read as contradictory. In essence, the Order contains language that can be read as both affirming the Superior Court’s denial of T.A.H. First’s motion to vacate the default judgment, while simultaneously reviving T.A.H. First’s ability to file counterclaims that it had not timely filed." After the Superior Court granted summary judgment on T.A.H. First’s claims on remand, T.A.H. First again appealed, arguing that the Supreme Court's prior mandate required the Superior Court to allow T.A.H. First to press its claims, despite the default judgment T.A.H. First had earlier suffered. Upon re-review of the matter, the Supreme Court concluded the Superior Court did not abuse its discretion or commit an error of law in its rulings in this case. View "T.A.H. First, Inc. v. Clifton Leasing Company, Inc." on Justia Law