Delaware Business Litigation Report

Delaware Business Litigation Report

Court Of Chancery Explains How Hard It Is To Appeal Arbitration Order

Posted in Arbitration

3850 & 3860 Colonial Blvd. LLC v. Griffin, C.A. 9575-VCN (March 30, 2015)

This decision explains how hard it is to appeal an order staying litigation in favor of arbitration.  Even when there are some good arguments over whether the dispute is subject to arbitration, the Supreme Court precedent strongly disfavors an interlocutory appeal.

Superior Court Upholds Multimillion Dollar Verdict

Posted in Business Torts

Professional Investigating & Consulting Agency, Inc. v. Hewlett-Packard Company Del Super. No. 12C-06-196 MMJ CCLD (March 23, 2015)

This decision upholds a rare multimillion dollar jury verdict for interference with the plaintiff’s business, including a $5,500,000 damage award for “humiliation” damages.  The Court also awards attorney fees to the successful plaintiff. The opinion is an excellent review of when a jury verdict may be set aside by the Court.

Court Of Chancery Issues Mother Of All In Pari Delicto Decisions

Posted in Business Torts

The Honorable Karen Weldin Stewart v. Wilmington Trust SP Services, Inc., C.A. 9306-VCP (March 26, 2015)

This and the AIG decisions are the leading decisions on when the in pari delicto defense works. The Court carefully summarizes the 3 exceptions to when in pari delecto bars a recovery: (1) the adverse interest exception, (2) the fiduciary duty exception, and (3) the public policy exception such as in the case of the federal securities laws.  Of these, the “greatest of all” is the fiduciary duty exception that even permits aiding and abetting clams to proceed.

Supreme Court Explains Again The Limits Of The Fair Dealing Covenant

Posted in Breach of Contract

Nationwide Emerging Managers LLC v. Northpointe Holdings LLC, No. 441, 2014 (March 18,2015)

This is yet another Supreme Court decision marking the bounds of the covenant  of good faith and fair dealing. The covenant is not to be used to modify the terms of a contract, to add terms the parties chose to not include or to provide a remedy that the parties never intended would apply in the event of a breach. While Delaware courts try to reach a “fair” result, that will not warrant letting a party alter what it bargained for after the fact.

CorpCast Episode 2: Advancement 101

Posted in Podcast

We’re back with the second episode of CorpCast, Morris James LLP’s podcast discussing Delaware corporate and commercial law and practice.  In “Advancement 101,” we discuss the fundamentals of advancement actions in Delaware’s Court of Chancery, distinguish advancement rights from indemnification rights, and provide frameworks for thinking about advancement both from the perspective of a director or officer seeking advancement and from the perspective of a company facing an advancement demand.  We will also touch on some of the common practice pitfalls in this area of the law and consider several reasons why Delaware may be the best venue to bring an advancement action. Continue Reading

Court Of Chancery Interprets Forum Selection Clause

Posted in Jurisdiction

Wilmington Savings Fund Society, FSB v. Caesars Entertainment Corporation, C.A. 10004-VCG (March 18, 2015)

This is an interesting decision because it holds that a forum selection clause must be “clear and unambiguous” before it will be held to provide an exclusive forum for all disputes. Clauses that just refer to specific types of disputes, such as contract disputes, will then not control where other disputes may be filed.

Delaware Supreme Court Leaves Open The Question Of Whether Breach Of Contract Is A Business Judgment

Posted in Breach of Contract

Friedman v. Khosrowshahi, No. 442,2014 (March 6, 2015)

In this interesting order affirming a Chancery decision, the Supreme Court went out of its way to make a point.  A stockholder suit alleging that the board breached a stock option plan may state a claim for breach of contract that does not necessarily involve a business judgment rule analysis but instead may involve a breach of the duty of loyalty. If so, then it may not be easily dismissed under a Rule 23.1 motion.

Court Of Chancery Explains Notice Required For Moot Claims

Posted in Derivative Claims

Swomley v. Schlecht, C.A. 9355-VCL (March 12. 2015)

This decision explains what notice is required when a representative litigation is to be dismissed as moot and a fee paid to the plaintiff’s attorneys.  Notice should be given to the class or the other stockholders in the way and form spelled out in this case. Further, the case may be re-filed by another stockholder who has the right to claim it was not moot.  No hearing is required before the case is dismissed after the notice is given.

Stating Proper Purpose Doesn’t Guarantee Books-and-Records Entitlement

Posted in Articles

It is well settled that stockholders of Delaware companies generally have the right to inspect the company’s books and records upon the showing of a proper purpose. However, as demonstrated in the Court of Chancery’s decision in Fuchs Family Trust v. Parker Drilling, C.A. No. 9986-VCN (Del. Ch. Mar. 4, 2015), that right is not absolute. Even where a proper purpose exists, the demand is properly denied where the requested books and records would not advance that purpose. Continue Reading

Court of Chancery Addresses Application of Fee-Shifting Bylaw

Posted in Bylaws, Case Summaries, Class Actions, Controlling Stockholder, Corporate Charters

The Rites of Spring are upon us: budding flowers, warmer temperatures, and a Delaware court issuing an important decision just before the annual Tulane Corporate Law Institute begins. This year the honor of issuing that decision fell to Chancellor Bouchard who issued his opinion in Strougo v. Hollander, C.A. No. 9770-CB (Del. Ch.) on March 16, 2015. The opinion addressed plaintiff’s motion for partial judgment on the pleadings that a fee-shifting bylaw adopted after the challenged transaction did not apply to him. The Court found that the fee-shifting bylaw did not apply to the plaintiff in this case, and in reaching this conclusion, made some interesting comments that will undoubtedly further the debate over the proposed legislation to eliminate fee-shifting bylaws and regulate forum selection bylaws. Continue Reading