The Delaware Court of Chancery continues to evolve its approach to multijurisdictional litigation. Exactly what that court will do next is uncertain. Its most recent decisions seem to rebut the prediction it would enjoin forum-shopping plaintiffs to prevent them from abusing the legal system by filing suits in multiple jurisdictions over the same controversy to try to pressure corporate defendants.Continue Reading...
When the Delaware Court of Chancery adopted Rule 5.1 in late 2012, the court took great pains to inform the public that Rule 5.1 represented a significant departure from the practices under former Rule 5(g). Notwithstanding this admonition from the court, until the court issued opinions addressing the new aspects of Rule 5.1, particularly what type of information met the "good cause" standard articulated in the rule, there was little guidance to flesh out exactly how the court would apply the new rule.Continue Reading...
This is a useful decision because it collects the relevant rules for deciding if there is a privilege for communications that include a mixture of business and legal advice. If the business advice can be segregated from the legal advice, the communication should be produced with the legal advice redacted. If the business advice predominates and segregating it from the legal advice is not possible, the communication should be produced. But if the business advice cannot be said to predominate and segregating the legal advice is not possible, the communication may be withheld.
As this decision affirms, it is possible to waive the right to a judicial dissolution in an LLC agreement. However, the decision also notes that the Court may use its equitable powers to remedy an abuse of power. This possible "escape valve" may be hard to invoke given the respect the Delaware Courts have for the right to contract away one's rights in an LLC agreement.
What are the damages when a party's right to consent to a transaction is violated? There is no easy answer to that question that involves predicting what might have been won in fair negotiations for that consent. Nonetheless, here the Court explains how it determines what are the reasonable expectations of the non-breaching party.
This is an excellent summary of the Delaware law on advancement and why all the arguments against improvidently granted advancement rights are wrong. For example, it explains why the right to be "defended' includes advancement, but the right just to be indemnified does not. In short, it is a good case to read before drafting advancement contracts.
If there is a dispute over the identity of the directors of a Delaware corporation, the corporation, its stakeholders and those with whom it does business require prompt certainty as to who is in charge. For that reason, Section 225 of the Delaware General Corporation Law provides for a summary proceeding to determine who rightfully comprises the board and officers of a Delaware corporation. While there is a rich body of Section 225 case law, there are few decisions addressing whether the party who loses at the trial court level is entitled to a stay of the court's order pending an appeal. The Court of Chancery recently addressed this issue in Klaassen v. Allegro Development, C. A. No. 8626-VCL (Del. Ch. November 7, 2013), known as Klaassen II, and partially stayed its post-trial order to allow the losing CEO to pursue an expedited appeal. In this decision, the court provided guidance on how it may limit the conduct of a judicially sanctioned board while a party challenges that outcome on appeal. The court also identified a significant issue that, once resolved by the Delaware Supreme Court, likely will affect how parties resolve leadership transitions when they are at odds over how to manage the company's business and affairs.Continue Reading...
The duty to negotiate in good faith is now well recognized in Delaware under SIGA Acquisition Inc. v. PharmAthene Inc., 67 A.3d 330 (Del. 2013). However, what is less clear is when exactly does that duty arise. This decision explains when the duty is created and distinguishes Delaware from New York law in that respect.
This is an example of a corporate nightmare for failing to follow the requirements to validly issue stock. Delaware law requires that the stock issuance be reflected by a "written instrument," not just some oral agreement. Moreover, the Court of Chancery will not use its equitable powers to cure a void stock issuance. Hence, the stock will be held to not exist and all the corporate acts taken in reliance of that stock being issued will be called into question.
This is another decision holding that a contractual limit on when a claim "survives" is actually a limitation on when such a claim may be filed in court based on a breach of contract. In short, survival clauses may shorten the statute of limitations.
The decision is also helpful in explaining that there is no requirement that the claim actually be known for it to expire and how to plead any of the several tolling doctrines that might apply to save such a claim.
This decision clarifies the Court of Chancery's jurisdiction under the clean up doctrine and when a contract subject to specific performance has not yet been breached.
Section 228 of the DGCL sets out the requirements to act by stockholder consent. Here, the Court notes that each stockholder's signature should be separately dated. While somewhat forgiving of a failure to observe all the technical requirements when there is no real factual dispute over what the stockholders did, this is a warning that a consent may be invalid if not done right.
What is the status of a general partner in a Delaware limited partnership after that GP is removed? As this decision points out, the answer is not clear and it may be just a holder of an economic interest, but not a limited partner. That question can be resolved by a provision in the partnership agreement and that is the better course as it will then help to determine the former GP's buy out rights.
The so-called conspiracy theory of jurisdiction over a non-resident is often misunderstood. This decision is useful because: (1) it explains the relationship between jurisdictional discovery and the burden of alleging facts sufficient to establish jurisdiction and (2) it again explains what must be shown to warrant jurisdiction under the conspiracy theory.