Delaware Business Litigation Report

Delaware Business Litigation Report

Benchmark Litigation Recognizes Seven Morris James Attorneys as Top Litigators in Delaware

Posted in News

Morris James LLP is pleased to announce that seven of its partners have been recognized as top local litigation attorneys in Delaware by Benchmark Litigation 2015: the definitive guide to America’s leading litigation firms and attorneys.

The attorneys recognized are:

P. Clarkson Collins, Jr. – Local Litigation Star
Richard Galperin – Local Litigation Star
Thomas E. Hanson, Jr. – Future Star
Richard K. Herrmann – Local Litigation Star
Peter B. Ladig – Local Litigation Star, Plaintiff
Lewis H. Lazarus – Local Litigation Star
Edward M. McNally – Local Litigation Star

Benchmark Litigation culminates their results from a six-month long extensive research period where they interview leading litigators and law firms. Along with peer-review testimony, recent casework is also reviewed. Firms cannot pay to be recommended for the guide; instead, they must be recommended by the nation’s leading private practice lawyers and in-house counsel.

Has the Chancery Court Created a New Tort?

Posted in Articles
McNally

Authored By Edward M. McNally
This article was originally published in the Delaware Business Court Insider December 17, 2014

A recent decision by the Delaware Court of Chancery may have plowed fresh ground by establishing a new tort claim against corporate directors. Lee v. Pincus, C.A. No. 8458-CB (Del. Ch. Nov. 14, 2014), held that directors who released themselves from a lockup agreement gained a benefit that was not shared with stockholders and may be liable to those stockholders as a result. This “improper benefit” claim is at least novel, if not entirely unprecedented. Corporate directors need to understand the implication of this decision. Continue Reading

Court Of Chancery Upholds Advance Notice Bylaw

Posted in Stockholders' Meetings

AB Value Partners LP v. Kreisler Manufacturing Corporation, C.A. 10434-VCP (December 16, 2014)

Advance notice bylaws are valid under Delaware law. However, their application may be enjoined in rare circumstances when the Board of Directors has “radically” changed the playing field after the time to give notice of a competing slate. This decision gives examples of when that has occurred and more often, when it has not occurred. The burden to get relief a is high one and is not met by just a change in circumstances not caused by the incumbent Board.

Court Of Chancery Reiterates Privilege Log Rules

Posted in Discovery

Mechel Bluestone Inc. v. James C. Justice Companies Inc., C.A. 9218-VCL (December 12, 2014)

When documents are withheld under a claim they are privileged, it is necessary to say why there is a privilege. A “privilege log” does just that, however, there are specific requirements for what must be on that log, or its cousin the redaction log. Failure to meet those requirement may result in a waiver of any privilege. This decision explains all the rules and how to meet them.

Of particular interest to Delaware lawyers, the decision twice points out that compliance with these requirements is a responsibility of the “senior Delaware lawyers” involved in the matter. My father said that someone was a “senior” if they were 10 years older than he was. He said that when he was 80. I doubt the Court of Chancery will agree with him.

Court Of Chancery Examines Trust Exculpation Limits

Posted in Fiduciary Duty

Mennen v. Wilmington Trust Co., C.A. 8432-ML (December 8, 2014)

Trust documents frequently provide that the trustee is not liable for any mistakes made in good faith. This decision examines how far that exculpation goes with respect to some very bad investment decisions. Not far enough in this case. It also shows that untruthful testimony, besides being just plain wrong, also has a way of really hurting that witness’s case.

Derivative Claims Dismissed for Failure to Plead Sufficient Facts

Posted in Articles
Lazarus (1)

Authored By Lewis Lazarus
This article was originally published in the Delaware Business Court Insider December 10, 2014

Claims for breach of fiduciary duty against directors for injury to a Delaware corporation caused by director misconduct are assets of the corporation. In deference to the director-centric model of corporate decision-making embodied in Delaware law, a stockholder may not obtain control over that corporate asset without first making a demand on the board to bring an action or pleading that demand is excused. When a stockholder plaintiff believes that demand is excused but fails first under Section 220 of the Delaware General Corporation Law to seek books and records related to alleged misconduct in a transaction, that plaintiff will need to allege with particularity, and without discovery or pertinent books and records, either that a majority of the board was not disinterested or independent or that the decision to enter into the transaction was not otherwise the product of a valid exercise of business judgment. Continue Reading

Court Of Chancery Explains Discovery In Appraisal Case

Posted in Appraisal

In Re Appraisal Of Dole Food Company, Inc., C.A. 9079-VCL (December 9, 2014)

Appraisal actions are often described as a battle of experts. However, as this decision illustrates, that does not mean that a plaintiff is not subject to discovery, particularly over what he thinks is the value of the company. This is becoming more common as parties buy stock after a merger is announced in an attempt to arbitrage appraisal rights. The liberal rules of discovery apply to all, even the plaintiff who knew nothing until he decided to buy stock.

Allergan Stockholders’ Board-Removal Contest Was Not Ripe

Posted in Articles
Manwaring (1) (1)

Authored By Albert H. Manwaring, IV
This article was originally published in the Delaware Business Court Insider December 3, 2014

Delaware courts have consistently recognized that disputes challenging corporate defensive measures are ripe for review when the defensive measures have a substantial deterrent effect on the ability of stockholders to exercise their rights. For example, in Moran v. Household International, 490 A.2d 1059, 1072 (Del. Ch. 1985), a corporation’s implementation of a shareholder rights plan, which deterred the ability of stockholders to receive takeover proposals and engage in a proxy fight for control of the corporation, was ripe for review. Similarly, in KLM Royal Dutch Airlines v. Checchi, 698 A.2d 380, 384 (Del. Ch. 1997), a corporation’s implementation of a shareholder rights plan or poison pill, which interfered with a stockholder’s contractual right to exercise a stock option, was ripe for review. More recently, in Pontiac General Employees Retirement System v. Ballantine, C.A. No. 9789-VCL, at *72-77 (Del. Ch. October 14, 2014) (Transcript Op.) (Laster, V.C.), the board’s implementation of a proxy put, which gave noteholders a right to accelerate payment of their debt if stockholders removed and replaced the majority of the corporation’s board, had a deterrent effect on the stockholders’ ability to conduct a proxy contest, and was thus ripe for review. In each of these cases, the key factor that the challenge was ripe for review was the “deterrent effect” of the defensive measure on the ability of stockholders to exercise their rights. Continue Reading