Morris James LLP is pleased to congratulate the lawyers listed below, who were most recommended by their professional peers in a survey of Delaware attorneys conducted by Delaware Today magazine. Morris James received more “top lawyer” peer recognitions and had more “top vote-getters” than any other law firm. Top vote-getters are listed in bold below and a number following a name indicates the number of recognitions this year. Continue Reading
In Oklahoma Firefighters Pension & Retirement System v. Citigroup, C.A. No. 9587-ML (Del. Ch. Aug. 13, 2014), a stockholder sought books and records related to a company’s board of directors and senior management regarding certain public investigations of two of the company’s wholly owned subsidiaries. Citigroup Inc. argued that the stockholder failed to demonstrate a nexus between the subsidiaries’ wrongdoing and the board or senior management, and therefore failed to show a credible basis to infer possible mismanagement or wrongdoing. The master in chancery disagreed with the company’s argument and recommended the court find that the stockholder stated a proper purpose for the inspection. Continue Reading
This important decision addresses two tricky questions of Delaware corporate law. First, it clarifies that the informed vote of a majority of the disinterested stockholders will invoke the business judgment rule when there is no controlling stockholder pushing the transaction.
Second, it makes it clear that stockholder approval may ratify director actions even when the stockholder vote is not required to implement that action.
The decision carefully reviews prior cases in reaching these conclusions and for that reason alone is worth a reading.
In a precedent-setting opinion, the Court of Chancery has allocated damages among some directors and one of their advisers in a breach of fiduciary duty case. This decision has big implications on how breach of duty cases are tried in the Court of Chancery.
First, the Court held that a contribution claim by one defendant against other defendants requires joint liability, not just joint culpability. Hence, if some directors are exculpated by a Section 102(b)(7) clause, they cannot be held to contribute to a damages award even if they are negligent. Conversely, if they violated their duty of loyalty (a claim outside of 102(b)(7) protection), they may be held liable to contribute.
Second, the Court held that an unclean hands defense may also bar a contribution claim under the right circumstances.
While there are many other aspects of this decision that warrant close reading, it will affect most directly how defenses line up in cases going to trial.
Normally a books and records case will not be dismissed on the basis that the claim sought to be investigated is subject to some affirmative defense. That defense is for another day if the claim is ever filed. However, when that claim is clearly subject to a limitations defense, then investigation of it may be too burdensome to permit, as was the case here. Note, however, that the underlying claim involved in this case had been investigated before and that influenced the decision.
This decision is yet another example of the difficulty in recovering under almost any legal theory, except breach of contract, when there is a detailed contract that was designed to exclude other oral agreements. Not only will claims of a side oral agreement be rejected, but so too will theories like unjust enrichment that are pled to get around the problem that the plaintiff is not satisfied with the deal made in the writing that the parties signed.
A recent Delaware decision highlights a trap for the unwary adviser to a business entity. The decision holds that helping a business get started may create fiduciary duties owed by the adviser, even if he or she is not acting in one of the roles that are normally thought of as creating such duties, such as serving as a lawyer or trustee. Because those fiduciary duties limit what the adviser may do for those other than his or her immediate client, it is important to recognize when those duties exist. Continue Reading
Stating a securities law claim is difficult under the standards set by the Dura and McCabe decisions and the PSLRA. This decision explains how to do it in a clear and concise way.
This is an important decision because it outlines the rights of creditors of an insolvent corporation to file a derivative suit for breaches of fiduciary duty, it holds that the creditors do not need to meet the continuous ownership rule that limits which stockholders may file such suits, and it implies that the demand requirements of Rule 23.1 must be met by a creditor plaintiff.
Also interesting is the holding that director decisions that do not directly benefit them or their controller are subject to the business judgment rule, even in the context of an insolvent entity. Creditors had sought to impose a rule of law giving them a preference for their interests in such situations, but they did not get it here.
Delaware law favors a strict interpretation of contract language. Here, the Supreme Court rejected an attempt to read into a contract provisions from a letter of intent signed before the final contract was executed. The final contract did not provide by its literal terms such an interpretation and the Supreme Court would not have any of the plaintiff’s attempts to read it otherwise.