Delaware Business Litigation Report

Delaware Business Litigation Report

Chancery Applies Contract Principles in Preferred-Shares Dispute

Posted in Articles, Bylaws
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In Choupak v. Rivkin, C.A. No. 7000-VCL (Del. Ch. April 6, 2015), the Delaware Court of Chancery concluded after a trial that the defendant and counterclaim-plaintiff, Vladimir Rivkin, forged documents, lied about exercising options, verified interrogatory responses and pleadings that he knew contained falsehoods, and testified falsely in deposition and at trial. The court found that Rivkin’s conduct was motivated by his desire to profit from a 2011 sale by merger of Inc., even though in 2008 he had sold his 4.4 percent equity interest in Intermedia to Intermedia’s founder, plaintiff Michael Choupak, and another Intermedia executive for $300,000. The court noted that had Rivkin prevailed on his claim that he was entitled to an additional 4 percent of the equity through preferred shares, he would have received over $5 million in damages based on the 2011 merger sale price of $127.5 million. The details of the facts that led the court to reach its findings are distressing but of wider import are the court’s application of traditional contract principles in ruling for Choupak, the court’s assessment of an equitable claim to unjust enrichment when the parties’ relationship is governed by contract, and its dicta agreeing with other Delaware decisions holding that exclusive forum-selection provisions are procedural and hence permitted in a bylaw. Continue Reading

Peter B. Ladig to Participate in a Panel Discussion at the E-Discovery for the Mid-Size Case CLE on April 30th, 2015

Posted in News

Morris James partner Peter B. Ladig will participate in a panel discussion at the E-Discovery for the Mid-Size Case CLE on April 30, 2015 sponsored by the E-Discovery and Technology Law Section of the Delaware State Bar Association. Mr. Ladig, Vice-chair of the firm’s Corporate and Fiduciary Litigation Group, will participate in a panel titled “Perspectives from the Bench: Judicial Perspectives on Attorneys’ Ethical Obligations to the Court and Their Clients.” Panel members will share their views on e-discovery issues, including attorneys’ roles in meeting their ethical obligations to the Court while fulfilling client expectations. Continue Reading

Court Of Chancery Notes The Outer Limits Of Contract/Fiduciary Claims

Posted in Breach of Contract

The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (April 20, 2015)

There is a long line of decisions that holds when the parties set out their mutual rights and obligations in a contract, only contract law governs and a breach of fiduciary duty claim cannot also be brought. That has other consequences because that also means that an aiding and abetting claim cannot be filed against third parties for helping a party breach its contract. There is no such claim under Delaware law. That is not true if the underlying claim was for breach of fiduciary duty where aiding and abetting claims are well recognized. In short, how to characterize the breach claim has real consequences insofar as suing third parties is concerned. This decision sets out this law and the issues, without resolving them, but in a helpful way.

Court Of Chancery Explains How To Overcome Claim Of Subjective Good Faith

Posted in Fiduciary Duty

In Re: El Paso Pipeline Partners L.P. Derivative Litigation, C.A. 7141-VCL (April 20, 2015)

Limited partnership agreements often only require that the general partner act with subjective good faith in doing a deal with a parent entity. That is because the standard seems an easy one to meet. But as this decision shows all too well, even that lax standard has its limits and ignoring objective evidence of unfairness will expose the GP to liability. This decision shows how to use the evidence of past transactions to establish the objective unfairness of a newer deal.  Hence, it is a tale of how not to act.

The opinion is also interesting for the way it explains the duties of a fiduciary in valuing a proposal. Just because the deal is accretive from a cash flow or EPS prospective does not make it fair. That is an important point to remember.

A Delaware Rapid Arbitration Act Primer

Posted in Articles

Delaware has enacted the Delaware Rapid Arbitration Act, which is intended to address the increasing costs and delays associated with traditional arbitration of business disputes. It does so by: (1) requiring arbitration generally to be completed within 120 days of the arbitrator’s acceptance of appointment (with only one extension of no more than 60 days); (2) penalizing arbitrators who fail to meet that deadline by reducing their fees substantially; (3) limiting pre-arbitration objections to the scope of the arbitration; and (4) limiting appeals of an award. While the parties to an agreement to arbitrate retain the freedom to choose much of how the arbitration is conducted, if they fail to do so, the DRAA provides the rules that apply by default. The following are the key aspects of the DRAA. Continue Reading

CorpCast Episode 4: Better Know a Judge: Vice Chancellor J. Travis Laster of the Delaware Court of Chancery

Posted in Podcast

On this episode of CorpCast, we’re honored to welcome Vice Chancellor J. Travis Laster of Delaware’s Court of Chancery.  In addition to discussing the reasons he came to Delaware to practice law, the Vice Chancellor shares his views from the bench, including some very helpful practice points and advice for younger attorneys.  Many thanks to the Vice Chancellor for joining us as our inaugural guest! Continue Reading

Supreme Court Applies McWane To Arbitration

Posted in Arbitration

LG Electronics Inc. v. Interdigital Communications Inc., No. 465, 2014 (April 14, 2015)

For the first time, the Delaware Supreme Court held that an arbitration proceeding qualifies as a having been first filed, warranting dismissal of a later filed suit under the McWane doctrine on forum selection. The facts here are somewhat unusual, but the decision has broad implications, particularly when the actual dispute was over the interpretation of a contract that did not have an arbitration clause.

Court Of Chancery Explains What Is A Credible Basis to Inspect

Posted in Books and Records

Southeastern Pennsylvania Transportation Authority v. Abbvie Inc., C.A. 10374-VCG (April 15, 2015)

It is too often thought that just by alleging some wrongdoing a demand for inspection of records is sufficient. Well, this decision explains why that is wrong. The demand must state a credible basis to believe that as a result of the inspection nonexculpated conduct will be uncovered and suit filed. That is hard to do when there is a 102(b)(7) provision in the certificate of incorporation and no real breach of loyalty claim.

CorpCast Episode 3: Preview of Business Divorce CLE at 2015 ABA Business Law Section Spring Meeting

Posted in Podcast

Whether you can’t attend the 2015 ABA Business Law Section Spring Meeting in San Francisco or you are attending and still trying to figure out your schedule, we’re giving you a preview of the topics being covered by host Pete Ladig and others on Saturday, April 18, at 10:30 AM in their CLE panel titled 50 Ways to Leave Your Lover, err .. Business Partner: The Essentials of Business Divorce in Privately Held Entities.  We’ll review the various aspects of Business Divorce, and hopefully entice you to attend to hear Kurt Heyman, Melissa Donimirski, Eric Milby, Michaela Battista Sozio and Vice Chancellor Donald F. Parsons, Jr. of the Delaware Court of Chancery discuss the issues in more detail.  Follow @DECorpCast for conference updates, or contact us at with questions or comments.  We would love to hear from you! Continue Reading