Delaware Business Litigation Report

Ginsburg v. Philadelphia Stock Exchange, C.A. No. 2202-CC (May 31, 2007).

It is often thought that even a short delay in seeking injunctive relief may bar a claim. Certainly in the case of claims to rescind a corporate transaction, any delay may be fatal. However, when the Court is satisfied that the plaintiff has been diligent, it is less likely to punish the delay that occurs in following the command of the Delaware Supreme Court to use the right to review corporate records before filing suit.

In this decision, the plaintiff knew he objected to the sale of securities by the PHLX and filed a demand to review its records on that sale. A year after the sale, he sued to have it rescinded. The Court denied the motion of the defendants for summary judgment on the claim for rescission because much of the delay in suing was attributed to the time the PHLX took in producing the documents the plaintiff had sought to review. In short, if you follow the rules to use the tools at hand you may get the time to do so.

Hough Associates Inc. v. Hall, C.A. No. 2385-N (Del. Ch. January 17, 2007).

While it is common for the courts to enforce non-compete agreements against the signatories to those agreements, it is less common for third parties to get dragged into the enforcement as well. Here, when a non-party to the agreement knew of its terms, actively assisted in the violation of the agreement and would itself have profited from that violation, the Court of Chancery had little pause in holding the agreement should be enforced against that third party.

W.L. Gore & Associates, Inc. v. Wu, C.A. No. 263-N (Del. Ch. September 15, 2006).

The extent to which a court will enjoin the violation of a confidentiality agreement covering trade secrets is often questioned. In this decision, the Court of Chancery issued an injunction that for ten years barred the defendant from working in a business that might permit him to use the trade secrets he had stolen from his employer. In part, the remedy was based on the useful life of the stolen materials.

Horizon Personal Communications, Inc. v. Sprint Corp., C.A. No. 1518-N, 2006 WL 2337592 (Del. Ch. Aug. 4, 2006).

There is no duty that is more often cited and so little understood as that requiring a contracting party to act in good faith and deal fairly with the other contracting parties. In this case the Court of Chancery exhaustively examined the contract between the parties, determined what was required to act in good faith, and fairly awarded an injunction to preclude a breach of that duty. In doing so, the Court's analysis provides a road map for tracking the duty to act in good faith in the performance of a contract.

Flowserve Corp. v. Burns Int'l Servs. Corp., C.A. No. 04-1294-JJF, 2006 WL 739886 (D. Del. Mar. 22, 2006).

Plaintiff filed a complaint seeking a declaratory judgment of its right to indemnification in asbestos litigation under the terms of a stock purchase agreement executed by its predecessor-in-interest, which had acquired a subsidiary of Borg-Warner Corp. ("BWC"). Defendant Burns International Services Corp. ("Burns"), which had purchased BWC's insurance assets at a liquidation sale, filed a counterclaim alleging that its indemnification obligations to plaintiff only arose out of a later letter agreement, and that once BWC's insurance was exhausted, plaintiff had to pay the costs of defending and resolving the asbestos claims. During the pendency of the instant case, plaintiff informed Burns that (i) it had terminated the counsel chosen by Burns to defend the asbestos claims; (ii) it was choosing its own counsel; and (iii) it was directing its new counsel to file third-party complaints against defendants and to pursue global settlements in the underlying asbestos cases (together, the "threatened actions"). Burns then sought a temporary restraining order and preliminary injunction to enjoin plaintiffs from taking the threatened actions.

Madison Real Estate Immobbilien-Anlagegesellschaft Beschrankt Haftende KG v. GENO One Financial Place L.P. and GENO Auslandsimmobilien GmbH, No. Civ.A. No. 1928-N, 2006 WL 456779 (Del. Ch. Feb. 22, 2006).

The plaintiff is a German entity organized under that country's laws, as is the second named German limited liability defendant. The latter party is also a general partner in the first defendant entity. The plaintiff was one of two bidders that made an unregulated tender offer for a part of the first-named defendant's Delaware limited partnership interest. Plaintiff filed a motion in the Court of Chancery for expedited injunction proceedings, seeking to enjoin the defendant's general partner from approving any transfer agreements related to the tender offers.

In re Serena Software, Inc. S'holders Litig., C.A. No. 1777-N, 2006 WL 375599 (Del. Ch. Feb. 09, 2006).

This is a motion for expedited proceedings for a preliminary injunction pertaining to certain disclosure claims not made public in SEC-filed proxy statements soliciting shareholder vote for an agreement for sale of the corporation at $24 per share. Class actions were earlier filed in the Delaware Court of Chancery and California's Superior Court challenging the sale transaction as a director-interested one.

Deloitte & Touche USA LLP v. Lamela, C.A. No. 1542-N, 2005 WL 2810719 (Del. Ch. Oct. 21, 2005).

Plaintiffs sought a preliminary injunction against Defendant to prevent him from soliciting any current, former or prospective clients that he had contact with while employed by Plaintiffs.

Willie Gary LLC. v. James & Jackson LLC., C.A. No. 1781, 2006 WL 75309 (Del. Ch. Jan. 10, 2006), aff'd, (Del. Mar. 14, 2006)(Berger, J.)

Plaintiff sought to enjoin defendant to remedy an alleged breach of the LLC Agreement and to specifically enforce the defendant's alleged promise to guarantee a debt of the LLC. Alternatively, plaintiff sought to dissolve the entity in which he owned 80% of stock because of an alleged decisional deadlock.

Richard Y. Johnson & Son, Inc. v. Just-In Construction, Inc., et al., C.A. No. 1735-S, 2006 WL 75308 (Del. Ch. Jan. 06, 2006).

This case involved the issue of a TRO to prevent defendant from alienating goods and effects and imposition of a constructive trust pursuant to 6 Del. C. §3501 under a claim of breach of fiduciary duties, to capture receipts to defray vendors and contractors retained to complete DMV related work.

Bally Total Fitness Holding Corp. v. Liberation Investments, L.P., Liberation Investments, Ltd., Liberation Investment Group, LLC and Emanuel R. Pearlman, 2005 WL 3525679 (D.Del., December 22, 2005).

The District Court for the District of Delaware granted Defendants' Motion to Dismiss Plaintiff's Preliminary Injunction application. At issue were SEC mandated disclosures in advance of the annual shareholders' meeting.

Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. Sept. 20, 2005).

Plaintiff sought preliminary injunction against consummation of Purchase Agreement pending arbitration of its substantive disputes with Defendant.

Frenz v. Gencor Indus., Inc., C.A. No. 1204-N, 2005 WL 2266594 (Del. Ch. Sept. 9, 2005).

Plaintiffs sought a temporary injunction barring the 2005 annual shareholder's meeting of Gencor Industries, Inc., or, in the alternative, to amend proxy materials to include a nominee for independent director.

Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. July 11, 2005).

Plaintiff Flight Options International, Inc. ("FOI") sought a preliminary injunction against defendant Flight Options LLC ("the Company"), a Delaware limited liability company.

Examen, Inc. v. VantagePoint Venture Partners 1996, C.A. No. 1142-N, 2005 WL 1653959 (Del. Ch. July 7, 2005).

Johnson v. VantagePoint Venture Partners 1996, C.A. No. 1260-N, 2005 WL 1653959 (Del. Ch. July 7, 2005).

This case arose out of an earlier dispute in which VantagePoint Venture Partners ("VantagePoint"), an investor holding the majority of a series of preferred stock in Examen, Inc. ("Examen"), a Delaware corporation, sought to veto a merger between Examen and a Delaware subsidiary of Reed Elsevier Inc. VantagePoint argued for a determination that under California law the holders of the series of preferred stock issued by Examen had a right to a class vote in the merger. But the Court of Chancery held that California law did not apply and that all of the stockholders were permitted to vote on the proposed merger.

Nutzz.com v. Vertrue Inc., C.A. No. 1231-N, 2005 WL 1653974 (Del. Ch. July 6, 2005).

Plaintiff Nutzz.com ("Nutzz") sought a preliminary injunction against defendant Vertrue Inc. ("Vertrue"), a company with which Nutzz contracted to develop an online membership program for NASCAR fans. After Vertrue terminated the agreement (claiming that Nutzz missed deadlines and promotion requirements), it sent an email to 1,200 Nutzz members advertising Vertrue's own membership program as an upgrade. Nutzz claimed that Vertrue's actions constituted a breach of their confidentiality agreement and a misappropriation of trade secrets.

In re Toys "R" Us Shareholder Litigation, C.A. No. 1212-N, 877 A.2d 975 (Del. Ch. June 24, 2005)

The Court of Chancery considered a motion to enjoin a vote of the stockholders of Toys "R" Us, Inc. to consider approving a merger with an acquisition vehicle formed by a group led by Kohlberg Kravis Roberts & Co. Pursuant to the terms of the merger agreement, the Toys "R" Us stockholders would receive $26.75 per share for their shares. The $26.75 per share merger consideration constituted a 123% premium over the price of TRU stock when merger negotiations began in January 2004. Plaintiffs charged the board did not act reasonably in pursuit of the highest attainable value. The Court of Chancery denied the motion to enjoin a stockholder vote on the proposed merger, saying stockholders could stop the merger by voting if they thought it was unfair

State ex rel. Brady v. Pettinaro Enterprises, 870 A.2d 513 (Del. Ch. 2005).

Attorney General brought consumer protection action under the Consumer Fraud Act, the Deceptive Trade Pratices Act, and the Health Spa Regulation against developer of condominium complex, alleging, among other things, that developer misled condominium purchasers into believing that clubhouse was part of the complex. Developer moved to dismiss action on the basis that the statute of limitations barred the Attorney General's claims and for failure to state a claim under the Deceptive Trade Practices Act. The court granted in part and denied in part Defendants' motion to dismiss.

Benitec Australia Ltd. v. Promega Corp., No. Civ. A. 04-889 JJF, 2005 WL 549552 (D.Del. Mar. 8, 2005).

The defendant filed a Motion For a Preliminary Injunction seeking to preserve its rights as an exclusive licensee for the duration of the law suit brought by plaintiff against defendant Promega Corporation ("Promega"). The Court denied the injunction.

Heinrich Beck v. Atlantic Coast PLC., et al., C.A. No. 303-N, (Del. Ch. Feb. 11, 2005)(published at 868 A.2d 840 (Del. Ch. 2005)).

This opinion deals with attorney sanctions under Court of Chancery Rules 11 and 37.

Tenneco Automotive Inc., et al. v. El Paso Corp., et al., C.A. No. 18810-NC (Del. Ch. Jan. 28, 2005).

This is an insurance contract related action brought by plaintiff, who also sought an injunction demanding notice under certain insurance policies. Plaintiff also sought a declaratory judgment that the insurance settlement agreement did not impair their rights and a permanent injunction.

Little Switzerland, Inc. v. Patrick J. Hopper, C.A. No. 590 (Del. Ch. Jan. 24, 2005)(published at 867 A.2d 955).

This case involved a request for an injunction filed by the employer-corporation seeking to stop an arbitration of a contractual claim by a plaintiff-employee. The employee sought significant payments under a Change in Control transaction that allegedly triggered a clause vesting the right to payment in the employee. The court held the claim was time-barred under 10 Del. C. §8111 and not 10 Del. C. §8106.

Randall Jacobson and Technology Development Corp. (USA), Ltd. v. Alfred Ronsdorf, C.A. No. 518-N, 2005 WL 29881 (Del. Ch. Jan. 06, 2005),aff'd, 2006 WL 212194 (Del. Ch. Jan 26, 2006) (TABLE).

Plaintiff-corporation, its president and major stockholder sought to enjoin defendant, a purported stockholder and former officer from acting as an officer or pursuing any claim against any officer, shareholder or contractor of the plaintiff company. Plaintiff also pursued a declaratory judgment that defendant was not an officer or director of the plaintiff under 8 Del. C. §225 and further sought to specifically enforce a stock-transfer agreement with defendant. Defendant sought to dismiss for lack of personal and subject matter jurisdictions and for forum non conveniens.

All Pro Maids, Inc. v. Susan Layton, et al., C.A. No. 058-N, 2005 WL 82689 (Del. Ch. Jan. 11, 2005).

This opinion discusses a post-judgment motion objecting to the form of the judgment and order relating to prejudgment and post-judgment interest awards pursuant to 6 Del. C. §2301.