Delaware Business Litigation Report

Transched Sys. Ltd. v. Versyss Transit Solutions, LLC, 2008 WL 948307 (Del. Super. Apr. 2, 2008)

This case illustrates Delaware’s objective theory of contract interpretation and underscores the importance of certain standard contractual provisions. 

The plaintiff purchased software from the defendants and argued that it incurred significant losses due to material misrepresentations, including, for example, the extent of completion of the software.  The defendants argued that the material misrepresentation claim was barred by the plain language of the contract, namely the exclusive remedy clause, integration clause, and disclaimer of extra-contractual representations. 

The contract stated that indemnification was the exclusive remedy “in respect of any breach of or default under this Agreement . . . .”  The integration clause stated that the written agreement was the entire agreement.  And, the reps and warranties clause stated that the seller was making no representation or warranty in respect of any of its assets.  The court held that the thrust of these three provisions was unambiguous: “no representations made outside of the four corners of the Agreement are to be given consideration by the parties in interpreting the terms.”  That is, the provisions precluded the plaintiff’s argument that it justifiably relied on the extra-contractual claims made by the defendants.

Accordingly, the Superior Court dismissed the plaintiff’s negligent misrepresentation claim.   

 In re The Bear Stearns Companies, Inc., Shareholder Litig., C.A. No. 3643-VCP (Del. Ch. Apr. 9, 2008).

In an opinion issued yesterday by Vice Chancellor Parsons (HT: M&A Law Prof and Pileggi), which you can access here, the Court of Chancery ordered a stay of the Delaware actions filed against Bear Stearns in favor of those filed in New York.  The Court’s reasoning recognizes the national importance of the matter and a concern for the stability of the financial markets and national economy.

This blog previously reported here on the class actions filed in Delaware against Bear Stearns and its directors, seeking to enjoin the sale to JPMorgan Chase.  A few days earlier, however, other Bear Stearns stockholders had filed similar suits in the New York Supreme Court.  Based on those earlier New York filings, the defendants moved the Court of Chancery to dismiss or stay the Delaware action.  This blog provided coverage of the oral argument here, remarking that the arguments raised several interesting questions, such as (1) the extent to which Delaware courts would defer to New York courts on matters of Delaware corporate law and (2) how Delaware courts would handle the issue of comity urged by the defendants. 

Those questions have now been answered.  The Court of Chancery decided to exercise its discretion to stay the Delaware proceedings for reasons of comity and the orderly and efficient administration of justice:

As discussed in this memorandum opinion, I have decided in the exercise of my discretion and for reasons of comity and the orderly and efficient administration of justice, not to entertain a second preliminary injunction motion on an expedited basis and thereby risk creating uncertainty in a delicate matter of great national importance.

Today is the second and final day of the Tulane Corporate Law Institute conference.

The New York Times DealBook is reporting live, with a look at the private equity market here and coverage of comments by Martin Lipton, Joseph Perella, and Chief Justice Steele here. 

The WSJ Deal Journal is providing live coverage: an interview with Sullivan & Cromwell partner Jim Morphy here; comments by Lipton and Perella here, where Lipton traces a line from Drexel Burnham Lambert to the financial world of today; and the Clear Channel discussion here, featuring Vice Chancellor Strine.

The DealScape is reporting here.

The annual Tulane Corporate Law Institute takes place today and tomorrow in New Orleans.  The conference brings together the country's most prominent corporate law practitioners, judges, and bankers to discuss the important developments in the world of M&A and corporate law.  The panelists this year include Delaware's own Chief Justice Steele, Vice Chancellor Strine, Vice Chancellor Lamb, and Vice Chancellor Parsons, as well as a number of Delaware lawyers.  Among the discussions taking place today: how recent legal and market developments are affecting public M&A deals, including a discussion of MAC clauses, breach provisions, and specific performance remedies--topics that are now taking center stage with cases like United Rentals, which this blog previously discussed here. 

The full program is available here.

The New York Times DealBook is reporting live here, with CNBC video here, the MAC discusssion here, market outlook here, perils of activist shareholders here, and the Deal Professor's insights and coverage of informal discussions here. 

The WSJ is providing live coverage here, discussing MAC's here, the credit crunch here, and the Delaware developments panel here. 

Pileggi is reporting here and here. 

See latest developments on 03/31/08 above: Last Thursday, a class action complaint was filed against Bear Stearns and its directors in the Court of Chancery.  The complaint alleges that the company has failed to maximize shareholder value by agreeing to be purchased by JPMorgan Chase for $2 per share.  The complaint further alleges that, by agreeing to the deal, the company has favored numerous constituencies over the shareholders.  You can access the complaint here.    

Update: The New York Times reports here that JPMorgan Chase raised its offer to $10 per share.  Professor Ribstein has commented here, along with Pileggi here. 

Further Update: An additional class action was filed against Bear Stearns on Monday by the Wayne County Employees' Retirement System (access the complaint here).  And, yesterday a TRO was filed on behalf of the plaintiffs in both actions, seeking to enjoin the sale, which is set to close on April 8 (access the TRO here).  Both actions, and the accompanying TRO, have been assigned to Vice Chancellor Parsons. 

Yesterday, February 27, 2008, two new complaints were filed against Yahoo! in the Court of Chancery. The first is a class and derivative action, Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund v. Yahoo!, C.A. 3578, which you can access here. The second, Mercier v. Yahoo!, C.A. 3579, an additional class action to those previously filed, can be found here. 

The plaintiff in the second action, Vernon A. Mercier, was also the lead plaintiff in Mercier v. Inter-Tel (Delaware), Inc., 929 A.2d 786 (Del. Ch. 2007), which you can access here. In a decision in that action last August, Vice Chancellor Strine denied the plaintiff’s application for a preliminary injunction and found that directors fearing that stockholders are about to make an unwise decision that poses the threat that all stockholders will irrevocably lose a unique opportunity to receive a premium for their shares have a compelling justification for a short postponement in the merger voting process to allow more time for deliberation.  The decision is worth reviewing for its interesting discussion of the interplay between the Blasius and Unocal doctrines.    

Gantler v. Stephens, C .A. No. 2392-VCP (February 14, 2008).

This decision illustrates the confusion that exists over the scope of review of a board's decision to not pursue a merger and largely eliminates the uncertainty. Briefly, the board here decided not to pursue a merger opportunity and the potential acquirer then withdrew its offer. The court held that the business judgment rule applied to the decision not to take the offer. In doing so, the court declined to apply the heightened scrutiny used under the Unocal decision as the board did not take any defensive steps to stop the suitor from going forward on its own.

Instead, the court held that to invoke a higher level of review, the plaintiff must show the board acted in bad faith or was not properly advised. Mere allegations that the board made the wrong decision are insufficient.

G & G LLC v. White, 2008 WL 205150 (D. Del. Jan. 25, 2008)

In this opinion declining to dismiss for lack of personal jurisdiction, the District Court found that it had personal jurisdiction over both the directors/officers of a Delaware corporation and over a foreign corporation that invested in a Delaware corporation. Plaintiff was a Virginia limited liability company that loaned $2.5 million to a Utah corporation. Plaintiff was granted a security interest in the Utah corporation’s assets, and perfected that interest by filing the required financing statements in Utah. However, the Utah corporation subsequently was merged with and into a Delaware corporation. Plaintiff asserted that this was done at the insistence of various defendants that were seeking to invest in the Utah corporation after Plaintiff informed them that it would not agree to subordinate its security interest to theirs. Plaintiff posited that the investor defendants thereafter controlled the Utah corporation and the Delaware corporation it was merged into, and fraudulently concealed the merger to prevent Plaintiff from perfecting its security interest upon the merger, while at the same time perfecting their own in Delaware. Plaintiff pointed to numerous instances where the Utah corporation, the Delaware corporation, their counsel, the directors/officers of the Delaware corporation (who were appointed by the investor defendants), and the investor defendants failed to notify Plaintiff of the merger and/or made misrepresentations regarding the continuing status of the corporation as a Utah corporation. Taking the allegations as true, the Court found that the actions of the investor defendants and the directors they appointed was sufficient to confer specific jurisdiction over them. 

United Rentals Inc v. RAM Holdings Inc. C.A. No. 3360-CC (December 12 and 21, 2007). 

In these two decisions the Court of Chancery sets out how it will interpret a contract. Following the objective theory of contract interpretation, the court searches for the "common understanding" of the parties. It will not hear evidence of a party's subjective mental impressions or unilateral understandings.

However, the court will apply the "Forthright Negotiator Principle" when a contract is ambiguous. Under that approach, a reasonable interpretation of contract language of one of the parties will be binding on the other party to the contract if he knew or should have known of the other party's understanding and did not object to it when the contract was signed. Silence then may be fatal.

Globis Partners LP v. Plumtree Software, Inc., C.A. No. 1577-VCP (November 30, 2007).

This decision explains why some attacks on a merger fail for want of a basis to avoid the business judgment rule and for a failure to make proper disclosure claims. The merger was a third-party transaction and the defendant directors received no unique benefit as a result. The Court held that granting those directors a right to indemnification, an acceleration of options and a cash out of vested options, did not constitute a special benefit that would make the directors interested parties. Hence, the business judgment rule applied.

The court also concluded that the complaint's disclosure claims lacked merit. For the most part, those claims were attacks on the merits of the investment banker's analysis attached to the proxy statement. That is not a claim of inadequate disclosure. Thus, the complaint was dismissed.

Appriva Shareholder Litig. Co., LLC v. EV3, Inc., -- A.2d --, 2007 WL 3208783 (Del. Nov. 1, 2007)

Deciding whether a motion to dismiss based on lack of standing is considered under Rule 12(b)(6) or 12(b)(1) has implications and has divided some courts. First, lack of subject matter jurisdiction under 12(b)(1) is non-waivable and can be raised by the court sua sponte, whereas failure to state a claim under 12(b)(6) must be raised by motion. Second, a 12(b)(6) motion for failure to state a claim may be converted to a motion for summary judgment, considering matters outside the pleadings, but a 12(b)(1) motion may not. In this consolidated appeal, the Supreme Court held that when the issue of standing is closely related to the merits, a motion to dismiss for lack of standing is properly considered under 12(b)(6) for failure to state a claim. 

In re Checkfree Corporation Shareholders Litigation, C.A. No. 3193-CC (November 1, 2007).

Exactly what needs to be included in a proxy statement for a merger vote seems to be a constant subject for debate. Only a "fair summary of the substantive work performed by the investment bankers" need be disclosed, not everything given to them. Moreover, when there is no competing bid, then to enjoin the merger the court must be convinced that a strong showing has been made of disclosure errors.

Twin Bridges Limited Partnership v. Draper, C.A. No. 2351-VCP (September 14, 2007).

This decision deals with how to change the governance structure of a limited partnership by using a merger to amend the partnership agreement. At the outset, the Court ruled that the doctrine of independent legal significance would not be applied to a two-step transaction involving an amendment to a limited partnership agreement to permit a merger and then the merger itself. Instead, the Court ruled that the two transactions were integrated and thus, considered as if they were a single event. This may mean that the corporate law concept of treating two transactions separately if they are authorized by two different sections of the corporate law will not apply in the context of a limited partnership that is based on contract law.

In addition, the Court held that using a merger to add an additional, tie-breaking general partner to the partnership governance structure was permissible absent a clear prohibition in the partnership agreement.

Law Debenture  Trust Company of New York v. Petrohawk Energy Corp., C.A. No. 2422-VCS (August 1, 2007).

Change of control provisions are common in employment contracts and other contexts. Here the provision was in a debenture. While primarily focusing on the specific language involved, this opinion is useful to others to see how to avoid triggering a change in control provision while at the same time implementing a merger.

Lemon Bay Partners LLP v. Hammonds, C.A. No. 05-327 (D.Del. June 26, 2007)

In this shareholder derivative action for breach of fiduciary duties against various corporate defendants, the Court held that the state law claims asserted so predominated the lone federal claim that exercise of supplemental jurisdiction was inappropriate. Plaintiffs, former shareholders of MBNA Corporation, asserted various claims against the defendants based on breach of fiduciary duties in connection with earnings reports and the merger of MBNA with Bank of America. Defendants moved to dismiss based on lack of subject matter jurisdiction, arguing that the Plaintiffs’ sole claim that rested on federal jurisdiction was so predominated by the state law claims as to make the exercise of the Court’s supplemental jurisdiction inappropriate. The Court concurred with the defendants, concluding that Plaintiffs’ federal law claim bore only a tangential relationship to the rest of the claims. The Court therefore granted Defendants’ motion to dismiss for lack of subject matter jurisdiction. 

In Re: Lear Corporation Shareholders Litigation, C.A. No. 2728-VCS (June 15, 2007).

The tactics to use and the terms to seek in merger negotiations are often debated and misunderstood. In this decision, the Court sets out considerable guidance on what to do and what to avoid.  Moreover, the Court once again points out the problem created by leaving too much of the work to the CEO whose personal economic interests are also at stake. In short, that is a process to be avoided.

The Court's extended discussion of termination fees, go-shop provisions, voting agreements and matching rights are mandatory reading for anyone with a role to play in an M& A deal.

In Re: The Topps Company Shareholders Litigation, C.A. No. 2786-VCS (June 14, 2007).

The duties of directors in a sale of the company situation are often difficult to articulate except to say they should get the best price. Here, however, the Court of Chancery examines a real world problem of dealing with two competing bids and explains in detail how to do so properly. Moreover, when as here the Court concludes the directors have been unreasonably favoring one bidder over another, it will intervene to level the playing field.

The Court required that the board of Topps, the baseball card company, end a standstill agreement it had with Upper Deck, amend Topps proxy materials that had unfairly portrayed the Upper Deck offer for Topps and otherwise act to be sure that Upper Deck's proposal to acquire Topps was fairly considered. The decision also illustrates the problems management may have when they are given assurances of continued employment by one bidder who they then seem to favor in the bidding process.

Matulich v. Aegis Communications Group. Inc., C.A. No. 2601-CC (May 31, 2007).

Under Section 253 of the DGCL, a parent corporation that owns 90% or more of the stock entitled to vote in a subsidiary may merge the subsidiary into itself without a stockholder vote. Here, however, some of the subsidiary's stock had the right to 'consent' to major corporate events, but not to vote on those events. Illustrating the importance of adherence to proper corporate formalities, this decision holds that the right to "'consent' is not the same thing as the right to vote". Hence, the merger was valid when the parent company had 90% of the voting stock of the subsidiary, even if the minority stockholder with the right to consent to the merger did not do so. In short, be careful how you write a corporate charter because the words used really count.

On January 15, 2008, the Delaware Supreme Court affirmed the Court of Chancery's judgment.

Mehiel v. Solo Cup Company, No. 06C-01-169-JEB, 2007 WL 901637 (Del. Super. Ct. Mar. 26, 2007).

This case arose from defendant’s acquisition of SF Holdings and relates to disagreements over the amount of SF Holdings’ working capital adjustments and, by extension, its purchase price. The plaintiff, chairman and CEO of SF Holdings, brought this action in his capacity as the shareholders’ representative for fraud in the inducement, breach of contract, and unjust enrichment. 

Shortly after the parties entered into the merger agreement—and days before closing—they found themselves deadlocked and unable to reach an agreement on the working capital adjustments. To resolve their differences, the parties appointed a neutral auditor as provided in the merger agreement, which further stated that the auditor’s decision would be final, binding, and conclusive, making no mention of appeal or reconsideration. The auditor resolved several issues in favor of the purchasing company (defendant), and plaintiffs’ action followed.

In re Netsmart Technologies, Inc., C.A. No. 2563-VCS, 2007 WL778612 (Del. Ch.).

When a company is to be sold, then the board of directors have so-called Revlon duties that basically come down to getting the best price. There is no set methodology or procedure the board must employ.  However it proceeds, its actions will be subject to a level of increased scrutiny by a reviewing court. In other words, the normal business judgment rules do not apply in such a case. This important decision illustrates what the Court of Chancery expects a board in "Revlon land" to do. 

Here the board was faced with two possible sets of potential buyers for their company: (1) so-called strategic investors who would acquire the company to run it as part of their other business interests and (2) private equity investors who would let current management run the company after taking it private. The board never really explored the possibility of a sale to strategic investors and, apparently, preferred a sale to private equity from the outset. Only one bidder stayed the course and the court was faced with a complaint that the price was not high enough. After finding some disclosure problems with the proxy materials, the Court held that the stockholders should be given an amended disclosure statement that included more financial information and enjoined the meeting until that was done. More importantly, the Court also ordered that the stockholders be told that their board had not really pursued a sale to strategic investors.

Ortsman v. Green, C.A. No. 2670-N (Del. Ch. February 28, 2007).

There is sometimes uncertainty as to what should be included in a disclosure statement that seeks stockholder approval of a merger. This brief opinion makes it clear that the basis for an investment banker's fees should be included, particularly when the fee is dependent in some degree on the merger's completion.

Louisiana Municipal Police Employees' Retirement System et al v. Crawford, C.A. No. 2635-N (Del. Ch. February 16, 2007).

In Delaware's corporate law, the doctrine of independent legal significance has a great importance. Basically, this means that if a transaction is authorized by any provision of our law, then it may go forward even if, in substance, it may seem to violate some other provision of that law. Thus, for example, a merger that really seems to be a sale of assets is still valid if it complies with the terms of the statute governing mergers. Here, the strength of that doctrine is called into question.

To make the merger of Caremark and CVS more competitive to a third party offer for Caremark, the directors of Caremark resolved to pay a special dividend to the Caremark stockholders. The problem was that the dividend was conditioned on those stockholders approving the merger with CVS. The plaintiffs argued that this dividend was really a cash payment as part of the merger consideration and thus triggered stockholder appraisal rights that occur when stockholders receive cash in a merger. The Court of Chancery agreed with the plaintiffs and rejected application of the doctrine of independent legal significance.

The result clearly was influenced by the evidence that the Caremark directors were motivated to declare the dividend to make the merger go through and thereby receive large personal benefits in the form of change of control payments. The point then is that when  the so-called "independent" event is really tied to personal interest and not to just getting a deal done, the Court is less likely to give it recognition as truly independent.

AHS New Mexico Holdings, Inc. v. Healthsource Inc., C.A. No. 2120-N (Del. Ch. February 2, 2007).

It is often the case that a merger agreement or sale of stock will provide for an adjustment to the closing price based on post-closing events. This decision holds that in such cases the procedures for submitting any dispute are enforceable and absent agreement of the parties will include all of their disputes over the adjustment. This later point is important because it permits the parties to reach preliminary agreements on some parts of the dispute while preserving their right to take the whole dispute to the chosen forum for resolution if all points are not resolved by negotiations.

Appriva Shareholder Litigation Co. v. ev3, Inc., C.A. No. 05C-11-208 JOH, 2006 WL 2555348 (Del. Super. Ct. Aug. 24, 2006).

Plaintiff entity controlled by certain former stockholders of acquired corporation sued acquirer alleging breach of merger agreement and fraud. Upon motion by defendant acquirer, the court dismissed the action on ground that plaintiff lacked standing.

The court noted that the merger agreement appointed two individuals as shareholder representatives who were required to act in concert, one of whom the complaint reflected was not affiliated with plaintiff in any way. The court also noted that the merger agreement did not permit assignment of the shareholder representatives' rights without defendants' consent, which was never given. Finally, the court rejected plaintiff's argument that it be permitted to bring the action as a third-party beneficiary as inconsistent with the merger agreement's express terms.

Abraham v. Emerson Radio Corp. C.A. No. 1845-N, 2006 WL 1879205 (Del. Ch. July 5, 2006).

This decision makes it clear that a controlling stockholder may sell control without fear of liability for the actions of the buyer after the transaction closes, with few exceptions. While it has long been the rule that a stockholder may deal with its shares as it sees fit, case law recognized that a controlling stockholder has a fiduciary duty to its company and the minority owners by virtue of the controller's ability to control what the company does. How that duty applied in the sale of control context is the question addressed in this case.

Gesoff v. IIC Indus. Inc., C.A. No. 19473, 2006 WL 1458218 (Del. Ch. May 18, 2006).

Plaintiff filed a class action, claiming a merger was the subject of unfair dealing and produced an unfair price. Another plaintiff filed a statutory appraisal claim based on the same merger.

Oliver v. Boston University, C.A. No. 16570-NC, 2006 WL 1064169 (Del. Ch. Apr. 14, 2006).

Defendant Boston University ("BU") was the controlling shareholder of Seragen, a financially troubled biotechnology company. Plaintiffs, a group of former minority stockholders of Seragen's common stock, challenged certain transactions before Seragen was merged and the process by which the merger proceeds were divvied up. The plaintiffs contended that the BU defendants breached their fiduciary duties to Seragen's common shareholders by approving various financial transactions, which were not fair to the common shareholder as a matter of price and process. The Court of Chancery awarded damages in excess of $4.8 million plus interest for breaches of the fiduciary duty of loyalty.

Hartman v. Pathmark Stores, Inc., C.A. No. 05-403-JJF, 2006 U.S. Dist. LEXIS 9349 (D. Del. Mar. 8, 2006).

Plaintiff filed a class action complaint against defendants, alleging violations of Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and breach of the fiduciary duty of loyalty by the directors of Pathmark Stores, Inc. ("Pathmark") in connection with a transaction between Pathmark and The Yucaipa Companies, LLC ("Yucaipa"). Plaintiff also moved for appointment as lead plaintiff, with his counsel as lead counsel. Defendants moved to dismiss the complaint.

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.

Delaware Ins. Guar. Ass'n v. Christiana Care Health Services, Inc., No. 244, 2005, 2006 WL 196382 (Del. Jan. 24, 2006).

The Delaware Insurance Guaranty Association ("DIGA") sought reimbursement from Christiana Care Health Services ("CCHS") pursuant to one of the Delaware Insurance Guaranty Association Act's provisions for claims paid on behalf of an insolvent insurer. In this case the insolvent insurer had insured a corporation that merged into CCHS. The Superior Court granted CCHS's motion for summary judgment, finding that CCHS was not an "insured" under the insurance policy. Reversing the lower court, the Delaware Supreme Court found that a court must consider the purpose and intent of 18 Del. C. § 4211 when determining if a company is an "insured." A court may not rely on terms in an insurance policy that are inconsistent with the purpose and intent of Section 4211. The Supreme Court found that CCHS became an insured after the named insured merged into the defendant, and CCHS is obligated to reimburse DIGA pursuant to Section 4211.

Blechner v. Daimler-Benz AG, C.A. No. 04-331-JJF, 2006 WL 167835 (D.Del. Jan. 24, 2005).

Plaintiffs, on behalf of themselves and other foreign shareholders who invested in securities of DaimlerChrysler AG, filed a class action complaint alleging securities fraud in connection with the merger of Chrysler Corporation and Daimler-Benz AG. Defendants moved to dismiss the complaint.

In re Tele-Communications Inc. Shareholders Litig., C.A. No. 16470, 2005 WL 3547674 (Del. Ch. Dec. 21, 2005), opinion revised and superceded by No. CIV. A. 16470, 2005 WL 3642727 (Del. Ch. Dec. 21, 2005), (revised Jan. 10, 2006)(Westlaw citation not available).

This summary judgment action originates from a Consolidated Amended Complaint that alleged nondisclosure of material information Continue Reading Posted By MorrisJames Delaware In Case Summaries , Class Actions , Derivative Claims , Directors , Fiduciary Duty , M&A , Special Committees | Permalink 0 Comments

Ubiquitel Inc. and Ubiquitel Operating Co. v. Sprint Corp, et al., C.A. No. 1489-N, 1518-N, 2006 WL 44424 (Del. Ch. Jan. 04, 2006).

and

Horizon Personal Communications, Inc. et al. v. Sprint Corp., et al., C.A. No. 1518-N (Del. Ch. Jan. 04, 2006).

These cases pertain to summary judgment and a request for declaratory judgment involving an anticipatory breach of a commercial agreement concerning a merger transaction.

Crescent/Mach I Partnership, L.P. v. Turner, C.A. No. 17455-NC, 2005 WL 3618279 (Del. Ch. Dec. 23, 2005).

Former stockholders who were cashed out in connection with merger sued the corporation's former controlling stockholder and the acquirer for breach of fiduciary duty and aiding and abetting breach of fiduciary duty, respectively. Plaintiffs complained of numerous side deals, allegedly negotiated by the controlling stockholder. Plaintiffs also complained that the controlling stockholder breached his fiduciary duty by supplying growth projections that he knew to be unduly pessimistic and inconsistent with management's view. Defendants moved for summary judgment, which the court granted in part and denied in part.

Bonham v. HBW Holdings, Inc., C.A. No. 820-N, 2005 WL 3589419 (Del. Ch. Dec. 23, 2005).

Former stockholders sued acquirer for release of $25 million held in escrow for purpose of indemnification for breach of warranty claims and other relief. The acquirer moved to dismiss the complaint on the grounds that it properly and timely noticed claims for breach of warranty and other issues, Plaintiffs failed to allege that those claims were made in bad faith, and certain of the claims were subject to mandatory arbitration under the terms of the stock purchase agreement.

Henke v. Trilithic Inc., C.A. No. 13155, 2005 WL 2899677 (Del. Ch. Oct. 28, 2005).

Plaintiff, who was a stockholder of Trilithic, Inc., brought an appraisal action against Defendant Trilithic under 8 Del. C. §262.

Gentile v. Rossette, C.A. No. 20213-NC, 2005 WL 2810683 (Del. Ch. Oct. 20, 2005).

Plaintiffs, former shareholders of SinglePoint Financial, Inc. which merged into a subsidiary of Cofiniti, Inc., alleged that two former directors of SinglePoint breached their fiduciary duties in connection with the issuance of a large number of shares to one of the defendants and the merger. Defendants moved for summary judgment.

Mehiel v. Solo Cup Co., C.A. No. 1596-N, 2005 WL 3074723 (Del. Ch. Nov. 3, 2005).

Following the closing on a merger, several disputes developed between the shareholder representative of an acquired company and the acquirer involving working-capital-adjustment issues and the accuracy of seller's representations and warranties. The merger agreement contained two separate arbitration provisions for working capital adjustment disputes and disputes regarding the parties' respective representations and warranties. The acquirer first attempted to submit its disputes with the shareholder representative to arbitration as working-capital claims. The arbitrator refused to consider those claims, however, based on the acquirer's failure to comply with certain procedural requirements. In response, the acquirer submitted the same claims to the separate arbitrator for representation-and-warranty claims. The shareholder representative subsequently filed a complaint asking the court to issue an injunction barring the second arbitrator from hearing the disputed claims.

AT&T Wireless Services, Inc. v. Federal Ins. Co., 2005 WL 2155695 (Del. Super. Ct. Aug. 18, 2005).

The Plaintiff filed a notice of partial dismissal in an attempt to dismiss certain defendants. The defendants who were purportedly dismissed moved to quash the notice of dismissal. The court found that one defendant insurer could be dismissed because the entire action was being voluntarily dismissed. However, the court granted the motion to quash as to the other defendant because the dismissal only eliminated certain claims as opposed to the entire action. Plaintiff also sought leave of the court to dismiss a second group of defendants pursuant to Rule 41(a)(2). The court denied this motion.

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

In Re Cox Communications Inc. Shareholders Litigation, C.A. No. 613-N, 879 A.2d 604(Del. Ch. June 6, 2005)

Vice Chancellor Strine ruled on a fee request in a case arising out of a proposal by the Cox Family to take Cox Communications private. The Family proposed a merger on fully negotiable terms with an opening bid of $32. The proposal was immediately followed by a flurry of class action lawsuits, as well as the formation of a special committee to review and evaluate the terms of the offer. The Family tentatively agreed with a special committee of independent directors to a price of $34.75 per share subject to approval by a majority of the minority stockholders and conditioned on settlement of the outstanding lawsuits, a final fairness opinion, and agreement on the terms of a final merger agreement.

Counsel for the plaintiffs eventually agreed that the $34.75 price accepted by the special committee was fair, accepted the other terms of the transaction, and agreed to settle their claims. After settlement, the Cox family agreed not to oppose a request by plaintiffs' counsel for payment of attorneys' fees of up to $4.95 million. Certain Cox stockholders, however, did object to the fee request and the Court of Chancery heard their obections.

The Court slashed a $4.95 million fee request to an award of $1.275 million and advised the plaintiff's bar to consider that award "generous."

Frontier Oil Corporation v. Holly Corporation, 2005 WL 1039027 (Del. Ch. April 29, 2005).

Frontier Oil Corporation and Holly Corporation are petroleum refiners that sought to merge. In conducting its due diligence review of Frontier, Holly discovered that activist Erin Brockovich was planning to bring a toxic tort suit claiming that an oil rig that had been operating for decades on the campus of Beverly Hills High School caused the students to suffer from a disproportionately high incidence of cancer. This raised concerns for Holly because a subsidiary of Frontier had previously operated the Beverly Hills drilling facility. Although the terms of the merger agreement were modified to address the situation, including broadening the representation to apply to litigation that would reasonably be expected to have a material adverse effect ("MAE") on Frontier, the court found that substantial litigation costs were not a MAE and therefore the contract could not be rescinded.

In re J.P. Morgan Chase & Co. S'holder Litig., 2005 WL 1076069 (Del. Ch. April 29, 2005), aff'd, 2006 WL 585606 (Del. Mar. 8, 2006).

J.P. Morgan Chase & Co. ("JPMC") and Bank One agreed to a business combination that was expected to create the second largest financial institution in the country. JMPC paid a premium over the market share price for Bank One, effectively making JPMC the acquirer and the Bank One the target. After the merger was completed, the stockholders of the acquirer sued its directors, alleging breaches of fiduciary duty with regard to the acquisition. Their claims stemmed from the allegation that the directors paid too much for the acquired bank. The defendants moved to dismiss the complaint on the basis that the claims were derivative, not direct, and that demand was not excused. The court granted defendants motion to dismiss.

Finkelstein v. Liberty Digital, Inc., 2005 WL 1074364 (Del. Ch. April 25, 2005).

This appraisal case involved the fair value of shares of a company, Liberty Digital, Inc., that was merged with an acquisition subsidiary of Liberty Media Corporation and survived the merger as a wholly owned subsidiary of Liberty Media. What was atypical about this appraisal case was that the parties were able to stipulate to the value of all but one of Liberty Digital's assets.

Examen, Inc. v. VantagePoint Venture Partners 1996, 873 A.2d 318 (Del. Ch. 2005).

The plaintiff, a Delaware corporation, sought a judicial declaration that Delaware law governed a stockholder vote on a pending merger because if the vote was governed by Delaware law, common stockholders and preferred stockholders would vote on the merger as a single class. The defendant, a large venture capital firm owning 83% of the corporation's preferred stock, argued that California law controlled because if California law were to apply in determining the voting rights of the Delaware corporation's stockholders in connection with the proposed merger, the preferred stockholders would have the right to vote as a separate class, effectively giving the defendant a veto over the merger. The court granted plaintiff's motion for judgment on the pleadings finding that Delaware law applied because this case was governed by the internal affairs doctrine.

Gilliland v. Motorola, Inc., 873 A.2d 305 (Del. Ch. 2005).

Plaintiff sought a class-wide "quasi-appraisal" remedy for minority stockholders eliminated in a short-form merger. Statutory appraisal was impractical for two reasons. First, formalistically, the minority stockholders no longer owned shares in the merged subsidiary and without the shares, they could not make the demand required by the appraisal statute. Second, from a practical standpoint, the two-year delay made it impossible to recreate the factual context necessary to have statutory appraisal. Therefore, Vice Chancellor Lamb granted the quasi-appraisal remedy and outlined its procedure.

In re Plains Resources Inc. Shareholders Litigation, C.A. No. 071-N, 2005 WL 332811 (Del. Ch. Feb. 04, 2005).

This is an action for plaintiff's attorney fees following settlement of fiduciary duty-based shareholder class actions.

Encompass Services Holding Corp. v. Prosero Incorp. f/k/a FacilityPro.com Corp., C.A. No. 578-N, 2005 WL 332810 (Del. Ch. Feb. 03, 2005).

This is a 8 Del. C. §262 share appraisal case brought by a "debtor in possession" after the dismissal of its earlier filed adversarial proceeding in the bankruptcy court.

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.