Delaware Business Litigation Report

Delaware Business Litigation Report

Category Archives: Fiduciary Duty

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Court Of Chancery Explains How To Be An Unintended Fiduciary

Posted in Fiduciary Duty
Bennett v. Lally, C.A. 9545-VCN (September 5, 2014) Your duties to another person may change significantly if you become a fiduciary to him. That fiduciary relationship may be formed inadvertently as this decision explains.  Thus, giving advice to another,  intending to act [as in this case] as a third-party contractor may get you involved in a … Continue Reading

Court Of Chancery Explains When Control Makes Dilution Claim Direct

Posted in Fiduciary Duty
In Re Nine Systems Corporation Shareholders Litigation, C.A. 3940-VCN (September 4, 2014) Whether a plaintiff’s claim is direct or derivative is often a critical issue. It has now been established that when a controlling stockholder issues equity to himself at an unfair price, the resultant dilution claim is a direct one. This decision explains how … Continue Reading

Court Of Chancery Permits Creeping Takeover

Posted in Fiduciary Duty
In re Sirius XM Shareholder Litigation, C.A. 7800-CS (September 27, 2013) This is an interesting decision because it discusses the duties, or lack thereof, a large stockholder who is buying more stock on the open market to take control.  Here the stockholder had a contract that it entered into when it loaned a lot of money … Continue Reading

Court Of Chancery Explains A Fiduciary’s Duty To Selling Stockholders

Posted in Fiduciary Duty
In Re Wayport Inc. Litigation, C.A. 4167-VCL (May 1, 2013) When does a corporate fiduciary owe a special disclosure duty to a minority stockholder whose stock he purchases?  There are several approaches to this question and this decision fully reviews them all.  Ultimately the Court adopted the so-called "special circumstances" rule that requires disclosure when the buying … Continue Reading

Court Of Chancery Explains What Is Commercially Reasonable

Posted in Fiduciary Duty
Edgewater Growth Capital Partners LP v. H.I.G. Capital Inc., C.A. 3601-CS (February 28, 2013, revised April 18, 2013) When a secured creditor forecloses on its line, the resulting sale must be "commercially reasonable."   What does that mean exactly?  This decision provides guidance to answer that question.  For example, just because the lender works with the … Continue Reading

Court Of Chancery Explains Effect Of Disinterested Director Approval

Posted in Fiduciary Duty
In re BJ’s Wholesale Club Shareholders Litigation, C.A. 6623-VCN (January 31, 2013) When a majority of a board of directors is not personally benefiting from a transaction they approve, the business judgment rule applies.  How do you overcome that BJR?  A plaintiff may do so by showing an "extreme set of facts" sufficient to support the … Continue Reading

Court Of Chancery Clarifies Controller Duty

Posted in Fiduciary Duty
In re Synthes Inc. Shareholder Litigation,  C.A. 6452-CS (August 17, 2012) This decision clarifies the extent of a controlling shareholder’s duties when selling her company. The controller is not required to sacrifice her own interests to benefit the minority, such as by accepting less for herself than others receive. Of course, the safe harbor is … Continue Reading