Court Of Chancery Upholds Clickwrap Non-Compete Agreement

Newell Rubbermaid Inc. v. Storm, C.A. 9398-VCN (March 27, 2014)

This decision holds that a clickwrap agreement is sufficient to bind an employee to a non-compete agreement.  This is an important innovation as it will permit employers to implement non-compete agreements quickly and without much fuss.

Court Of Chancery Issues Novel Injunction

Numoda Corporation v. Numoda Technologies Inc., C.A. 9163-VCN (March 27, 2014)

It is common in a Section 225 action seeking the determination of the composition of a company's board of directors for the court to issue a status quo order.  Those orders stop the company from taking any actions out-of-the-ordinary course of business until the Court decides who is really in control.  Here the Court issued a similar order pending a decision on whether the plaintiff was entitled to have stock issued to it to take control.  This extends the use of status quo orders to a new realm.

Court Of Chancery Enforces Forum Selection Agreement

BE&K Engineering Company LLC v. Rocktenn CP LLC, C.A. 8837-VCL (January 15, 2014)

Anti-suit injunctions to enforce a choice of forum clause are not always easy to get.  Delaware courts do not like to interfere with other courts jurisdiction.  Instead, they prefer that a party aggrieved by the violation of a contract that selects Delaware as the forum to resolve disputes ask the non-Delaware court to stay its hand. However, as this decision illustrates, when pressed, a Delaware court will enjoin litigation elsewhere in the right circumstances. One such circumstance is when the party to be enjoined has tried to manipulate the system by taking inconsistent positions on what forum the contract requires. Trickery with the Courts is never a good idea.

Court Of Chancery Denies Anti-Suit Injunction

The North River Insurance Company v. Mine Safety Appliances Company, C.A. 8456-VCG (December 20, 2013)

The Court of Chancery has again denied a request for an anti-suit injunction. This time the Court noted that the litigation sought to be enjoined would actually continue by a party not before the Court. Hence, the injunction was not going to accomplish an end to duplicative litigation. 

Court Of Chancery Provides Guidelines On Stantdstill Orders

IMO Dissolution Of Adir Managment Services, C. A. Nos. 8717 and 8718-VCN (August 9, 2013)

The Court of Chancery often enters standstill orders or status quo orders when the control of a Delaware entity is in dispute.  The orders are designed to prevent actions that may not be what the actual management would do in circumstances when the identity of that management is not in doubt. Disputes over the form of these orders are common and this decision seems to settle how one provision should be worded.  At least in the absence of special circumstances, the provision of the order that prevents extraordinary actions should be worded so as to permit action after 7 days notice to the other side, who is then free to seek court action if it objects.

Supreme Court Upholds Forum Selection Clause

National Industries Group v. Carlyle Investment Management LLC,  No. 586, 2012 (May 29, 2013)

This is an important decision because it upholds the power of the Delaware Court of Chancery to enforce by an injunction the forum selection clause in a contract.  Previously, there was some doubt under the existing case law whether such an injunction would issue, but, at least among sophisticated litigants, there is no doubt any more.  Note that the clause in question provided that a "court in Delaware" would hear any dispute.  A clause that attempted to vest jurisdiction only in the Court of Chancery is questionable because a contract alone cannot confer jurisdiction on that court with its limited equity jurisdiction.

Court Of Chancery Enjoins Solicitation

Kallick v. Sandridge Energy Inc., C.A. 8182-CS (March 8, 2013)

This is an important decision dealing with a so-called "Proxy Put."  Briefly, a Proxy Put permits creditors to call corporate debt when a new board of directors is elected without the consent of the current board.  This decision applies the reasonableness standard of Unocal rather than the stricter standard of review of Blasius to decide if the Board has properly refused to approve a competing slate of directors for purposes of preventing a Proxy Put.

The Court carefully distinguished other circumstances where such a Put might be upheld, such as when a competing slate's election might cause immediate harm to the corporation.

Court Of Chancery Denies Expedition Of Money Claim

Intrepid Investments LLC v. Selling Source LLC,  C.A. 8261-VCN (February 8, 2013)

It is not always easy to have the Court of Chancey expedite your case just because you ask for an injunction.  Here, the Court denied expedition because the plaintiff had waited 5 months to ask for it and because the plaintiff's claim was really just for damages.

Court of Chancery Discusses Expedited Proceedings

The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (January 18, 2013)

This decision provides a good review of when the Court will expedite a proceeding.

Court Of Chancery Expands Entitlement To Injunction

AM General Holdings LLC v. The Renco Group Inc., C.A. 7639-VCN (December 21, 2012)

This is an interesting decision because it may extend the circumstances where the Court of Chancery will issue a preliminary mandatory injunction requiring the payment of money.  It is often said, perhaps wrongly, that there is an adequate remedy by the award of damages that precludes issuing an injunction requiring such a payment.  Here, however, the parties' contract contained a provision recognizing that irreparable harm would occur if the payment was not made and the failure to make the payment also frustrated a key provision in the parties' contract governing how their entity would be operated.  That was enough to get the injunction.

Court Of Chancery Enjoins Loan Restructuring

Trilogy Portfolio Company Inc. v. Brookfield Real Estate Financial Partners LLC,  C.A. 7161-VCP (January 13, 2012)

This decision is an example of the growing Court of Chancery litigation over enforcement of loan agreements.  The court reviewed the recent deicisions over when to issue an injunction or instead leave the parties to a damages remedy.  Here the decision is affected by the procedural stance of the litigation because the burden the plaintiff must bear is somewhat less at the TRO stage and the decision fully explains how that affected its conclusion to issue an injunction.

Court Of Chancery Enjoins Suit In Another Jurisdiction

ASDC Holdings LLC v. The Richard J. Malouf 2008 All Smiles Grantor Retained Annuity Trust,  C.A. 6562-VCP (September 14, 2011)

Frequently a contract will have a provision selecting Delaware as the forum to litigate any dispute.  What happens then when a case is filed elsewhere and one party seeks to enforce the forum selection clause by an injunction in Delaware against the prosecution of the other litigation?   Well, this decision tells us the result and resolves possible conflicting holdings in other courts including the Delaware Supreme Court.  Briefly:

1. The Court of Chancery will grant the injunction if the forum selection clause properly confers jurisdiction in Delaware courts.  Note that this means that selecting the Court of Chancery may not work if the dispute is not subject to equitable jurisdiction in that court.  Better to select  "any" court with jurisdiction in Delaware over the subject matter of the dispute.

2. The forum selection clause must be broad enough to include any dispute "arising out of" or "related" to the dispute.  A narrower clause may not work.

Court Of Chancery Denies Relief Over Two Week Delay

CNL-AB LLC v. Eastern Property Funds I SPE (MSREF) LLC ,C.A. 6137-VCP (January 28,  2011)

This decision again illustrates how fast a claim may be barred by inaction.  Here two weeks passed after the plaintiff  was on notice of its claim before suit was filed.  Too late the Court said to ask for an injunction.

Court of Chancery Explains When It Will Appoint A Receiver

Pope Investments LLC v. Benda Pharmaceutical Inc. ,C.A. 5171-VCP ( December 15, 2010)

When a Delaware corporation becomes insolvent, it is possible to have the Court of Chancery appoint a receiver to take over its management.  Possible, but not easy as this decision shows.  Assuming that insolvency is proved, a receiver will be appointed when it will serve a "beneficial purpose".  What that translates into is when there is no real alternative to protect creditors effectively.

When it is possible to use the usual methods of enforcing a judgment or there are other, less dramatic remedies available, a receiver is not warranted.  For example, if the plaintiff has the right to appoint directors, then it should use the statutory remedy to force a stockholder meeting and the election of those directors.

Finally, to the extent the plainitff's case is based on what it alleges to be corporate abuses by current management, it needs to first prove those abuses before the court will appoint a receiver. After all, the extent of the abuse has to be determined before the remedy may be crafted.

Behind all this cautionary approach is the natural reluctance of any court to be dragged into the everyday management of a business.  For once a receiver is appointed, the court knows that every dispute over what the receiver does is probably going to end up before the court for resolution.  That is not fun.

Court Of Chancery Enjoins Termination Of Supply Contract

Arkema v The Dow Chemical Company, C.A. 5479-VCP ( May 14, 2010)

When the economy is in stress, contracts to supply materials at a fixed price seem to be broken more often. This decision explains what you have to show to get  a TRO against the breaking of such a contract by the supplier.  In short, it is not easy but can be done when the ability to "cover" is not available.

Court of Chancery Enjoins Violation of Non-Compete

Zrii LLC v. Wellness Acquisition Group, Inc., C.A. 4374-VCP (September 21, 2009).

This is an interesting case because of the limitations on the remedy imposed for violating a non-competition agreement. The decision illustrates the rule that no matter how wrong the conduct, the remedy of an injunction will be limited to stopping the competition for the period provided for in the agreement. Of course, a damage remedy is also available.

Court of Chancery Denies TRO for Laches

Topspin Partners L.P. v. Rocksolid Systems. Inc., C.A. 4275-VCL (Del. Ch. Jan. 21, 2009)

 

This decision illustrates the sometimes forgotten Delaware rule that if you get a TRO you better act fast. Here the plaintiff sat on its rights for ten months and the Court, while finding that irreparable harm might occur and that the claims appeared meritorious, denied immediate relief because of the delay.

 

Court of Chancery Explains When Delay Is Not A Bar

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.

Court of Chancery Enforces Non-Compete Agreement

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.

Court of Chancery Grants Ten Year Injunction

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.

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Court of Chancery Expands Duty To Act in Good Faith

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.

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District Court Enjoins Plaintiff from Initiating Third-Party Proceedings Against Defendants and from Pursuing Global Settlement Strategy in Pending Asbestos Cases

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.

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Court of Chancery Denies Motion For Expedited Preliminary Injunction Hearing For Lack of "Colorable Claim" Demonstrating Imminent Irreparable Harm

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.

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Court of Chancery Grants Expedited Injunction Proceedings In Interested Merger's Disclosure Claim

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.

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Court of Chancery Partially Grants Plaintiffs' Motion For A Preliminary Injunction Enforcing A Non-Competition Agreement

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.

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Court Of Chancery Holds That Contractually Agreed Issues Of Substantive Arbitrability Are For Judicial Resolution

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.

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Court Of Chancery Grants Plaintiff's Rule To Show Cause And Finds Defendant Was Contemnor Despite Wrongful TRO

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.

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District Court Grants Motion to Dismiss Proceeding for Preliminary Injunction

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.

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Court of Chancery Enjoins Consummation Of Purchase Agreement Pending Arbitration

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.

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Court of Chancery Denies Plaintiffs' Motion To Temporarily Enjoin Annual Shareholders' Meeting Or To Amend Proxy Materials

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.

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Court of Chancery Grants Preliminary Injunction Against Majority Stockholder Seeking to Purchase Additional Shares for a Penny Each in an Attempt to Convert Some of its Debt to Equity

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.

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Court of Chancery Denies Request for Permanent Injunction Against Shareholder Seeking to Challenge Merger-After Merger is Consummated

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.

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Court of Chancery Denies Preliminary Injunction to Business Partner Who Alleges Breach of Confidentiality and Misappropriation of Trade Secrets

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.

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Court of Chancery Denies Motion for Temporary Injunction Where Breakup Fee Is Alleged To Be Too High

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

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Court of Chancery Dismisses Attorney General's Claims under the Consumer Fraud Act and the Deceptive Trade Practices Act as Being Time Barred, but Sustains Claim under the Health Spa Regulation

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.

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Federal Court Denies Injunction In Diversity-Based Exclusive Licensing Matter.

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.

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Court Sanctions Counsel Under R.11 & R.37 For Inexcusable Violations

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.

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Court of Chancery Examines Post-Merger Insurance Agreement And Denies Injunction Demanding Notice Under Policies

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.

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Court of Chancery Holds Limitation Act In 10 Del. C. 8111 And Not 8106 Applies For "Other [Work] Benefits"

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.

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Corporation Seeking Injunction, Declaratory Judgment, Specific Enforcement And Contract Damages Prevails In Court of Chancery On Dismissal Motions

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.

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Court of Chancery Denies Unpleaded Prejudgment Interest Request

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.

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