The complaint was filed under seal.  The matter has been retained by Chancellor Chandler.   

The WSJ Law Blog has coverage here.  And, The NY Times reports here.   

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.   

This is a case of bylaws gone bad. While the obvious intent of the company's advance notice bylaw was to obtain notice of what directors a dissident slate might want to nominate, the language of the bylaws was fatally deficient. Thus, this decision gives a good drafting lesson .

The bylaw required advanced notice of an intent to bring a matter before the annual meeting. However, the bylaw made an exception for any matter the company itself had noticed for the meeting. When the company, as always, noticed the meeting would include the election of directors, the court held that included the nomination of directors as part of the matters to be considered. Thus, the court held that the intent to nominate a dissident slate need not be noticed again by the dissidents in accordance with the advance notice bylaw provisions.

The way to avoid this mistake is to make it clear in the bylaws that the intent to nominate a slate different than that proposed by the company is subject to a reasonable advance notice provision in the bylaws. In short, state the rules of the game clearly.

Attorneys who cause a benefit for stockholders are entitled to be awarded. However, the benefit must be caused by the litigation they filed and not just happen to follow the institution of litigation. This gets tricky to determine sometimes as the plaintiff's attorneys insert themselves into the process of negotiating a higher merger price and then claim credit for it. Who gets that credit is the question.

That issue will be decided based on a record that includes the views of the participants in the merger discussions. Hence, that needs to be kept in mind and the record made at the time the events occur. 

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.

The plaintiffs argued that the merger agreement contained an exclusive forum selection clause, which stated that any action “based on any matter arising out of or in connection with” the agreement shall be brought in Delaware.  The plaintiffs also argued that the dispute raised numerous novel and substantial issues of Delaware corporate law, particularly that “the proposed transactions include perhaps the most extreme combination of deal protections approved by a board of directors of a public Delaware corporation ever considered by this Court.”  The plaintiffs added that Delaware has the authority to regulate the internal affairs of its corporations and that the Court of Chancery is uniquely positioned as the regular arbiter of corporate law disputes. 

The Court held that the claims in the complaint only required the application of well-settled principles of Delaware law to admittedly unique facts.  Further, the Court noted that the extraordinary situation that the case presents is unlikely to recur and thus Delaware’s interest in having this case heard in its courts is somewhat relaxed.  The Court distinguished Topps and Ryan v. Gifford, where the Court declined to stay Delaware actions involving novel issues having widespread application in favor of similar litigation in another state.      

The Court’s driving concern in reaching its decision appears to be the stability of the financial markets and national economy, a concern that was clearly shared by the Federal Reserve when it got involved in the deal.  In determining that the fourth factor weighed in favor of a stay, the Court noted the risk of harm that competing litigations would create in this delicate matter.  On the sixth factor, the Court found that the practical considerations included “the risk that inconsistent rulings would negatively impact not only the parties involved, but also the U.S. financial markets and the national economy” and “the involvement of unusual third party players, including, inter alia, the Federal Reserve Bank and the Department of Treasury.”  Such considerations made this a rare case warranting a stay.

This one line from the decision sums it up: “What is paramount is that this Court not contribute to a situation that might cause harm to a number of affected constituencies, including U.S. taxpayers and citizens, by creating the risk of greater uncertainty.”   

In this case of first impression, the Court of Chancery held that a corporation had a duty to a warrant holder to truthfully answer its inquiries about corporate plans. This is significant because normally there is no fiduciary duty running to warrant holders and no duty to keep them informed. Here, however, finding that when asked about a matter that implicated the warrant holders' financial interest, there was a duty to answer a question truthfully.

In a case of apparent fist impression, a bankruptcy court in Delaware has held that Caremark duties apply to corporate officers as well as directors. Thus, corporate officers also have the duty to exercise reasonable care in oversight of corporate operations in their area of responsibility. This is hardly a surprise. However, given that the officer involved in this case was considered the company's general counsel, this decision has some far-reaching implications.

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 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. 

This decision confirms that for limited liability companies the rule applies from corporate law that a suit for inspection of books and records is a limited case that may not also include other claims such as breach of fiduciary duty.