Source: https://www.morrisjames.com/blogs-Delaware-Business-Litigation-Report,archives-2014-12
Timestamp: 2019-04-20 20:41:19+00:00

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Showing 22 posts from December 2014.
Court Of Chancery Awards Fees To A "Bad Guy"
Holley v. Nipro Diagnostics Inc., C.A. 9679-VCP (December 23, 2014) It is often thought that if a former director is convicted of wrongdoing there is no need to indemnify her for defense fees. That simplistic view overlooks what may be a reimbursement right the company's bylaws adopted when all were friendly. But as this decision points out, there may be a right to fees incurred in a partially successful defense and, even worse, a right to fees for fees incurred to establish that right. Ignoring that just makes bad situation worse.
United Technologies Corp. v. Treppel, No. 127, 2014 (December 23, 2014) This decision holds that in granting inspection of a company's records, the Court of Chancery may limit the use of those records to litigation in Delaware. The factors that guide the Court's discretion are spelled out in a non-exclusive way.
Morris James LLP is pleased to announce that seven of its partners have been recognized as top local litigation attorneys in Delaware by Benchmark Litigation 2015: the definitive guide to America’s leading litigation firms and attorneys. The attorneys recognized are: P. Clarkson Collins, Jr. – Local Litigation Star Richard Galperin – Local Litigation Star Richard K. Herrmann – Local Litigation Star Peter B. Ladig – Local Litigation Star, Plaintiff Lewis H. Lazarus – Local Litigation Star Edward M. McNally – Local Litigation Star Benchmark Litigation culminates their results from a six-month long extensive research period where they interview leading litigators and law firms. Along with peer-review testimony, recent casework is also reviewed. Firms cannot pay to be recommended for the guide; instead, they must be recommended by the nation’s leading private practice lawyers and in-house counsel.
2009 Caiola Family Trust v. PWA LLC, C.A. 8028-VCP (December 18, 2014) This decision is interesting because it upholds the Court of Chancery's jurisdiction over a non-resident who, through a non-Delaware entity, manages a Delaware LLC. Thus, simply putting a non-resident entity between you and the Delaware entity will not always shield you from Delaware's jurisdiction.
C & J Energy Services Inc. v. City of Miami General Employees' And Sanitation Employees' Retirement Trust, Nos. 655 /657, 2014 (December 19, 2014) In this important decision, the Delaware Supreme Court clarifies that: (1) Revlon does not require an auction before a company is sold, (2) a reasonable sale process is all that is required, not a perfect one, and (3) the standard to enjoin a merger is particularly high when a mandatory injunction is sought that affects third party rights. In a sense, this decision is a companion to the MFW decision that applied a business judgment standard of review to a merger approved by a fully informed and independent SLC and a majority of the disinterested stockholders. Delaware M&A law is rapidly evolving with these decisions.
In Re Family Dollar Stockholder Litigation, C.A. 9985-CB (December 19, 2014) On the same day that the Delaware Supreme Court clarified what Revlon requires, the Court of Chancery's new Chancellor also applied the same standard to deny an injunction under the Revlon principles. This illustrates the respect the Court gives to disinterested Board decisions, even under a heightened scrutiny test.
AB Value Partners LP v. Kreisler Manufacturing Corporation, C.A. 10434-VCP (December 16, 2014) Advance notice bylaws are valid under Delaware law. However, their application may be enjoined in rare circumstances when the Board of Directors has "radically" changed the playing field after the time to give notice of a competing slate. This decision gives examples of when that has occurred and more often, when it has not occurred. The burden to get relief a is high one and is not met by just a change in circumstances not caused by the incumbent Board.
Zutrau v. Jansing, C.A. 7457-VCP (December 8, 2014) This may well be the definitive decision on when and for how much an attorney may have a so-called charging lien on a client's recovery in order to get paid.
Mennen v. Wilmington Trust Co., C.A. 8432-ML (December 8, 2014) Trust documents frequently provide that the trustee is not liable for any mistakes made in good faith. This decision examines how far that exculpation goes with respect to some very bad investment decisions. Not far enough in this case. It also shows that untruthful testimony, besides being just plain wrong, also has a way of really hurting that witness's case.
In Re Appraisal Of Dole Food Company, Inc., C.A. 9079-VCL (December 9, 2014) Appraisal actions are often described as a battle of experts. However, as this decision illustrates, that does not mean that a plaintiff is not subject to discovery, particularly over what he thinks is the value of the company. This is becoming more common as parties buy stock after a merger is announced in an attempt to arbitrage appraisal rights. The liberal rules of discovery apply to all, even the plaintiff who knew nothing until he decided to buy stock.
In Re Zhongpin Inc. Stockholders Litigation, C.A. 7393-VCN (November 26, 2014) To obtain business judgment review for a transaction with a controlling stockholder, the M&F Worldwide decision requires an independent committee and a majority-of-the-minority stockholder vote. This decision holds that those provisions must be part of the deal from the outset and adding a stockholder vote by the minority after the merger deal is signed comes too late to invoke the Worldwide case. The decision is also useful in explaining when even a 17% stockholder may be a controller because of his power over the entity.
In re Comverge Inc. Shareholder Litigation, C.A. 7368-VCP (November 25, 2014) Numerous Delaware decisions have upheld deal protection provisions in merger agreements. But, as this decision shows, it is still possible to go too far. When a combination of a termination fee, an expense reimbursement provision, and a convertible note amount to a 13% fee for ending the deal, that is too much protection and unfairly discourages a competing bid. The decision is also very good at explaining when a buyer may be charged with aiding and abetting liability. Just being a hard negotiator is not enough.
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I LLLP, C.A. 7906-VCG (November 26, 2014) This is an interesting decision because it explains the pleading rules for a fraud claim and how such a claim relates to other possible causes of action such as unjust enrichment.
Cigna Health And Life Insurance Company v. Audax Health Solutions Inc., C.A. 9405-VCP (November 26, 2014) Escrow provisions are common in merger deals, particularly those involving private equity. Here, however, the parties went a different route and tried to require the selling stockholders to agree to indemnify the buyer for various possible events. The Court stressed that its opinion was limited to invalidating such arrangements when the indemnification was unlimited in time and scope. The opinion also invalidates the use of a clawback provision in a transmittal letter used to obtain the merger consideration when tendering the stock bought in the merger.

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