Source: https://www.morrisjames.com/blogs-Delaware-Business-Litigation-Report,archives-2014-10
Timestamp: 2019-04-23 19:52:50+00:00

Document:
Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Showing 17 posts from October 2014.
In re TPC Group Inc. Shareholders Litigation, C.A. 7865-VCN (October 29, 2014) This is the latest in a series of decisions dealing with the claims of plaintiff stockholders for an attorneys' fee based on improved consideration received in a merger after the stockholders filed suit. The argument is that the pendency of the suit contributed to upping the merger price. While the burden of proving there was no connection between the suit and the bump up is on the company, here that burden was met and the fee petition was denied.
In re Crimson Exploration Stockholder Litigation, C.A. 8541-VCP (October 24, 2014) This is an important decision for 2 reasons. First, it collects the prior decisions that determine when a less-than-50% owner is considered a controlling stockholder so as to potentially invoke entire fairness review. Second, it then reviews the prior decisions that hold when a controller is competing with the minority stockholders, even when the controller is not on both sides of the deal. That may occur, for example, when the controller receives special treatment in the transaction.
Mehta v. Smurfit-Stone Container Corporation, C.A. 6891-VCL (October 20, 2014) This decision explains the rights of a dissenting stockholder who demands appraisal and then withdraws that demand. She is entitled to damages if she does not then receive the merger consideration.
In re KKR Financial Holdings LLC Shareholder Litigation, C.A. 9210-CB (October 14, 2014) This important decision addresses two tricky questions of Delaware corporate law. First, it clarifies that the informed vote of a majority of the disinterested stockholders will invoke the business judgment rule when there is no controlling stockholder pushing the transaction. Second, it makes it clear that stockholder approval may ratify director actions even when the stockholder vote is not required to implement that action. The decision carefully reviews prior cases in reaching these conclusions and for that reason alone is worth a reading.
In re Rural/Metro Corporation Stockholders Litigation, C.A. 6350-VCL (October 10, 2014) In a precedent-setting opinion, the Court of Chancery has allocated damages among some directors and one of their advisers in a breach of fiduciary duty case. This decision has big implications on how breach of duty cases are tried in the Court of Chancery. First, the Court held that a contribution claim by one defendant against other defendants requires joint liability, not just joint culpability. Hence, if some directors are exculpated by a Section 102(b)(7) clause, they cannot be held to contribute to a damages award even if they are negligent. Conversely, if they violated their duty of loyalty (a claim outside of 102(b)(7) protection), they may be held liable to contribute. Second, the Court held that an unclean hands defense may also bar a contribution claim under the right circumstances. While there are many other aspects of this decision that warrant close reading, it will affect most directly how defenses line up in cases going to trial.
Black Horse Capital LP v. Xstelos Holdings, Inc., C.A. 8642-VCP (September 30, 2014) This decision is yet another example of the difficulty in recovering under almost any legal theory, except breach of contract, when there is a detailed contract that was designed to exclude other oral agreements. Not only will claims of a side oral agreement be rejected, but so too will theories like unjust enrichment that are pled to get around the problem that the plaintiff is not satisfied with the deal made in the writing that the parties signed.
Wolst v. Monster Beverage Corporation, C.A. 9154-VCN (October 3, 2014) Normally a books and records case will not be dismissed on the basis that the claim sought to be investigated is subject to some affirmative defense. That defense is for another day if the claim is ever filed. However, when that claim is clearly subject to a limitations defense, then investigation of it may be too burdensome to permit, as was the case here. Note, however, that the underlying claim involved in this case had been investigated before and that influenced the decision.
Stanley Black & Decker Inc. v. Gulian, C.A. 12-1342-LPS (D.Del. September 30, 2014) Stating a securities law claim is difficult under the standards set by the Dura and McCabe decisions and the PSLRA. This decision explains how to do it in a clear and concise way.
Quadrant Structured Products Company Ltd. v. Vertin, C.A. 6990-VCL (October 1, 2014) This is an important decision because it outlines the rights of creditors of an insolvent corporation to file a derivative suit for breaches of fiduciary duty, it holds that the creditors do not need to meet the continuous ownership rule that limits which stockholders may file such suits, and it implies that the demand requirements of Rule 23.1 must be met by a creditor plaintiff. Also interesting is the holding that director decisions that do not directly benefit them or their controller are subject to the business judgment rule, even in the context of an insolvent entity. Creditors had sought to impose a rule of law giving them a preference for their interests in such situations, but they did not get it here.
ev3 Inc v. Lesh, No. 515, 2013 (Del. September 30, 2014) Delaware law favors a strict interpretation of contract language. Here, the Supreme Court rejected an attempt to read into a contract provisions from a letter of intent signed before the final contract was executed. The final contract did not provide by its literal terms such an interpretation and the Supreme Court would not have any of the plaintiff's attempts to read it otherwise.
Oklahoma Firefighters Pension & Retirement System v. Citigroup Inc., C.A. 9587-ML (September 30, 2014) This decision explains when wrongful conduct at a subsidiary is sufficient to warrant inspection of the parent's records to determine if the parent has violated any Caremark duties. At least when there is some basis to infer that the parent had oversight responsibility for the subsidiaries activities in question the very low standard for granting inspection is satisfied.
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