Source: https://www.morrisjames.com/blogs-Delaware-Business-Litigation-Report
Timestamp: 2019-04-23 02:13:09+00:00

Document:
Verition Partners Master Fund, Ltd. v. Aruba Networks, Inc., No. 368, 2018 (Del. Apr. 17, 2019).
Almond v. Glenhill Advisors LLC, C.A. No. 10477-CB (Del. Ch. Apr. 10, 2019).
Under the “corporate benefit doctrine,” litigants whose efforts result in a substantial benefit to a Delaware corporation or its stockholders generally are entitled to an award of their attorneys’ fees and expenses. This opinion emphasizes that the doctrine is a flexible one based on the Court of Chancery’s prerogative to do equity in each case.
Here, the Court considers and denies a fee application by stockholder-plaintiffs who challenged a defective short-form merger. The basis for the plaintiffs’ claims included technical errors in the language of certain corporate instruments that resulted in a reverse stock split with a ratio much larger than intended (2,500 to 1, rather than 50 to 1). That, in turn, resulted in the merger receiving less than the required stockholder approval. When the corporation attempted to ratify the defective corporate acts under Section 204 of the DGCL and sought judicial validation under Section 205, the plaintiffs opposed it. Plaintiffs ultimately lost on the issue at trial. Although the end-result—removing a cloud over the merger’s validity—could be considered a “benefit” resulting from the plaintiffs’ litigation efforts, the Court denied their subsequent fee application. According to the Court, in particular, it would be inequitable to reward plaintiffs for conferring a benefit they opposed.
McElrath v. Kalanick, C.A. No. 2017-0888-SG (Del. Ch. Apr. 1, 2019).
This derivative action arose out of Uber’s acquisition of a self-driving vehicle firm named Otto, which involved former Google employees. Google sued Otto and Uber for alleged intellectual property infringement, resulting in Uber settling the dispute for $245 million. The plaintiff sued Uber’s directors for the acquisition, claiming they should have known better than to rely on their CEO’s promotions of the deal and his representations regarding the company’s due diligence findings under the circumstances.
CelestialRX Investments, LLC v. Krivulka, C.A. No. 11733-VCG (Del. Ch. Mar. 27, 2019).
Section 109 of the Delaware Limited Liability Company Act is an “implied consent” statute. It provides for personal jurisdiction in Delaware over (i) “managers” named in the governing LLC agreement, and (ii) persons who otherwise “participate materially” in the LLC’s management. 6 Del. C. § 18-109(a). This recent decision is notable for holding that, based on the allegations, certain officers who performed important tasks for the LLC did not “participate materially” in its management for Section 109 purposes. The Court pointed to precedent holding that “material participation” for Section 109 purposes requires actual control or a decision making role. Here, one defendant was alleged to be a former manager who retained a “vice chairman” title and engaged a financial advisor on the LLC’s behalf. The other defendant at-issue served as the company’s President and CEO and had important day-to-day responsibilities. Such allegations fell short, however, in the circumstances alleged, where the plaintiffs’ complaint and arguments emphasized that, another defendant, who was designated as the “manager” in the governing LLC agreement, exercised “absolute control and discretion” and acted as “emperor, supreme leader and dictator for life.” The Court reasoned such contentions precluded a finding that the two officers possessed decision making authority of their own. Accordingly, they were not subject to personal jurisdiction under Section 109.
Sun Life Assurance Co. of Can. – U.S. Ops. Hldgs., Inc. v. Grp. One Thousand One, LLC, f/k/a Del. Life Hldgs., LLC, C.A. No. N18C-07-173 (AML) (CCLD) (Del. Super. Mar. 29, 2019).
In re Pilgrim’s Pride Corp. Derivative Litigation, Consol. C.A. No. 2018-0058-JTL (Del. Ch. Mar. 15, 2019).
Plaze, Inc. v. Callas, C.A. No. 2018-0721-TMR (Del. Ch. Feb. 28, 2019).
Delaware courts generally respect and enforce forum selection provisions in contracts. It is often disputed whether or not certain contracting parties or parties related to contracting parties are subject to such provisions. That fight becomes more complicated when it is not a single contract but multiple related contracts at issue. This decision, dealing with a stock purchase agreement and related production facility leases, wades into these sometimes choppy waters. It addresses several doctrines in this area, including how Delaware courts interpret forum selection provisions, when Delaware courts read related contemporaneous agreements as a single agreement, when Delaware courts apply equitable estoppel in the context of forum selection provisions, and when non-signatories can enforce forum selection provisions against signatories.

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