Source: https://www.morrisjames.com/blogs-Delaware-Business-Litigation-Report,archives-2006
Timestamp: 2019-04-23 19:53:30+00:00

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Showing 179 posts from 2006.
Effective January 1, 2007, there will be some significant rule changes in the Delaware Court of Chancery. Some of these changes will affect pending actions and are required reading. The most extensive changes are directed at preventing the kick-back abuses that have occurred in other jurisdictions where lawyers have allegedly paid professional plaintiffs to bring class and derivative suits. These changes may be briefly summarized as follows.
First, all complaints must now be "verified". In other words, the plaintiff must swear or affirm that the facts alleged are true or at least that there is a basis to believe they are true.
Second, in class and derivative suits, the plaintiff must file an affidavit stating he will not receive any payment for acting as a representative party, except for damages or fees and costs awarded by the Court. In effect, this means that the plaintiff may not receive any compensation for acting as a plaintiff unless the Court approves that payment. A similar affidavit must be filed when any settlement is presented for approval by the Court.
Third, in pending actions, the "no-kick-back" affidavit must be filed when any person asks to intervene as a representative party or asks to be appointed as a representative party.
There are some other more minor changes to the rules as well.
In Re William Lyon Homes Shareholders Litigation, C.A. No. 2015-N (Del. Ch. December 21, 2006).
When there are two competing class or derivative actions, there may arise a conflict between them. This is particularly so when one is settled and the settlement will affect the right to proceed in the other litigation. That conflict may generate a fight among plaintiff's counsel over the fees to be awarded by the Court in the settlement. That is what occurred here.
Such fee split cases are governed by the rules set out in In re Infinity Broad. Corp. Shareholders Litigation, 802 A2d 285 (Del. 2002). In effect, this requires the Court to allocate the fees among the claimants based on the Court's views of their respective contributions to the settlement.
The plaintiff in a related California case that sought some of the fees to be awarded ended up with nothing for failure to justify their claim.
On December 21, 2007, the Delaware Supreme Court reversed, in part, the Court of Chancery decision. The Supreme Court held that there was enough in the record to support a presumption that the plainitff in the California case had contributed to a price rise that benefited the class and remanded for further proceedings .
ATR-Kim Eng Financial Corp. v. Araneta, C.A. No. 489-N (Del. Ch. December 21, 2006).
Commentators sometimes wonder when director inattention will ever be so bad so as to warrant finding directors liable in the absence of self-dealing. This was just such a case. Briefly, the board consisted of a majority owner who picked a relative and an employee to constitute the other members of the board of directors. The Court concluded that the two non-controlling directors basically did nothing to carry out their duties to the entity and just accepted at face value everything they were told by the controlling stockholder. As a result, the Court found all the directors liable when the controlling stockholder looted the entity.
B.F. Rich Co., Inc. v. Gray, C.A. No. 1896-N (Del. Ch. December 15, 2006).
Union Oil Company of California v. Mobil Pipeline Company, C.A. No. 19395-N (Del. Ch. December 15, 2006).
In this fact intensive decision the Court of Chancery reviewed the Delaware law on contract construction and remedies. It upheld the general rule that the unilateral mistake of one party to a contract that is not known by the other party will not justify the cancellation of the contract on the basis of that mistake.
Tropical Nursing, Inc. v. Accord Health Serv., Inc., 2006 WL 3604783 (Del.Super. Ct. Dec. 7, 2006).
Tropical Nursing, Inc. v. Ingleside Homes, Inc., 2006 WL 3579075 (Del. Super. Ct. Dec. 11, 2006).
Edix Media Group Inc. v. Mahani, C.A. No. 2186-N (Del. Ch. December 12, 2006).
This decision is noteworthy for its careful analysis of what relief is appropriate for a breach of an agreement not to compete. The Court distinguished between the broader duties owed by employees from those more limited duties owed by independent contractors. The relief awarded was the product of a very specific analysis that tailored that relief to the harm proved to have been inflicted.
Remote Solutions Co., Ltd. v. FGH Liquidating Corp., Civil Action No. 06-004-KAJ, 2006 WL 3498657 (D. Del. Dec. 5, 2006).
Plaintiff filed a Motion for Reconsideration and to Amend the Court’s earlier Memorandum Order in which it denied the plaintiff’s motion to vacate or modify an arbitration award for failing to demonstrate a proper basis for subject matter jurisdiction. The plaintiff now sought to have the Court amend its order so it could cure the jurisdictional defect. The Court granted the motion to the extent that the plaintiff could renew its prior motion to vacate or modify the arbitration award by demonstrating proper subject matter jurisdiction.
The Court also permitted the motion to relate back to the date of the original filing. It further permitted the defendant to move independently for confirmation of the arbitration award regardless of the course of action chosen by plaintiff.
State of Delaware v. Philip Morris USA, Inc. C.A. No. 2088-N (December 12, 2006).
By this decision Delaware joins the vast majority of other states in ordering arbitration over the disputes arising out of the State's agreement with tobacco companies.
Shamrock Activist Value Fund LP v. iPass Inc., C.A. No. 2462-N (Del. Ch. December 12, 2006).
When seeking to inspect corporate records, the stockholder needs to have a reasonable purpose for doing so. If the stated purpose is to investigate wrongdoing, there must be a real basis to suspect wrongdoing or the demand will be denied. Here the demand was at least partially deficient because allegations of improper conduct seemed to be little more than that the company had not met its predicted financial results. The plaintiff escaped dismissal of its suit on narrow grounds that there were also allegations of a failure to carry out a plan that was more definite than just a prediction, something closer to a promise that was broken.
Cantor v. Perelman, Civil Action No. 97-586-KAJ, 2006 WL 3462596 (D. Del. Nov. 30, 2006).
Plaintiff and defendants filed motions to exclude the testimony and reports of several experts. The Court granted the motions to exclude the entire proposed testimony of one expert from both parties. The motions were denied with respect to all other experts in all other respects.
This action originates from a plan of reorganization in bankruptcy litigation involving Marvel Entertainment Group, Inc. (“Marvel”) and the Trustees of the MAFCO Litigation Trust (“Trust”) created as part of the Reorganization Plan. The Trust was created to pursue breach of fiduciary duty and unjust enrichment claims against defendants comprising Perelman, a controlling stockholder and chairman of Marvel, and other directors of the Marvel companies. The instant opinion is connected to the issue of three tranches of notes (“Notes”) issued in 1993 and 1994 by Marvel, raising $553.5 million by using Marvel stock as collateral. Plaintiffs alleged that the defendants breached their fiduciary duties by using Marvel resources to sell the Notes and including restrictions on the issue of debt or dilution of Perelman’s shareholding in those Notes.
Majkowski v. American Imaging Management Services LLC, C.A. No. 1797-N (Del. Ch. December 6, 2006).

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