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05/26/20

[UPDATED] Preston Hollow – Interference with Business Relations

The Delaware Court of Chancery, in Preston Hollow Capital, LLC v. Nuveen, LLC, et al., C.A. No. 2019-0169-SG, memo. op. (Del. Ch. Apr. 9, 2020), finds plaintiff company demonstrated that defendant, a competitor, intentional interfered with plaintiff’s business relations by threatening to refrain from doing business from plaintiff’s customers, but its demonstration of past harm did not support entry of permanent injunctive relief.

NEW:  Morris James discusses the decision in Chancery Finds Tortious Interference By Financial Industry Competitor and Addresses the Requirements for Obtaining Permanent Injunctive Relief.

Frank Reynolds discusses the decision in Chancery Court finds muni bond giant Nuveen used size, “lies” and pressure to squash small rival.

$$$ Law360 discusses the decision in Preston Hollow Gets No Relief For Nuveen’s ‘Lies’.

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[UPDATED] Braidy – Voting Agreement

The Delaware Supreme Court, in Craig T. Bouchard v. Braidy Industries, Inc., et al., C.A. No. 2020-0097-KSJM, memo. op. (Del. Ch. Apr. 28, 2020), found that the propriety of directors’ purported increase in authorized stock, stock split, expansion of the board, and appointment of themselves to the board as their own designees — rather than a controlling stockholder’s designees — based on rights of appointment obtained due to their increased stock ownership under a Voting Agreement required further fact development.

NEW:  K&L Gates discusses the decision in Court of Chancery Decides Motions to Dismiss, Motion for Summary Judgment, and Motion for Judgment on the Pleadings When Plaintiff Sues Stockholders and Directors of the Company He Founded.

$$$ Law360 discusses the decision in Chancery Wants More Details On Aluminum Firm Board Fight.

[UPDATED] Harpoon Therapeutics – Fraudulent Inducement

The Delaware Court of Chancery, in Maverick Therapeutics, Inc., et al. v. Harpoon Therapeutics, Inc., C.A. No. 2019-0002-SG, memo. op. (Del. Ch. Apr. 3, 2020), found that a party to a collaboration agreement with an entity spun off from defendant company demonstrated that defendant fraudulently induced the collaborator to invest in and collaborate with the spun-off entity based on a broad, exclusive transfer of technology to the spun-off entity, even though the agreement transferring technology from defendant to the spun-off entity, to which the collaborator was not a party, unambiguously covered a narrow field of technology.

NEW:  Morris James discusses the decision in Delaware Corporate and Commercial Case Law 2019 Year in Review: Significant Decisions of the Delaware Supreme Court and the Delaware Court of Chancery.

$$$ Law360 discusses the decision in Chancery Finds Fraud In Cancer Drug Firm’s Spinoff Deal.

05/22/20

[UPDATED] Blue Apron – Federal Forum Selection

The Delaware Delaware Supreme Court, in Matthew B. Salzberg, et al. and Blue Apron Holdings, Inc., et al. v. Matthew Sciabacucchi, No. 346, 2019, opinion (Del. Mar. 18, 2020; rev. Apr. 14, 2020), reversed the Court of Chancery’s ruling that corporate charter provisions requiring that securities claims under securities claims under the Securities Act of 1933 be asserted only in federal court are invalid, concluding that such provisions are valid under Delaware law.

NEW:  Faegre Drinker discusses the decision in Delaware Supreme Court Upholds Validity of Exclusive Federal Forum Provisions.

Skadden Arps discusses the decision in Delaware Supreme Court Upholds Validity of Provisions Designating Federal Courts as Exclusive Forum of 1933 Act Claims.

Wilmer Hale discuss the decision in Open Questions After the Landmark Decision in ‘Salzberg.

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[UPDATED] Fiduciary Duties Owed Creditors

NEW:  Robinson & Cole discusses fiduciary duties owed and standards of review applied when companies are insolvent or in the zone of insolvency in Financially Distressed Businesses: Revisiting the Business Judgment Rule and the Entire Fairness Doctrine.

Keith Bishop discusses fiduciary duties owed creditors under California law in Directorial Duties To Creditors – Getting To The Bottom Of The California Trust Fund Theory

Wachtell, noting the potential for financial challenges such as liquidity shortages, debt defaults, and revenue declines in the current economic environment, discussed duties that directors owe creditors under Delaware law in Fiduciary Duties in Times of Financial Distress.

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[UPDATED] ESG

NEW:  Is Stakeholderism Bad for Stakeholders? responds to recent academic arguments that corporate focus on stakeholder interests will harm stakeholders and that shareholder value maximization remains the proper purpose of the corporation, asserting that objections are not inherently harmful to stakeholders, and depend on proper implementation of stakeholder-oriented reforms.

How Corporate and Securities Laws Affect Social Responsibility and Corporate Purpose discusses the role of state corporate law and federal securities regulation in promoting the role of corporates social responsibility and environmental, social, and governance concerns, and advocates for ways in which the law can better accommodate corporate promotion of such concerns.

UCLA’s Professor Stephen Bainbridge discusses research in Environmental & Social Voting at Index Funds, which supports the conclusion that passively managed index funds, despite touting commitments to Environmental, Social, and Governance objectives, do not meaningfully participate in ESG activism in ESG Voting by Index Funds.

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05/21/20

[UPDATED] ODN Holding – Redemption Rights

The Delaware Court of Chancery, in The Frederick Hsu Living Trust v. Oak Hill Capital Partners III, LP, et al. and ODN Holding Corp., C.A. No. 12108-VCL, memo. op. (Del. Ch. May 4, 2020), found a controlling stockholder engaged in unfair dealing by causing a company to accumulate cash to satisfy its redemption rights, but that its actions were entirely fair because market conditions made other deployment of cash likely useless.

NEW:  $$$ Law360 discusses the decision in Revisiting The Benefits Of An Efficient Contract Breach.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Finds Controlling Investor’s Cash-Accumulation Strategy in Advance of Preferred Stock Redemption Payments Satisfied Entire Fairness.

Stinson discusses the decision in Private Equity Firm Proves Strategy was Entirely Fair.

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Efficient Breach

Sidley discusses the theory of efficient breach as a means of avoiding contractual obligations, citing instructive Delaware case law, in Revisiting The Benefits Of An Efficient Contract Breach.

[UPDATED] M&A Litigation

NEW:  Gibson Dunn provides a chart showing common M&A fact patterns and the standard of review likely to apply in such situations under Delaware law in Determining the Likely Standard of Review Applicable to Board Decisions in Delaware M&A Transactions.

White & Williams – M&A Litigation Rising Amidst COVID-19 Uncertainty: Considerations for Litigators and Deal-Makers.

Paul Weiss discusses recent decisions of the Delaware Court of Chancery addressing claims regarding M&As in Delaware M&A Quarterly.

05/20/20

[UPDATED] McCleary – Duty of Care

The Delaware Court of Chancery, in Buckley Family Trust v. Charles Patrick McCleary, et al. and McCleary, Inc., C.A. No. 2018-0903-AGB, memo. op. (Del. Ch. Mar. 31, 2020), dismissed stockholder plaintiff’s “oppressive abuse of discretion” claim for refusal to declare dividends, where directors were not exculpated for breaches of the duty of care under 8 Del. C. § 102(b)(7), where plaintiff failed to allege directors acted coercively or out of self-interest.

NEW:  K&L Gates discusses the decision in Court of Chancery Defers to Board of Director’s Business Judgment in Response to Stockholder’s Dividend Demand.

Morris James discusses the decision in Chancery Dismisses Claims Seeking to Compel a Dividend Declaration and for Breach of the Duty of Care.

05/19/20

[UPDATED] Teucrium – Books & Records

The Court of Chancery, in Dale Riker v. Teucrium Trading, LLC, C.A. No. 2019-0314-AGB, memo. op. (Del. Ch. May 12, 2020), ordered limited inspection of the company’s projections for the coming year for plaintiff’s purpose of valuing his interest, finding audited financials already available to plaintiff provided all other information needed for valuation, and finding plaintiff failed to show a credible basis to suspect wrongdoing as a basis to inspect books and records.

NEW:  Francis Pileggi discusses the decision in Books-and-Records Cases: The Fainthearted Need Not Apply.

$$$ Law360 discusses the decision in Ag Fund’s Ex-CEO Loses Most Of Document Bid In Chancery.

[UPDATED] Kandi – Books & Records

The Delaware Court of Chancery, in William Hughes, Jr. v. Xiaoming Hu, et al. and Kandi Technologies Group, Inc., C.A. No. 2019-0112-JTL, memo. op. (Del. Ch. Apr. 27, 2020), denied defendants’ motion to dismiss derivative claims for failure to make demand, finding directors face a likelihood of Caremark liability for failure to implement financial controls, based on books and records absent from a purportedly complete 8 Del. C. § 220 production.

NEW:  Wachtell discusses the decision in Citing Thin Board Record, Delaware Court of Chancery Again Sustains Oversight Claim.

Cooley discusses the decision in Another Caremark claim survives dismissal.

D&O Diary’s Kevin LaCroix discusses the decision in Another Delaware Breach of the Duty of Oversight Case Survives Dismissal Motion

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05/18/20

[UPDATED] Paraflon – Books & Records Demand

The Delaware Court of Chancery, in Paraflon Investments, Ltd. v. Linkable Networks, Inc., C.A. No. 2017-0611-JRS, memo. op. (Del. Ch. Apr. 3, 2020), found plaintiff was not entitled to inspection of books and records not requested in its demand letter.

NEW:  Morris James discusses the decision in In a Books and Records Action, Court Critiques Defendant’s Motion to Dismiss, and Declines to Order Inspection of Documents Not Requested in the Plaintiff’s Demand.

K&L Gates discusses the decision in Plaintiff Entitled to Inspect Additional Documents Where Proper Purpose Demonstrated as to Mismanagement and Wrongdoing.

Francis Pileggi discusses the decision in Chancery Grants Section 220 Request Post-Trial.

UIP – Entirely Fair Transaction

The Delaware Court of Chancery, in Marion Coster v. UIP Companies, Inc., et al., C.A. No. 2018-0440-KSJM (consol.), memo. op. (Del. Ch. Jan. 28, 2020), found the sale of unissued stock to one director on a three-member board, which resulted in breaking deadlock underlying a pending action for appointment of a custodian, was subject to entire fairness, and found the sale to have been entirely fair.

K&L Gates discusses the decision in Court of Chancery Applies Entire Fairness Standard to Stock Sale Approved By Interested Board of Directors.

[UPDATED] Wanu Water – Board Communication with Stockholders

The Delaware Court of Chancery, in Todd O’Gara, et al. v. Sheldon Coleman, et al. [Wanu Water], C.A. No. 2018-0708-KSJM, memo. op. (Del. Ch. Feb. 14, 2020), dismissed breach of fiduciary duty claims alleging that a director acted disloyally based on correspondence between stockholders and the board that was critical of and allegedly disparaged plaintiff controller, finding the correspondence instead reflected concern for the company.

NEW:  K&L Gates discusses the decision in Attempt to Seize Control of a Beverage Company?  Court of Chancery Finds Insufficient Evidence of Civil Conspiracy.

Morris James discusses the decision in Chancery Addresses Civil Conspiracy Elements.

Frank Reynolds discusses the decision in Chancery finds failure to allege conspiracy means dismissal of ex-director and his foreign firms.

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[UPDATED] Inspirion – Superior Offer

The Delaware Court of Chancery, in Acela Investments, LLC, et al. v. Raymond DiFalco, et al. and Inspirion Delivery Sciences, LLC, et al., C.A. No. 2018-0558-AGB, memo. op. (Del. Ch. Apr. 27, 2020), approved the sale of an LLC by a Liquidating Trustee, rejecting an objection that the Trustee improperly rejected a bid for greater consideration, but which carried risk, submitted after a bidding deadline.

NEW:  K&L Gates discusses the decision in Court Holds Trustee Did Not Abuse Discretion In Rejecting Competing Acquisition Proposal For Liquidated Entity’s Assets.

$$$ Law360 discusses the decision in Chancery Backs Trustee In Pharma Sale Despite 11th-Hour Bid.

Allergan – Stockholders’ Representative

The Delaware Court of Chancery, in Fortis Advisors, LLC v. Allergan WC Holding, Inc., C.A. No. 2019-0159-MTZ, letter op. (Del. Ch. May 14, 2020), found that selling stockholders’ representative, in an action seeking payment of an earnout under a Merger Agreement, was not required to provide discovery from the selling stockholders, and such a requirement was contrary to the Agreement’s representative framework.

Francis Pileggi discusses the decision in Chancery Rules on Real-Party-In-Interest Issue.

[UPDATED] Connecture – Equity Rollover

The Delaware Court of Chancery, in Jim Gilbert, et al. v. Ezra Perlman, et al. [Connecture], C.A. No. 2018-0453-SG, memo. op. (Del. Ch. Apr. 29, 2020), finds it not reasonably conceivable that minority stockholder defendants acted with a majority holder as a control group to take a company private based on their agreement to roll over their equity, where majority holder did not give up control to the minority holders to obtain their assistance.

NEW:  Frank Reynolds discusses the decision in Chancery says no controller fiduciary liability for chairman who wasn’t in buyout control group.

Dechert discusses the decision in Delaware Court of Chancery Adopts New Framework for Determining whether to Join Minority Stockholders with a Controlling Stockholder as Part of a Control Group.

Tulane Law’s Professor Ann Lipton discusses the decision in Who’s a Controlling Stockholder: A New Twist.

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05/15/20

[UPDATED] Delaware Courts

The Delaware Court of Chancery issued a March 6, 2020 standing order, Standing Order Concerning COVID-19 Precautionary Measures, order (Del. Ch. Mar. 6, 2020), implementing procedural precautions, particularly the use of telephonic rather than live hearings, to help prevent coronavirus transmission.  On March 11, the Delaware Division of Public Health announced the first case of coronavirus infection in the State, and on March 13, the Delaware Supreme Court issued an Order Declaring a Judicial Emergency, order (Del. Mar. 13, 2020) encouraging telephonic proceedings. The Supreme Court subsequently ordered closure of the State Courthouses to the public effective March 23, and ordered an extension of the closure to June 13, 2020. In re COVID-19 Precautionary Measures, order (Del. May 14, 2020). The Courts have established a designated webpage — The Delaware Judiciary Response to Coronavirus Disease (COVID-19) — to publish the latest developments.

NEW: Skadden reports that Delaware Supreme Court and Court of Chancery are operational and pending corporate litigation has continued with minimal interruption, and discusses the courts’ current status and procedures in Checking In With Delaware Courts Amid the COVID-19 Crisis.

The News Journal discusses the Delaware Supreme Court’s extension of its prior order closing the state’s courthouses to the public in Delaware courts will continue to operate virtually for now.

Law360 discusses the Delaware Court of Chancery’s changes in procedure to continue to handle corporate disputes during the coronavirus pandemic in Del. Chancery Is Uniquely Suited For Coronavirus Response.

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[UPDATED] Poison Pills

NEW:  Mark S. Nelson reports on recent research by the Council of Institutional Investors, examining poison pills adopted in 2020, which finds some pro-shareholder developments but also questions whether implementation of poison pills during the coronavirus pandemic will benefit stockholders in CII report examines the reemergence of the poison pill.

The Return of Poison Pills: A First Look at “Crisis Pills” examines renewed adoption of poison pills during the coronavirus pandemic, noting trends relating to industry and time of adoption.

King & Spalding suggests that a comprehensive, proactive corporate strategy designed to mitigate company-specific risks is superior to traditional defensive measures such as the poison pill in A New Era For Activist Defense: Going Beyond the Relics of the 80s.

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05/14/20

[UPDATED] Chemours – Agreement to Arbitrate

The Delaware Court of Chancery, in The Chemours Co. v. DowDuPont, Inc., et al., C.A. No. 2019-0351-SG, memo. op. (Del. Ch. Mar. 30, 2020), dismissed a spun-off subsidiary’s claims against its former parent’s successor in favor of arbitration, rejecting the subsidiary’s argument that it could not have assented to be bound by the spinoff agreement’s arbitration provisions because it was controlled by its parent.

NEW:  Skadden Arps discusses the decision in Court of Chancery Dismisses Consent and Unconscionability Claims Challenging Contract Between Parent and Wholly Owned Subsidiary.

Morris James discusses the decision in Chemours v. DowDuPont: Chancery Requires Subsidiary to Arbitrate Separation Agreement Dispute with Parent Despite the Subsidiary’s Lack of “Real World” Consent to the Separation Agreement.

Legal Newsline discusses the decision in Arbitration ordered after Chemours split off from DuPont and sued it.

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[UPDATED] Lululemon – Termination for Cause

The Delaware Court of Chancery, in David Shabbouei v. Laurent Potdevin, et al. and Lululemon Athletica, Inc., C.A. No. 2018-0847-JRS, memo. op. (Del. Ch. Apr. 2, 2020), dismisses a stockholder derivative action challenging a board’s decision to allow a company’s CEO to resign and receive severance, rather than terminate him for cause following employee complaints of inappropriate conduct, for failure to plead demand, examining individual directors’ likelihood of liability under a duty of oversight theory despite plaintiff’s insistence that it did not plead a Caremark claim.

NEW:  K&L Gates discusses the decision in Derivative Suit Dismissed For Failing to Plead Demand Futility.

Morris James discusses the decision in The Court of Chancery Dismisses Effort to Plead Around Rule 23 in CEO’s Attempt to Escape Alleged Oversight Failures.

Frank Reynolds discusses the decision in Chancery Court finds charges over lululemon board’s CEO exit pact too thin to pass pre-suit demand.

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[UPDATED] Appraisal

NEW:  Skadden discusses methods of valuation used in recent decisions of the Delaware Court of Chancery in statutory appraisal proceedings in Court of Chancery Continues To Rely on Market-Based Metrics in Appraisal Decisions.

Ben Lucy discusses the Delaware Supreme Court’s treatment of the Efficient Capital Markets Hypothesis and agency cost reductions for purposes of determining fair value under DFC, Dell, and Aruba, in Defining Appraisal Fair Value.

Andrew D. Campbell of Novack & Macey discusses appraisal rights under Illinois law in Illinois Appraisal and Valuation Rights: An Overview.

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