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Case Law

01/29/21 Palisades Growth – Invalidation of Surprise Resolutions

The Delaware Supreme Court, in Alex Bäcker, et al. v. Palisades Growth Capital II, LP [QLess], No. 156, 2020, opinion (Del. Jan. 15, 2021), affirms invalidation of surprise resolutions by which defendant seized board control, concluding that equity may award such relief based on deception of directors with respect to regular board meetings as well as special meetings.

Frank Reynolds discusses the decision in Delaware high court agrees proof of director deception is enough to invalidate “coup”.

01/29/21 MoneyGram – Ineffective Compliance

The Delaware Court of Chancery, in Timothy Richardson v. J. Coley Clark, et al. and MoneyGram International, Inc., C.A. No. 2019-1015-SG, memo. op. (Del. Ch. Dec. 31, 2020), dismissed Caremark claims for failure to plead demand futility where, although director defendants conceivably responded ineffectively to compliance problems, plaintiff did not allege with particularity that they acted in bad faith.

NEW:  Sidley Austin discusses the decision in Caremark Claims: Not Mission Impossible, but Still Risky Business for Plaintiffs.

$$$ Law360 discusses the decision in MoneyGram Dodges Suit Over Money Laundering Compliance.

01/28/21 [UPDATED] AmerisourceBergen – Investigation of Possible Wrongdoing

The Delaware Supreme Court, in AmerisourceBergen Corp. v. Lebanon County Employees’ Retirement Fund, et al., No. 60, 2020, opinion (Del. Dec. 10, 2020), affirmed the Court of Chancery’s interlocutory rulings in Lebanon County Employees’ Retirement Fund, et al. v. AmerisourceBergen Corp., C.A. No. 2019-0527-JTL, memo. op. (Del. Ch. Jan. 13, 2020), that stockholders’ right to inspect books and records for the purpose of investigating possible wrongdoing is not limited to “actionable” wrongdoing and does not require disclosure of intended use of information obtained.

NEW:  Locke Lord discusses the decision in Delaware Supreme Court Rules Stockholders Are Entitled to ‎Books and Records Based on “Investigatory Purpose” Without Stating Objectives of ‎Investigation.

Olshan Frome discusses the decision in Delaware Supreme Court Affirms AmerisourceBergen Ruling that Company Must Produce Documents.

Appraisal Rights Litigation Blog discusses the decision in Del. Supreme Court Weighs In and Affirms Shareholders’ Rights to Access Books and Records.

Sheppard Mullin discusses the decision in Delaware Supreme Court Provides Important Guidance Regarding Section 220 Demands, Rejecting Several Limiting Principles Frequently Offered By Corporations Resisting Stockholder Inspection Demands.

Morris James discusses the decision in Delaware Supreme Court Clarifies When Books and Records Requests to Investigate Wrongdoing or Mismanagement Have a “Proper Purpose”.

Sidley Austin discusses the decision in Sharpening The “Tools At Hand”: Delaware Supreme Court Holds Stockholders May Access Books And Records Without Proof Of An Actionable Future Claim.

Montgomery McCracken discusses the decision in Stockholder Books and Records Actions: Delaware Supreme Court Levels the Playing Field for Stockholders Seeking to Investigate Malfeasance.

Kramer Levin discusses the decision in Delaware Supreme Court Holds That Stockholders Need Ordinarily Only Identify a ‘Credible Basis’ for Possible Wrongdoing, Not ‘Actionable Misconduct,’ to Establish a ‘Proper Purpose’ for a Section 220 Books and Records Demand.

Cleary Gottlieb discusses the decision in Delaware Supreme Court Clarifies Section 220’s “Proper Purpose” Test.

$$$ Morris James discusses the decision in Court Clarifies When Books and Records Requests to Investigate Wrongdoing or Mismanagement Have a ‘Proper Purpose’.

Wilson Sonsini discusses the decision in Delaware Supreme Court Issues Key Decision Addressing Stockholders’ Rights to Access Books and Records Under Section 220 of Delaware General Corporation Law.

Francis Pileggi discusses the decision in Supreme Court Rejects Two Common Defenses to Section 220 Demands.

Shearman & Sterling discusses the decision in Delaware Supreme Court Clarifies That A Section 220 Demand Is Not Necessarily Required To Establish That Suspected Wrongdoing Is “Actionable”.

$$$ Law360 discusses the decision in No Need To Explain Strategy In Doc Demand, Del. Justices Say.

01/28/21 [UPDATED] Rev Worldwide – Forum Selection Clause

The Delaware Court of Chancery, in John J. Mack v. Rev Worldwide, Inc., C.A. No. 2019-0123-MTZ, memo. op. (Del. Ch. Dec. 30, 2020), dismissed claims challenging an amended contract pursuant to a forum selection clause, finding plaintiff’s agreement to be bound by amendments approved by other parties made the amended contract’s forum selection clause enforceable.

NEW:  Morris James discusses the decision in Chancery Analogizes to Bylaw Provisions to Conclude that Noteholder was Bound to Forum Selection Clause in Amended Note.

Francis Pileggi discusses the decision in Conflicting Forum Selection Clauses Addressed.

01/27/21 [UPDATED] GPB – Entity Controller Liability

The Delaware Court of Chancery, in Jeff Lipman, et al. v. GPB Capital Holdings, LLC, et al. and GPB Holdings II, LP, et al., C.A. No. 2020-0054-SG, memo. op. (Del. Ch. Nov. 18, 2020), in a derivative action brought by limited partners on behalf of a limited partnership, found that it would have been futile to make demand on the partnership’s general partner, an LLC, because both the LLC and its individual controller faced a risk of liability for the claims asserted.

NEW:  Morris James discusses the decision in Chancery Excuses Demand Where General Partner and its Controller Faced Substantial Likelihood of Liability.

$$$ Law360 discusses the decision in GPB Capital Mismanagement Suit Survives In Chancery.

01/25/21 [UPDATED] Christopher & Banks – Demand Futility Under Unocal

The Delaware Court of Chancery, in Mark Gottlieb v. Jonathan Duskin, et al. and Christopher & Banks, Corp., C.A. No. 2019-0639-MTZ, letter op. (Del. Ch. Nov. 20, 2020), dismissed derivative breach of fiduciary duty claim challenging directors’ defensive actions, allegedly taken for entrenchment purposes, for failure to plead demand futility, finding that application of enhanced scrutiny under Unocal did not, standing alone, excuse demand.

NEW:  Morris James discusses the decision in Chancery Dismisses Derivative Action for Failure to Plead Demand Futility Despite Unocal Enhanced Scrutiny.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Dismisses Derivative Claims for Failure to Plead Demand Futility Notwithstanding Unocal Enhanced Scrutiny.

01/25/21 [UPDATED] Anbang – Ordinary Course of Business

The Delaware Court of Chancery, in AB Stable VIII, LLC v. MAPS Hotel and Resorts One, LLC, et al., C.A. No. 2020-0310-JTL, memo. op. (Del. Ch. Nov. 30, 2020), found that the seller of multiple hotel properties pursuant to a Sale and Purchase Agreement made extensive changes to its business, including employee layoffs and closures of facilities, in response to the coronavirus pandemic, that constituted failure to comply with a condition under the Agreement that business be “conducted in the ordinary course of business,” and allowed the buyer to terminate the Agreement.

NEW:  Morris James discusses the decision in Chancery Declines to Order Specific Performance of $5.8 Billion Luxury Hotel Deal Scuttled by COVID-19 Changes to Hotel Business Operations.

Quinn Emanuel discusses the decision in Ordinary Course in Extraordinary Times.

Latham & Watkins discusses the decision in Delaware Court Nixes Deal Due to Seller’s Failure to Operate in “Ordinary Course” During COVID-19.

Cooley discusses the decision in Delaware Puts the Conduct of Business Covenant on Center Stage in COVID-Related M&A Dispute.

Fried Frank discusses the decision in First COVID-19 M&A Decision: Target’s Pandemic Responses Breached the Ordinary Course Covenant.

Olshan Frome Wolosky discusses the decision in Delaware Chancery Court Provides Important Guidance on COVID-19’s Impact on a Buyer’s Obligation to Close.

Akin Gump discusses the decision in Delaware Court of Chancery Issues Precedential Decision Addressing the Impact of COVID-19 on M&A Transaction, Finding Violation of Ordinary Course Covenant but No Material Adverse Effect.

Cooley discusses the decision in Delaware Puts the Conduct of Business Covenant on Center Stage in COVID-Related M&A Dispute.

Paul Hastings discusses the decision in Delaware Court of Chancery Concludes Response to COVID-19 Pandemic Breached Ordinary Course Covenant.

Dorsey & Whitney discusses the decision in Chancery Opinion Provides First Delaware Court Guidance on COVID-19’s Impact on MAE Provisions and Ordinary Court Course Covenants.

Mayer Brown discusses the decision in Ordinary Course of Business in the Shadow of the Pandemic: Delaware Court Rules That Measures Resulted in Breach of Covenant.

Wilson Sonsini discusses the decision in Delaware Court of Chancery Addresses Effects of Pandemic on Material Adverse Effect Provision and Ordinary Course Covenants in Busted Deal Case.

Jones Day discusses the decision in Delaware Court of Chancery Provides First Guidance on COVID-19 Broken Deal Issues.

Paul Weiss discusses the decision in Delaware Court of Chancery Permits Buyer to Terminate Merger Due to Target’s Failure to Operate in the Ordinary Course; But Finds No MAE Due to COVID-19.

Fried Frank discusses the decision in First COVID-19 M&A Decision: Target’s Pandemic Responses Breached the Ordinary Course Covenant–AB Stable.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Rules Inadequate Disclosure and Pandemic-Driven Changes to Hotel Operations Breached Covenants and Excused Closing.

Dechert discusses the decision in Delaware Court of Chancery Issues Major Decision on COVID-Related Issues in M&A Deals, Allows Buyer to Terminate Agreement for Breach of Operating Covenant.

Troutman Pepper discusses the decision in Changes to Target’s Business Prompted by COVID-19 Pandemic Breached Ordinary Course Covenant, Permitting Buyer to Escape Deal.

$$$ Delaware Business Court Insider discusses the decision in Delaware Hotel Case Is First to Find Impact of COVID-19 Pandemic Can Void Sales.

Reuters’ Alison Frankel discusses the decision in Delaware judge excoriates Gibson Dunn in Anbang/Miraebusted deal ruling.

Reuters discusses the decision in Mirae Asset wins U.S. lawsuit against China’s Anbang on scrapped $5.8 billion hotel deal.

01/22/21 [UPDATED] International Rail – LLC Advancement Rights

The Delaware Court of Chancery, in International Rail Partners, LLC, et al. v. American Rail Partners, LLC, C.A. No. 2020-0177-PAF, memo. op. (Del. Ch. Nov. 24, 2020), found LLC managers entitled to advancement, recognizing that standard indemnification provisions in commercial contracts are generally presumed to apply to third-party claims, not claims between contracting parties, but declines to apply that proposition to an LLC Agreement.

NEW:  Morris James discusses the decision in Chancery Finds Company Responsible for Advancing Costs of Defense to Its CEO in a Claim Brought by the Company.

$$$ Law360 discusses the decision in Railroad Operator’s Fees Must Be Covered, Chancery Says.

Frank Reynolds discusses the decision in Chancery rules Delaware’s LLC Act requires advancement for firm’s suit against member, CEO.

01/21/21 [UPDATED] WeWork – Adverse Interests

The Delaware Court of Chancery, in In re WeWork Litigation, C.A. No. 2020-0258-AGB (consol.), opinion (Del. Ch. Aug. 21, 2020), finds that company management could not withhold company privileged information from directors who served on a special committee of a company’s board based on management’s unilateral determination that the committee members’ interests were adverse to the company’s interests.

NEW:  K&L Gates discusses the decision in Management Cannot Unilaterally Preclude Directors From Obtaining Privileged Communications.

Morris James discusses the decision in Chancery Holds That Management Does Not Have Unilateral Authority to Preclude a Director From Obtaining the Company’s Privileged Information.

Sheppard Mullin discusses the decision in Delaware Court of Chancery Clarifies that Management Cannot Unilaterally Curtail a Director’s Access to Corporation’s Privileged Information.

Kramer Levin discusses the decision in Delaware Court of Chancery Confirms Directors’ Right to Access Company’s Privileged Information.

Frank Reynolds discusses the decision in Chancery says management can’t exclude any director faction from attorney/client document discovery.

Cleary Gottlieb discusses the decision in Recent Decision Confirms Directors’ Right to Access Privileged Communications Between Management and Company Counsel.

Law.com discusses the decision in WeWork Parent’s Management Can’t Block Directors From Discovery, Bouchard Rules in First-Impression Case.

$$$ Law360 discusses the decision in Chancery Says WeWork Can’t Block Docs From Directors.

01/21/21 – Legent Group – “Legal” Claim Dispute

The Delaware Court of Chancery, in Legent Group, LLC, et al. v. Axos Financial, Inc., et al., C.A. No. 2020-0405-KSJM, order (Del. Ch. Jan. 8, 2021), rejected defendants’ contention of plaintiffs’ claim of indemnification under the merger agreement to exercise jurisdiction because the claim was “purely legal” rather than equitable.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Exercises Subject Matter Jurisdiction Appropriate Over Merger Agreement Dispute “Legal” Claim.