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Case Law

01/21/21 [UPDATED] Gilead – Books & Records Defense

The Delaware Court of Chancery, in Deborah Pettry, et al. v. Gilead Sciences, Inc., C.A. No. 2020-0132-KSJM, memo. op. (Del. Ch. Nov. 24, 2020), in a books and records action under 8 Del. C. § 220, entered judgment in stockholder plaintiffs’ favor, finding defendant company’s defenses, described as “over-aggressive,” as baseless, and invited plaintiffs to move for an award of attorneys’ fees and expenses incurred in seeking inspection.

NEW: Morris James discusses the decision in Chancery Grants Leave to Move for Fees for Overly Aggressive Books and Records Defenses.

Keith Bishop discusses the decision in Fee Shifting May Be New To Delaware, But It’s Old Hat In California.

Goodwin discusses the decision in Delaware Court of Chancery Rules Against Gilead in Books and Records Action.

Appraisal Rights Litigation Blog discusses the decision in Del. Chancery Admonishes Issuer Over Attempts to Block Shareholders’ Access to Books and Records.

Cleary Gottlieb discusses the decision in Fee-Shifting – A Potential New Tool In Stockholders’ Toolbox When Seeking Books And Records.

Francis Pileggi discusses the decision in Chancery Provides Refreshing Section 220 Guidance.

$$$ Law360 discusses the decision in Chancery Slams Gilead Stonewalling Over Records Demands.

01/19/21 Gulf LNG – Federal Arbitration Act

The Delaware Supreme Court, in Gulf LNG Energy, LLC, et al. v. ENI USA Gas Marketing, LLC, No. 22, 2020, opinion (Del. Nov. 17, 2020), found claims asserted in a second arbitration constituted an impermissible collateral attack on an award in a first arbitration that, under the Federal Arbitration Act, could only be asserted in a court proceeding to review, vacate, or modify the first arbitration award.

Morris James discusses the decision in Delaware Supreme Court Finds that Court of Chancery Had Jurisdiction To Enjoin a Collateral Attack on a Prior Arbitration Award Under the Federal Arbitration Act.

01/14/21 Skyline Renewables – General Powers of Management

The Delaware Court of Chancery, in Lorenzo Roccia, et al. v. Martin Mugica, et al. and Skyline Renewables, LLC, C.A. No. 2020-0641-MTZ, order (Del. Ch. Dec. 29, 2020), found that the CEO of an LLC, granted “general powers of management” typical of a chief executive, and control of the company’s “business and operations,” lacked authority to remove a board member of an entity the LLC partially owned.

Francis Pileggi discusses the decision in Delaware Chancery Court rules CEO director removal authority is not ‘usual and ordinary’ core business.

01/14/21 Great Hill – Contractual Fee-Shifting

The Delaware Court of Chancery, in Great Hill Equity Partners IV, LP, et al. v. SIG Growth Equity Fund I, LLLP, et al., C.A. No. 7906-VCG, memo. op. (Del. Ch. Dec. 31, 2020), declined to award attorneys’ fees in litigation between parties to a merger agreement under a “prevailing party” fee shifting clause, where neither party prevailed, or an indemnification clause that did not clearly call for fee shifting for first party claims.

Francis Pileggi discusses the decision in Chancery Addresses Contractual Fee-Shifting Where Prevailing Party Is Unclear.

01/01/21 [UPDATED] MaD Investors – Books and Records Deadline

The Delaware Court of Chancery, in MaD Investors GRMD, LLC, et al. v. GR Companies, Inc., C.A. No. 2020-0589-MTZ, memo. op. (Del. Ch. Oct. 28, 2020), rules as a matter of first impression that the five business day deadline for responding to a books and records demand under 8 Del. C. § 220(c) terminates at midnight on day five rather than 5 p.m.

NEW:  Morris James discusses the decision in Chancery Dismisses Section 220 Complaint on Jurisdictional Grounds, Finding That Plaintiffs Filed Seven Hours Prematurely.

$$$ Law360 discusses the decision in Timing Dooms Investor’s Del. Suit For Cannabis Deal Books

12/31/20 [UPDATED] WeWork – Special Litigation Committees

The Delaware Court of Chancery, in In re WeWork Litigation, C.A. No. 2020-0258-AGB (consol.), opinion (Del. Ch. Dec. 14, 2020), rules that, where a board committee caused a corporation to seek voluntary dismissal of a lawsuit that a previously formed committee had filed and wanted to maintain, the motion for leave to dismiss is reviewed under the Zapata framework.

NEW:  Sidley Austin discusses the decision in “New” Special Committee May Not Dismiss Case Brought by “Old” Special Committee.

Tulane Law’s Professor Ann Lipton discusses the decision in The I in We.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Applies Zapata to Assess New Board Committtee’s Motion to Dismiss Claims Being Pursued by a Previously Established Special Committee.

$$$ Delaware Business Court Insider discusses the decision in Delaware Chancellor Finds One WeWork Committee Can’t Dismiss Other Committee’s Case.

 

12/30/20 [UPDATED] Corporate Case Law

NEW:  Skadden discusses recent Delaware decisions addressing breach of fiduciary duty claims involving allegations that an independent but “supine” board was misled by a conflicted fiduciary in Delaware Decisions Highlight Pleading Requirements for Fiduciary Duty Claims in the Face of Disinterested Director Approval.

NEW: Skadden discusses recent Delaware decisions addressing the “ab initio” requirement under M&F Worldwide, to shift the standard of review applicable to controlling stockholder transactions from entire fairness to business judgment in Recent MFW-Related Developments in Delaware Courts.

Law360 summarizes significant Delaware corporate law decisions issued in the first half of 2020 in Top Delaware Cases Of 2020: A Midyear Report.

Freshfields discusses Delaware case law involving insiders who sought to aid a financially-struggling company but were later challenged by other stockholders for engaging in flawed and unfair processes, and missteps to be avoided when seeking financing or considering downside exits for distressed companies in Navigating Strategic Alternatives in Distressed Scenarios: Takeaways for Boards.

White & Williams discusses Delaware case law addressing fiduciary duties owed creditors and oversight liability in Board of Directors Guidance When Addressing Emergency Circumstances Occasioned by the COVID-19 Pandemic.

Francis Pileggi highlights key topics from a number of recent Delaware Supreme Court and Court of Chancery decisions from January and February 2020 in Anthology of Blurbs About Recent Delaware Corporate and Commercial Decisions.

$$$ Francis Pileggi and co-authors review important Delaware court decisions during the year 2019 in 15th Annual Review of Key Delaware Corporate and Commercial Decisions.

Bloomberg Law reviews its choices for the top five Delaware corporate law decisions for the years 2010-2019 in Top Five Delaware Corporate Law Rulings of the Last Decade.

Farrel Fritz reviews the top ten New York “business divorce” decisions that it reported during the year 2019 in Top Ten Business Divorce Cases of 2019.

Fried Frank discusses developments in the concept of corporate purpose, M&A sale processes, Delaware case law, M&A agreements, stockholder activism, and other topics during the year 2019 in Fried Frank Discusses Where Things Stand at Year-End 2019.

[$$$] Law360 reviews 2019 corporate case law developments in Delaware State and Federal Courts in The Biggest Delaware Cases Of 2019.

12/29/20 [UPDATED] New York Business Entity Law

NEW:  Farrell Fritz discusses significant New York and Delaware court decisions issued in 2020 in lawsuits among co-owners of closely held LLCs and Limited Partnerships in Top 10 Business Divorce Cases of 2020.

Farrell Fritz discusses the New York Supreme Court’s decision in Lard-PT, LLC v Seokoh, Inc., et al., C.A. No. 651726/2020, opinion (N.Y. Sup. Oct. 20, 2020), which found that an LLC member’s breaches of an operating agreement in connection with a notice of deadlock discharged another member’s buy-out obligation, and notes practical considerations of the ruling in LLC Member Pays the Price For Not Sticking to Deadlock-Breaking Script.

Farrell Fritz discusses the New York Supreme Court’s decision in Lois Weinstein v. RAS Property Management, LLC, et al., C.A. No. 653735/2019, opinion (N.Y. Sup. Oct. 23, 2020), which held, as a matter of first impression, that commencement of a proceeding seeking dissolution or appointment of a receiver for a limited partnership can result in withdrawal of its general partner and dissolution of the entity, even if the LP agreement does not provide for dissolution under such circumstances, in Limited Partnerships and the Self-Fulfilling Dissolution Petition.

Farrel Fritz discusses the New York Supreme Court’s decision in Rena Pachter v. David Winiarsky, et al., No. 502779/20, opinion (N.Y. Sup. Oct. 13, 2020), dismissing a 50% LLC member’s claim for statutory dissolution of the LLC but finding that plaintiff stated a claim for common law dissolution that had not previously been recognized by a New York Court, and suggests that the ruling may permit LLC owners to work around the challenging requirements for statutory dissolution under New York’s LLC law in First-Impression Decision Recognizes a Cause of Action for Common-Law LLC Dissolution.

Farrel Fritz discusses the New York Appellate Division’s decision in Daniel Shatz v. Douglas Chertok, et al., No. 10972, opinion (N.Y. App. Feb. 27, 2020), finding that a manager-managed LLC Agreement providing the manager “sole and absolute discretion” in decision-making did not defeat a non-managing member’s breach of fiduciary duty claim alleging that a managing member exercised discretion in bad faith in When an LLC Manager’s “Sole and Absolute Discretion” is Neither Sole Nor Absolute.

Farrell Fritz discusses New York case law governing the enforceability of oral agreements concerning the rights of owners different types of business entities in Enforceability of Oral Operating, Shareholder, and Partnership Agreements.

Farrel Fritz discusses validity and effect of transfers of LLC membership interests under New York law, noting that transfer rights can be subject to restrictions that are strengthened, weakened, or eliminated by the terms of an LLC Agreement, but statutory default rules leave involuntarily withdrawn members with economic interest rather than membership interests in Turmoil Follows Involuntary Transfers of LLC Membership Interests.

Farrel Fritz discusses the New York Appellate Division’s decision in Julius Behrend v. New Windsor Group, LLC, et al., No. 17-01392, opinion (N.Y. App. Jan. 29, 2020), affirming a ruling that the purported transfer of an interest in an LLC without unanimous consent of the other LLC members, required under the LLC agreement, did not make the transferee an LLC member, and resulted only in transfer of entitlement to receive distributions and profit and loss allocation, in Always Check Provenance Before Taking an Assignment of LLC Interest.

Farrel Fritz discusses the New York Court of Appeals’ decision in Luciano Bonanni, et al. v. Horizons Investors Corp., et al., No. 2017-06803, opinion (N.Y. App. Jan. 29, 2020), affirming a Trail Court’s finding that an asset sale between an LLC and a PLLC was a de facto merger based on cessation of business by the predecessor and continuity of business operations, management, assets, and personnel by the successor, and that the successor retained the predecessor’s liabilities, in  Bending the Rules of Standing: The De Facto Merger Doctrine.

Farrel Fritz discusses the New York Supreme Court’s decision in Culligan Soft Water Co., et al. v Clayton Dubilier & Rice, LLC, et al., No. 651863/12, opinion (N.Y. Sup. Mar. 19, 2020), which found, in a derivative action, that futility of a litigation demand for claims asserted in an amended complaint must be considered as to liquidators appointed after plaintiff filed its original complaint but before plaintiff filed its amended complaint, rather than corporate directors, in The Pre-Suit Demand Requirement for a Corporation in Liquidation or Receivership.

Farrell Fritz discusses the New York Superior Court’s decision in Amit Doshi v. Michael Besen, No. 651696/19, opinion (N.Y. Sup. Ct. Dec. 30, 2019), judicially dissolving a deadlocked company, finding that resignation of one of the company’s two 50% stockholders as a director did not resolve deadlock, in Resignation: Antidote for Internal Dissention and Deadlock?

Farrell Fritz’s Peter Mahler discusses case law interpreting purpose and audit provisions of a New York LLC Agreement in Court Takes Ambiguity Off the Menu of Restaurant’s LLC Agreement.

Farrell Fritz discusses the New York Supreme Court’s decision in Lois Weinstein v. RAS Property Management, LLC, et al., No. 653735/19, opinion (N.Y. Sup. Feb. 5, 2020), finding that a successor in interest to a deceased limited partner succeeds to the decedent’s economic rights but not partner status for purposes of derivative standing in Death of Limited Partner Disarms Derivative Action.

Farrell Fritz’s Peter Mahler discusses New York case law addressing the ability of a minority LLC member to force dissolution in LLC Member’s Petition to Dissolve Boxing Club Dealt First Round KO.

Farrell Fritz discusses the New York Supreme Court’s decision in Robert Shapiro v. Gabriel Ettenson, et al., No. 654641/17, memo. op. (N.Y. Sup. Ct. Dec. 23, 2019), finding that an LLC member’s claim for wrongful expulsion in breach of the LLC Agreement was direct rather than derivative, where defendants allegedly failed to follow the Agreement’s dissociation procedures, in The Curious Case of the Expelled LLC Member Bound by Operating Agreement He Never Signed.

Lowenstein Sandler discusses the New York Appellate Division’s ruling in Mark A. Galasso v. Cobleskill Stone Products, Inc., et al., No. 527237, memo. op. (N.Y. App. Div. Feb. 28, 2019), an appraisal action, holding that a valuation was not protected by attorney-client privilege because it was created for an estate tax filing before the appraisal action commenced, in Are Communications With Third Parties Still Attorney-Client Privileged in Appraisal?

Bryan Cave discusses the New York Appellate Division’s ruling in Kevin Askari, et al. v. McDermott, Will & Emery, LLP, et al., No. 606862/15, opinion (N.Y. App. Div. Nov. 27, 2019), finding that New York law governed privilege applicable to seller’s pre-transaction communications notwithstanding a contractual Delaware choice of law clause, and differences between New York and Delaware law addressing privilege applicable to pre-transaction communications in post-transaction disputes in Buyer’s Purchase or Seller’s Privilege? Attorney-Client Communications in the Post-Sale Context.

McGuireWoods discusses the New York Appellate Division’s ruling in Kevin Askari, et al. v. McDermott, Will & Emery, LLP, et al., No. 606862/15, opinion (N.Y. App. Div. Nov. 27, 2019), finding that New York law governed privilege applicable to seller’s pre-transaction communications despite a purchase agreement’s Delaware choice of law clause due to New Yok’s greater interest in the litigation in NY Appellate Division Affirms Seller Retains Privilege for Certain Pre-acquisition Communications.

Shearman & Sterling discusses the U.S. Court of Appeals for the Second Circuit’s decision in Chufen Chen, et al. v. Dunkin’ Brands, Inc., No. 18-3087, opinion (2d Cir. Mar. 31, 2020), finding that registration to do business in New York does no subject a company to general personal jurisdiction in The Second Circuit Holds that New York Business Registration Does Not Constitute Consent to General Personal Jurisdiction.

Sheppard Mullin discusses the U.S. Court of Appeals for the Second Circuit’s decision in Chufen Chen, et al. v. Dunkin’ Brands, Inc., No. 18-3087, opinion (2d Cir. Mar. 31, 2020), finding that registration to do business in New York does no subject a company to general personal jurisdiction in Second Circuit Holds that Registering to do Business in New York Under Section 1301 of the Business Corporation Law Does Not Constitute Consent to General Personal Jurisdiction in New York Courts.

12/29/20 [UPDATED] Outerwall – Director Conflicts

The Delaware Court of Chancery, in Mark Rudd v. Jeffrey J. Brown, et al. [Outerwall], C.A. No. 2019-0775-MTZ, memo. op. (Del. Ch. Sept. 11, 2020), dismissed Revlon and disclosure claims challenging a completed merger, rejecting an argument that director defendants were conflicted by the prospect of losing their seats in a threatened proxy contest.

NEW:  K&L Gates discusses the decision in Chancery Court Dismisses Complaint, Holding That Directors Were Not Conflicted In Approving A Merger Simply Due to the Threat of a Looming Proxy Content.

Morris James discusses the decision in Chancery Confirms that, Without More, Threat of Proxy Contest from Activist Investor is Insufficient to Render Director Defendants Conflicted in Sale Transaction.

Hunton Andrews & Kurth discusses the decision in Court Rejects Challenge to M&A Transaction Despite  Activist Pressure.

Frank Reynolds discusses the decision in Chancery finds merger charges against directors can’t penetrate Outerwall’s exculpatory clause.

$$$ Law360 discusses the decision in Chancery Ruling Offers Takeaways On Conflicts In M&A Sales.

12/28/2020 [UPDATED] M&A Litigation

NEW:  Fasken discusses the Ontario Superior Court of Justice’s decision in Fairstone Financial Holdings, Inc., et al. v. Duo Bank of Canada, No. 20-641857-00CL, opinion (Ont. Sup. Ct. J. Dec. 2, 2020), finding that the effects of the coronavirus pandemic did not constitute a Material Adverse Event / Effect under a merger agreement allowing an acquirer to avoid closing a merger in No, you MAE not: Ontario Court Rules that Duo Bank Cannot Rely on Material Adverse Event Clause to Avoid Closing Fairstone Deal.

Davies discusses the Ontario Superior Court of Justice’s decision in Fairstone Financial Holdings, Inc., et al. v. Duo Bank of Canada, No. 20-641857-00CL, opinion (Ont. Sup. Ct. J. Dec. 2, 2020), finding that the effects of the coronavirus pandemic did not constitute a Material Adverse Event / Effect under a merger agreement, that the target’s response to the pandemic did not breach its obligations to conduct business in the ordinary course, and ordering specific performance requiring the buyer to close on the merger in Buyer Beware: In Canada’s First COVID-19 “Busted Deal” Decision, Court Finds That Duo Bank Cannot Terminate Its Acquisition of Fairstone Financial.

Quinn Emanuel discusses legal and practical aspects of lawsuits involving termination of mergers based on the alleged existence of a Material Adverse Change / Material Adverse Event or failure of a target company to operate in the ordinary course of business as a result of the coronavirus pandemic, based on its experience as litigation counsel in several such actions — settled and pending — in the Delaware Court of Chancery in Report from the Front Lines: COVID-19 M&A Litigation in Delaware.

Deallawyers.com discusses recent decisions by the Delaware Court of Chancery finding plaintiffs effectively pled fraudulent inducement in business acquisitions, notwithstanding anti-reliance clauses, based on representations and warranties within the acquisition agreements in M&A Litigation: Contractual Fraud Claims Are The New Black.

Cooley discusses issues that the Delaware Court of Chancery has preliminarily addressed in merger termination lawsuits where the transactions require debt financing in Pandemic-Related Deal Litigation Highlights Buyer Leverage in Transactions Requiring Debt Financing.

Cooley discusses recent Delaware case law emphasizing the obligation of corporate directors and officers to keep a company board or special committee informed of material developments throughout a sale process, including after signing, in Renegotiating Deal Terms? Delaware Reminds Fiduciaries of Unremitting Duties.

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.