Archive: 2016

Chancery Court Determines that Merger Price is Fair Value in an Appraisal Proceeding as a Result of a Properly Conducted Sales Process

By: Annette Becker and Makda Goitom

In Merion Capital L.P. v. Lender Processing Services, Inc., No. 9320-VCL (Del. Ch. Dec. 16, 2016), the petitioners, Merion Capital L.P. and Merion Capital II L.P. (together, “Merion” or “Petitioners”), issued a post-trial opinion in an appraisal proceeding arising from the acquisition by merger (the “Merger”) of Lender Processing Services, Inc. (the “Company” or “Respondent”) by Fidelity National Financial, Inc. (“Fidelity”). After a four-day trial, the Chancery Court concluded that the fair value of the Company’s stock at the effective time of the Merger was the merger price as a result of a properly conducted sale process.

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Delaware Chancery Court Lacks Personal Jurisdiction Under the LLC Act’s Implied Consent Provision Unless Defendant has “Control” or “Decision-Making” Capability

By Scott E. Waxman and Douglas A. Logan

The Delaware Court of Chancery held that it lacked personal jurisdiction over the defendant because the allegations failed to show that the defendant possessed the necessary “control” or “decision-making” capability required for “material participation” under the Delaware Limited Liability Company Act’s (the “LLC Act”) implied consent provision.

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Delaware Chancery Court Refers Issues of Arbitrability to Arbitrator in Officer Indemnification and Advancement Dispute

By: Shoshannah Katz and James Parks

In Meyers, et al. v. Quiz-Dia LLC, et al., C.A. No. 9878-VCL (Del. Ch. Ct. December 2, 2016), the Chancery Court referred the issue of arbitrability with respect to certain indemnification claims made by former officers of the Quiznos family of companies pursuant to their employment agreements to arbitration and stayed the proceedings as to those claims, while refusing to grant a stay of the proceedings with respect to separate claims for indemnification and advancement arising under a range of other agreements.

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Delaware Chancery Court Grants Fee and Expense Award in Dell Appraisal Case

By: Naomi R. Ogan and Stephanie S. Liu

In In Re Appraisal of Dell, C.A. No. 9322-VCL (Del. Ch. October 17, 2016), previously discussed here, the law firm representing Dell Inc.’s stockholders in appraisal proceedings challenging the valuation of shares in connection with Dell’s 2013 “go-private” merger was awarded approximately $4 million in advanced expenses and $4 million in attorneys’ fees. The Delaware Court of Chancery held that the amounts were reasonable and that the expenses and fees should be allocated pro rata among the appraisal class. Since this was a case where counsel had incurred significant out-of-pocket expenses, the court held that the approach that best balanced the interests of the attorneys and the class was to deduct reimbursable expenses first, then award a fee based on the net benefit achieved.

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Chancery Court Finds Clear Disclaimer of Reliance on Extra-contractual Statements in Dismissing Buyer’s Fraud Claim; Allows Certain Breach of Contract Claims to Proceed

By: C.J. Voss and H. Corinne Smith

In IAC Search, LLC, v. Conversant LLC (f/k/a ValueClick, Inc.), C.A. No. 11774-CB (Del. Ch. Ct. November 30, 2016) the Chancery Court granted the defendant’s motion to dismiss plaintiff’s fraud claim based on the inclusion of provisions in the purchase agreement that disclaimed reliance on extra-contractual statements that bar plaintiff’s fraud claim.  The Court also granted defendant’s motion to dismiss one breach of contract claim, but denied the motion with respect to several other breach of contract claims.

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Chancery Court Compels Arbitration Based On Email Communications That Included All Essential Terms

By: Scott E. Waxman and Trevor M. Gates

In Gomes v. Karnell, No. 11814-VCMR (Del. Ch. Nov. 30, 2016), the Delaware Court of Chancery granted the defendants’ motion to compel arbitration and held that an email exchange between the parties’ attorneys formed a valid arbitration agreement.  The plaintiff, Mark Gomes (“Gomes”), an investment analyst with thousands of followers, alleged breaches of fiduciary duty, breaches of contract, waste, and aiding and abetting breaches of fiduciary duty.

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REVLON AND UNOCAL ENHANCED SCRUTINY REJECTED FOR DISSOLUTION PLAN

By Kevin P. Stichter and Nathan Harrill

In Huff Energy Fund v. Gershen, C.A. No. 11116-VCS, the Delaware Court of Chancery dismissed a stockholder’s challenge to the board of director’s decision to dissolve the company following an asset sale.  The Court ruled that the enhanced scrutiny standards of Revlon and Unocal do not supplant the business judgment rule in the context of a company’s decision to dissolve.

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CHANCERY COURT DISMISSES POST-CLOSING DISCLOSURE CLAIMS AGAINST DIRECTORS OF MILLENNIAL MEDIA, INC.

By Merrick Hatcher and Andrew Lloyd

In An Nguyen v. Michael G. Barrett, et al., C.A. No. 11511-VCG (Del. Ch. Sept. 28, 2016), Vice Chancellor Glasscock granted defendants’ motion to dismiss claims brought by a stockholder against members of the board of directors of Millennial Media, Inc., a Delaware corporation (“Millennial”), finding that plaintiff’s allegations failed to state a non-exculpated claim of breach of fiduciary duty with respect to alleged disclosure violations in connection with Millennial Media’s acquisition by AOL, Inc. (“AOL”). Read More

Delaware Chancery Court Dismisses Revlon Claims Based on Fully Informed, Uncoerced Stockholder Vote

By Lisa Stark and Jonathan Miner

In In Re OM Group, Inc. Stockholder Litigation, C.A. No. 11216-VCS (Del. Ch. Oct. 12, 2016), the Delaware Court of Chancery dismissed Revlon claims, on the basis that the challenged merger had been approved by a disinterested, uncoerced and fully-informed majority vote of the target’s stockholders and therefore the business judgment rule applied.

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DELAWARE CHANCERY COURT APPLIES MFW FRAMEWORK TO DISMISS SUIT BY MINORITY STOCKHOLDERS IN CONNECTION WITH SQUEEZE-OUT MERGER

By Annette Becker and Joseph Phelps

In In re Books-A-Million, Inc. Stockholders Litigation, No. 11343-VCL (Del. Ch. Oct. 10, 2016), the plaintiffs, minority stockholders of Books-A-Million, Inc. (the “Company”), alleged that the Company’s directors, controlling stockholders and several of its officers breached their fiduciary duties in connection with a squeeze-out merger effected by the controlling stockholders in 2015 to take the Company private.  The Court of Chancery held that the plaintiffs failed to plead facts to take the transaction outside the six-pronged framework approved by the Delaware Supreme Court in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2014) (“MFW”), and, consequently, the business judgment rule, rather than the entire fairness test, applied in reviewing the merger.  Upon application of the business judgment rule, the Court dismissed the case.

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Chancery Court Dismisses Derivative Breach of Fiduciary Duty Claims as Improperly Pled and the Requests for Declaratory Judgment as Not Ripe

By: Annette Becker and Makda Goitom

In Chester County Employees’ Retirement Fund v. New Residential Investment Corp., No. 11058-VCMR (Del. Ch. Oct. 7, 2016), the Court of Chancery granted the motion to dismiss brought by defendants (the members of the board of directors of New Residential Corp. (“New Residential”), its manager, the manager’s owner, and its controlling stockholder: (i) for an improperly pled derivative claim (with leave to replead) brought against the defendants for breach of fiduciary duty by the plaintiff, a stockholder of New Residential, (ii) for plaintiff’s failure to sufficiently plead futility in demanding that the board of New Residential bring the derivative suit, and (iii) as to declaratory judgments sought by plaintiff with respect to the Defendants’ liability under certain documents as not being ripe (with leave to replead).

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DELAWARE CHANCERY COURT DISMISSES CLAIMS DUE TO A PRIOR BROAD SETTLEMENT RELEASE

By Scott Waxman and Thomas Meyer

In Geier v. Mozido, LLC, C.A. No. 10931-VCS (Del. Ch. Sept. 29, 2016) (Slights, V.C.), the Delaware Court of Chancery granted the motion of Mozido LLC (“LLC”) and Mozido, Inc., a subsidiary of LLC (“Inc.” and together with LLC, “Defendants”), to dismiss claims relating to incentive options promised, but not delivered, to a former director of LLC (“Plaintiff”).

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