Archive: February 19, 2016

Chancery Court Tosses Complaint For Lacking Foundational Facts Available To Plaintiffs-Stockholders Under Delaware General Corporation Law § 220

By Annette Becker and Max E. Kaplan

In Thermopylae Capital Partners, L.P. v. Simbol, Inc. C.A. No. 10619-VGC (Jan. 29, 2016), Vice Chancellor Glasscock granted defendants’ motion to dismiss, with prejudice.  After attempting to unravel the allegations in plaintiffs’ pleadings as to a dilution claim, the Court of Chancery held that the complaint’s omission of pertinent facts tested the limits of “reasonable conceivability” by requiring the Court to speculate as the fundamental facts necessary for plaintiffs to prevail—facts available to plaintiffs under Delaware General Corporation Law § 220.

Plaintiffs—stockholders and former management of defendant Simbol, Inc. (“Simbol”)—claimed that Simbol’s board of directors, executives, and certain defendants-stockholders diluted plaintiffs’ shares in the corporation as part of an elaborate “scheme” to usurp corporate control for the benefit of defendants-stockholders Mohr Davidow Ventures (“MDV”) and Itochu Corporation (“Itochu”).  By so doing, defendants purportedly breached their fiduciary duties to minority stockholders, causing them direct harm.

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CHANCERY COURT DISMISSES CASE FOR IMPROPER VENUE AFTER “EXPORTING” CONTRACTUAL FORUM SELECTION CLAUSE FROM AGREEMENT SIGNED BY PLAINTIFF

By John E. Blair, Jr. and Tony Yerry

In Bonanno v. VTB Holdings, Inc. (C.A. No. 10681-VCN) (Del. Ch. February 8, 2016), Vice Chancellor Noble granted a defendant corporation’s motion to dismiss a plaintiff shareholder’s breach of contract claim, ruling that plaintiff’s redemption claim fell within the scope of a forum selection provision contained in a transaction document signed by plaintiff that required the parties to litigate such disputes in the state courts of New York or the federal courts therein.

The action arose when plaintiff John Bonanno, a shareholder of Voyetra Turtle Beach, Inc. (“VTB”), a predecessor corporation to VTB Holdings, Inc. (“VTBH”), brought a breach of contract claim in the Delaware Court of Chancery against defendant VTBH for failure to redeem his shares after a 2014 strategic merger involving VTBH, which Bonanno claimed qualified as a triggering event for a redemption.  VTBH sought dismissal for improper venue based on the forum selection clauses located in various transaction documents previously entered into among the parties, all of which required them to litigate their disputes in either New York state court or the United States District Court for the Southern District of New York.  Ultimately, the Delaware Court of Chancery granted VTBH’s motion to dismiss for improper venue, holding that the redemption is a “transaction” that was contemplated in a 2011 Right of First Refusal Agreement (the “2011 ROFR”) between the parties and the 2011 ROFR contained an exclusive New York forum selection clause, which governed Bonanno’s claims as a matter of New York law.

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