Archive: January 2018

Court of Chancery Holds That Corwin Defense Is Not Appropriate for the Limited Scope and Purpose of a Books and Records Action Under Section 220

By: David Forney and Tami Mack

In Lavin v. West Corporation, C.A. No. 2017-0547-JRS (Del. Ch. December 29, 2017), the Court of Chancery held that stockholder plaintiff Mark Lavin (“Lavin”) had adequately demonstrated a credible basis from which the Court could infer that wrongdoing had occurred regarding the merger of West Corporation (the “Company”) and Apollo Global Management (“Apollo”) in support of Lavin’s Section 220 demand for inspection, and that a Corwin defense (that the transaction at issue was approved by a majority of disinterested and informed stockholders) is not a bar to an otherwise properly supported Section 220 demand for inspection.

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CHANCERY COURT FINDS ORAL AGREEMENT TO SETTLE PROXY CONTEST BINDING AND ORDERS SPECIFIC PERFORMANCE OF THE SETTLEMENT AGREEMENT

By Josh Gaul and Caitlin Velasco

In Sarissa Capital Domestic Fund LP, et al. v. Innoviva, Inc., C.A. No. 2017-0309-JRS (Del. Ch. Dec. 8, 2017), the Delaware Court of Chancery ruled in favor of dissident stockholder plaintiffs, Sarissa Capital Domestic Fund LP, et al. (“Sarissa”) of Innoviva, Inc. (“Innoviva”), concluding that Sarissa and Innoviva entered into a binding, oral settlement agreement to resolve a proxy contest prior to Innoviva’s 2017 annual stockholder meeting and specific performance of the settlement agreement was warranted. Read More

Court of Chancery Grants Motion for Judgment on the Pleadings Finding No Implied Condition as to the Accuracy of Information in Financial Reports

By: John Blair and Ernest Simons

In Greenstar IH Rep, LLC and Gary Segal v. Tutor Perini Corporation, the Court of Chancery granted the plaintiff’s motion for judgment on the pleadings and motion to dismiss counterclaims in a breach of contract suit arising out of the sale of GreenStar Services Corporation to Tutor Perini Corporation (“Tutor Perini”) in 2011 (the “Acquisition”). The merger agreement that memorialized the Acquisition (the “Merger Agreement”) provided Greenstar IH Rep, LLC (“Plaintiff”) a right to receive post-closing earn out consideration from Tutor Perini (“Earn-Out Payments”) over a five year period in the event that certain pre-tax profit milestones were reached on an annual basis.  Tutor Perini made Earn-Out Payments in the first and second years following the Acquisition, but declined Plaintiff’s demand for Earn-Out Payments in the third, fourth, and fifth years. As such, Plaintiff filed a complaint seeking damages relating to Tutor Perini’s failure to make Earn-Out Payments; Tutor Perini counterclaimed alleging fraud and a right to offset any harm caused by fraud.

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CHANCERY COURT HOLDS BUSINESS STRATEGY DISPUTES MAY NOT BE RESOLVED BY APPOINTMENT OF A RECEIVER UNDER SECTION 291

By: Annette Becker and Rich Minice

In, In re: Geneius Biotechnology, Inc., C.A. No. 2017-0297-TMR (Del. Ch. Dec. 8, 2017), the Delaware Court of Chancery denied a minority stockholder’s petition for the appointment of a neutral third-party receiver under Section 291 of the Delaware General Corporation Law (“DGCL”) because the petitioner minority stockholder failed to prove, by clear and convincing evidence, that Geneius Biotechnology, Inc. (“Geneius”) was insolvent.  The court held that Section 291 actions are not to be used as a method of resolving business strategy disputes between stockholders and management.

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CHANCERY COURT HOLDS THIRD PARTY IS LIKELY SUBJECT TO DELAWARE SERVICE OF PROCESS UNDER THE STATE’S LONG-ARM STATUTE AND THEREFORE THE COURT NEED NOT DETERMINE IF ADDITION AS INVOLUNTARY COUNTERCLAIM PLAINTIFF IS PROPER

By: Scott E. Waxman and Douglas A. Logan

In Lilly Lea Perry v. Dieter Walter Neupert and Cote d’Azur Estate Corporation, C.A. No. 2017-0290-VCL (Del. Ch. Dec. 6, 2017), the Court of Chancery held that the BGO Foundation (the “Foundation”) was a party that should be joined for just resolution of the underlying dispute between Lilly Lea Perry (“Ms. Perry”), the plaintiff, and Dieter Walter Neupert (“Mr. Neupert”) and Cote d’Azur Estate (the “Company”), the defendants. The Court of Chancery also held that because it appeared that the Foundation could be served under the Delaware Long-Arm Statute, it was not necessary for the court to consider adding the Foundation as an involuntary counterclaim plaintiff.

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Director’s Breach of Contract Lawsuit Found to Violate the Underlying Contract’s Confidentiality Clause

By: David Forney and Benjamin Kendall

In Cappella Holdings, LLC v. Anderson, C.A. No. 9809-VCS (Del. Ch. Nov. 29, 2017), the Chancery Court dismissed a director’s breach of contract claims against his former employer relating to alleged violations of an anti-dilution provision in his employment agreement.  The Court instead found that the director’s initial complaint, which included highly sensitive information about the company, violated the confidentiality provision of the underlying contract on which his claims were based.

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