In Sciabacucchi v. Liberty Broadband Corp., et al., C.A. No. 11418-VCG (Del. Ch. July 26, 2018), the Delaware Court of Chancery denied in part a motion to dismiss brought by defendants Liberty Broadband Corporation (“Liberty”), Liberty’s largest stockholder, and the board of directors of Charter Communications, Inc. (“Charter,” and collectively “Defendants”), for failure to plead demand futility. The Court ruled that the Plaintiff, a stockholder of Charter, pleaded sufficient facts to support a reasonable inference that the influence of Liberty’s largest stockholder would prevent the Charter board of directors from exercising independent and disinterested business judgment when considering a demand to bring a lawsuit on behalf of the corporation.
In A&J Capital, Inc. v. Law Office of Krug, C.A. No. 2018-0240-JRS (July 18, 2018), A&J Capital, Inc. (“A&J”) sought a declaratory judgment that it was improperly removed from its position as manager of LA Metropolis Condo, I LLC (the “Company”) because it was not given notice or an opportunity to be heard prior to removal. Vice Chancellor Slights denied A&J’s motion for summary judgment, holding that A&J’s removal was proper under both the Company’s governing documents and common law.
In Basho Technologies, Inc. v. Georgetown Basho Investors, LLC, C.A. No. 11802-VCL (Del. Ch. July 6, 2018), the Delaware Court of Chancery reaffirmed the principle that a stockholder with actual control of a corporation violates its fiduciary duties by advancing its own interests to the detriment of the corporation. Applying the entire fairness standard in its decision following trial, the court held that Georgetown Basho Investors, LLC (“Georgetown”), the controlling stockholder of Basho Technologies, Inc. (“Basho”), owed and breached fiduciary duties to Basho as a stockholder with actual-but not majority-control. The court ultimately awarded plaintiffs Earl Gallaher (“Gallaher”) and various investment funds under his control (the “Plaintiff(s)”) damages in the aggregate amount of $20,268,878.
The Delaware Court of Chancery determined that a flawed deal process kept the merger price from being a reliable indication of value in the Blueblade Capital Opportunities LLC and Blueblade Capital Opportunities CI LLC (collectively, “Blueblade”) v. Norcraft Companies, Inc. (“Norcraft”) (C.A. No. 11184-VCS (Del. Ch. July 27, 2018)), appraisal action.
In In re Appraisal of Solera Holdings, Inc., C.A. No. 12080-CB (Del. Ch. July 30, 2018), the Delaware Court of Chancery, applying an adjusted deal price analysis in a statutory appraisal proceeding, determined that the fair value of the stock of Solera Holdings, Inc. (“Solera” or the “Company”) at the time of its March 2016 going-private merger transaction was $53.95 per share–the deal price less estimated synergies. The Court reached this conclusion after thoroughly examining and ultimately rejecting the use of (a) the discounted cash flow (“DCF”) analysis, proposed by seven investment funds that were former stockholders of Solera (the “Petitioners”) and the (b) the unaffected market price analysis, proposed by Solera in supplemental briefing in response to the use of such analysis in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (Del. Ch. May 21, 2018). Read More
In In re Hansen Medical, Inc. Stockholders Litigation, C.A. No. 12316-VCMR (Del. Ch. June 18, 2018), the Delaware Court of Chancery found that plaintiffs had stated a reasonably conceivable claim that the acquisition of Hansen Medical, Inc. (“Hansen”) by Auris Surgical Robotics, Inc. (“Auris”) should be reviewed under the entire fairness standard of review because the transaction involved a controlling stockholder group which extracted benefits from the transaction not shared with the minority. The Court denied motions to dismiss filed by the alleged control group and Hansen’s directors and officers.
In ChyronHego Corporation, et al., v. Cliff Wight and CFX Holdings, Inc., C.A. No. 2017-0548-SG (Del. Ch. July 31, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the plaintiffs’ claim for extra-contractual fraud on the basis that the stock purchase agreement contained an effective anti-reliance clause that precluded such claim. The Court found that the anti-reliance clause rebutted the common law fraud element of reliance on any extra-contractual representations, as described further below. At the same time, the Court dismissed the defendants’ motion to dismiss claims for fraud and breaches of express representations and warranties under the stock purchase agreement, finding that the plaintiffs had sufficiently pleaded the elements of these claims.
In Olenik v. Lodzinski, C.A. No. 2017-0414-JRS (Del. Ch. July 20, 2018), the Court of Chancery, in a motion to dismiss, found that Earthstone Energy, Inc.’s (“Earthstone”) decision to employ the framework laid out in Kahn v. M&F Worldwide, Corp., 88 A.3d 635 (Del. 2014) (“MFW”) in structuring a transaction secured the benefit of the business judgment rule for its fiduciaries, even at the pleadings stage. The Court found that where the Plaintiff failed to plead waste, or facts which the Court could reasonably conceive as waste, the Plaintiff’s claim that officers and the controlling stockholder breached their fiduciary duties by approving an unfair transaction as interested parties, must be dismissed.
In Domain Associates, L.L.C. et al. v. Nimesh S. Shah (C.A. No. 12921-VCL), Vice Chancellor Lastor held that, in the absence of clear language in the limited liability company agreement, a withdrawn member of a venture capital fund’s management company is entitled to the fair value of his or her member interest, not simply the amount of the member’s capital account.
In Ms. Mary Giddings Wenske, et al. v. Blue Bell Creameries, Inc., et al., the Delaware Chancery Court denied Defendants’ motion to dismiss a breach of contract claim, finding that Plaintiffs had pled a set of facts that allow a reasonable inference that Defendants breached the standards set forth in its partnership agreement.
In Akrout v. Jarkoy, No. 2017-0473-JRS (Del. Ch. July 10, 2018), the plaintiff Nabil Akrout sought a declaration that the dissolution of Intelligent Security Systems International, Inc., Delaware corporation (“ISSI”), was void, and alleged that three individual director-defendants had breached their fiduciary duties to him by failing to apprise him of ISSI’s dissolution and financial condition. Akrout also alleged that the dissolution deprived him of accrued salary and dividends.
In Mudrick Capital Management, L.P. v. Globalstar, Inc., C.A. No. 218-0351-TMR (Del. Ch. July 30, 2018), plaintiff Mudrick Capital Management L.P. (“Mudrick Capital”), a minority stockholder of defendant Globalstar, Inc. (the “Company”), brought a demand under Section 220 of the Delaware General Corporate Law (“Section 220”) to inspect certain communications and documents relating to the Company’s proposed merger with Thermo Acquisitions, Inc. (“Thermo”). The Delaware Court of Chancery granted Mudrick Capital’s demand for certain emails, communications and valuation materials relating to the merger, and denied Mudrick Capital’s demand for certain internal draft materials.