Archive: December 2019

Not quite instantaneous, Holmesian “Bad Men” can win by knowing the law: Plaintiffs who tried to preserve direct and derivative claims in a settlement agreement failed to realize that they had already bargained them away

By: Scott E. Waxman and Chris Fry

In Urdan v. WR Capital Partners, LLC, C.A. No. 2018-0343-JTL (Del. Ch. 2019), the Delaware Court of Chancery (the “Court”) held that Urban and Woodward (the “Plaintiffs”) lost the ability to assert their derivative and direct claims by failing to properly preserve their claims in the stock repurchase agreements and settlement agreement among the Plaintiffs, Energy Efficient Equity, Inc. (the “Company”), and the private equity group that essentially pushed the Plaintiffs out of the Company, WR Capital Partners, LLC, et al., (the “PE Firm”).  The Court dismissed the Plaintiffs’ remaining claims for fraud, as the Plaintiffs could not reasonably rely on puffery, and unjust enrichment, as this is more properly a derivative claim dismissed with the direct and derivative claims above.

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Delaware Court of Chancery Dismisses Derivative Claims in Reliance on Exculpatory Language in Limited Liability Company Agreement

By Scott E. Waxman and Frank J. Mazzucco

In MKE Holdings, Ltd. and David Bergevin v. Kevin Schwartz, et al. and Verdesian Life Sciences, LLC, C.A. No. 2018-0729-SG (Del. Ch. Sept. 26, 2019), the Delaware Court of Chancery relied on exculpatory language in a Limited Liability Company  Agreement to grant a defendant’s motion to dismiss a derivative claim alleging breach of duty by the company’s managers.

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ANOTHER “WELL-PLED” CAREMARK CLAIM SURVIVES A MOTION TO DISMISS

By: Lisa R. Stark and Sara M. Kirkpatrick

In a recent decision, In Re Clovis Oncology, Inc. Derivative Litigation, C.A. No. 2017-0222-JRS, 2019 WL 4850188 (Del. Ch. Oct. 1, 2019), the Delaware Court of Chancery held that stockholders of Clovis Oncology, Inc. (“Clovis”), a developmental biopharmaceutical company, adequately pled facts that supported a pleading stage inference that the Clovis board of directors breached its fiduciary duties by failing to oversee the clinical trial of the company’s most promising drug and then allowing the company to mislead the market regarding the drug’s efficacy.

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Settlement Agreement Violates Preferred Stockholder Consent Rights

By: Jill B. Louis and Pouya D. Ahmadi

In PWP Xerion Holdings III LLC v. Red Leaf Resources Inc., C.A. No. 2017-0235-JTL (Del. Ch. Oct. 23, 2019), the Delaware Court of Chancery (the “Court”) granted Xerion Holdings III LLC’s (“Xerion”) motion for partial summary judgement on a breach of contract claim, holding that the Red Leaf Resources, Inc. (“Red Leaf” or the “Company”) breached Xerion’s contractual right to consent as the holder of a majority of the shares of the Company’s Series A preferred stock.

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Stockholder Letter Requesting Remedial Action Deemed a Pre-Suit Demand

By: Joanna Diakos Kordalis and Zack Sager

In Solak v. Welch, the Court of Chancery found that a letter from a stockholder to the board of directors, which requested remedial action to address allegedly excessive non-employee director compensation, was a pre-suit demand and dismissed the stockholder’s complaint for failing to allege wrongful demand refusal.

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