2019 – Delaware Docket

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

Dec 27 2019

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.

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

Dec 27 2019

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.

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

Dec 24 2019

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.

Settlement Agreement Violates Preferred Stockholder Consent Rights

Dec 20 2019

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.

Stockholder Letter Requesting Remedial Action Deemed a Pre-Suit Demand

Dec 20 2019

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.

Delaware Court of Chancery Grants Stockholder’s Post-Merger Request to Review Company’s Books and Records under DGCL § 220

Nov 20 2019

By Scott E. Waxman and Frank J. Mazzucco

In Kosinski v. GGP Inc., C.A. No. 2018-0540-KSJM (Del. Ch. Aug. 28, 2019), the Delaware Court of Chancery (the “Court”) granted a stockholder’s request, following a merger, to review a company’s books and records under Section 220 of the Delaware General Corporation Law (“DGCL”).

Delaware Court of Chancery Denies Plaintiff’s Request for Declaration of Status as Majority Stockholder, Sole Director, and Chief Executive Officer

Nov 20 2019

By Scott E. Waxman and Frank J. Mazzucco

In In Re Hawk Systems, Inc., C.A. No. 2018-0288-JRS (Del. Ch. Sept. 4, 2019), the Delaware Court of Chancery (the “Court”) denied a plaintiff’s request for a declaration that he was the majority stockholder, sole director, and chief executive officer of a company.

Delaware Court of Chancery Holds That Third-Party Stockholder Has Standing to Enforce Anti-Takeover Protections

Nov 13 2019

By Scott E. Waxman and Frank J. Mazzucco

In Arkansas Teacher Retirement System v. Alon USA Energy, Inc., et al., C.A. No. 2017-0453-KSJM (Del. Ch. Jun. 28, 2019), the Delaware Court of Chancery found that a plaintiff stockholder, in connection with a merger, had standing as a third-party beneficiary to bring claims for breach of fiduciary duty and breach of a stockholder agreement.

Former Derivative Plaintiff Lacks Standing to Pursue Direct Claims Against General Partner

Nov 13 2019

By: Scott Waxman and Zack Sager

In Morris v. Spectra Energy Partners (DE) GP, LP, the Court of Chancery held that the plaintiff, who previously lost standing to maintain a derivative action after it ceased to be a unit holder of a limited partnership, also lacked standing to directly challenge the fairness of the transaction that extinguished its right to pursue the derivative action.

Delaware Court of Chancery Holds Deal Price Generated Through Reliable Sales Process Was Fair Value

Nov 08 2019

By: Shoshannah D. Katz and Serena M. Hamann

In the statutory appraisal proceeding, In re Appraisal of Columbia Pipeline Group, Inc., Cons. C.A. No. 12736-VCL (Del. Ch. August 12, 2019), the Delaware Court of Chancery determined that the fair value of Columbia Pipeline Group, Inc. (“Columbia” or the “Company”) common stock at the effective date of acquisition by TransCanada Corporation (“TransCanada”) was the deal price of $25.50 per share, not the $32.47 per share price proposed by the petitioners. The petitioners argued that the Court should determine fair value using the discounted cash flow method (“DCF”), while TransCanada proposed use of the deal price minus synergies and Columbia’s unaffected trading price as valuation indicators. The Court ruled the sale process in this case was sufficiently reliable to make the deal price a persuasive indicator of fair value.

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