Archive: November 2021

Court of Chancery Allows LLC’s Breach of Fiduciary Duty, Aiding and Abetting, and Breach of Contract Claims to Proceed, But Not Fraud

By Justin H. Roeber and Peter Ayers

In Largo Legacy Group, LLC v. Evens Charles et al., C.A. No. 2020-0105-MTZ (Del. Ch. June 30, 2021), the Delaware Court of Chancery denied a motion to dismiss brought by defendants against Plaintiff Largo Legacy Group, an investor in Largo Hotel, LLC (“Largo Hotel”), a hotel development company.  The Court found that Plaintiff successfully stated claims against the company’s principals for breach of fiduciary duty, aiding and abetting, and breach of contract arising from the defendants’ efforts to launch a parallel hotel venture on an adjacent piece of land owned by Largo Hotel.  The Court, however, concluded that Plaintiff’s claim for fraud did not survive the motion to dismiss due to failure to plead the claim with particularity.

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As the Battle over the Universata Acquisition Rages, the Chancery Court Finds that the Appropriate Standard of Review Regarding Actions of a Stockholders’ Representative is “Subjective Good Faith”

By: Gregory R. Youman and Scott G. Ofrias

As the battle over the acquisition of equity in Universata, Inc. continues, the Court of Chancery, in Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021), resolved two general exceptions asserted by Plaintiffs to the Special Master’s Final Report (“Final Report”).  In doing so, the Court decided that an escrow fund was properly created pursuant to the Merger Agreement, and further held that the appropriate standard of review regarding actions of the Stockholders’ Representative is “subjective good faith.”  However, the ultimate resolution of all the exceptions awaits further briefing by the parties.

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stockholder bears burden of proving breach of redemption obligation; directors used best judgment to retain sufficient resources of the company

By: Michele Barnes and Jessica Liu

In Continental Investors Fund, LLC v. TradingScreen, Inc., et al, C.A. No. 10164-VCL (Del. Ch. July 23, 2021), the Delaware Court of Chancery (“Court”) denied plaintiff’s claim for breach of contract, holding that Continental Investors Fund, LLC (“Continental”) failed to carry its burden of proving that TradingScreen, Inc. (“Company”) “acted in bad faith, relied on unreliable methods or data, or reached conclusions so off the mark as to constitute constructive fraud” when calculating the redemption value of Continental’s preferred stock. Further, the Court limited the interest due calculation to the date on which funds were legally available.

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