admin – Page 2 – Delaware Docket

Misunderstanding Regarding Dates Does Not Provide Grounds to Reform Earn-Out Provision in Purchase Agreement, Rules Chancery Court

Jun 15 2018

In Glidepath Limited v. Beumer Corporation, the Delaware Court of Chancery ruled against the sellers of a limited liability company, holding that the purchase agreement should not be reformed to correct the dates comprising the earn-out period for the transaction. The Court reasoned that while the seller was in fact mistaken about the terms of the agreement, there was neither a mutual mistake nor a unilateral mistake with knowing silence; additionally, the Court was unable to reform the contract because the parties did not come to a specific prior understanding that differed from the written agreement.

Chancery Court Denies Motion to Dismiss Brought by Defendant Tesla Motors, Inc. After Concluding that Elon Musk is a Controlling Stockholder

May 18 2018

By Holly Hatfield and Daisy Sexton

In In Re Tesla Motors, Inc. Stockholder Litigation, the Delaware Chancery Court denied Defendants’ motion to dismiss an action brought by plaintiffs (Tesla stockholders) against nominal Defendant Tesla Motors in connection with Tesla’s acquisition of SolarCity Corporation. Plaintiffs alleged that Tesla’s board of directors breached their fiduciary duties by approving the acquisition of SolarCity, which benefitted SolarCity stakeholders but negatively affected Tesla stockholders. SolarCity is a public Delaware corporation founded by Elon Musk and his cousins, Peter and Lyndon Rive. Musk and his cousins sit on the SolarCity Board. Lyndon was SolarCity’s CEO and Peter was its CTO.

Chancery Court Limits Access to Books and Records Based on Stockholder’s Failure to State Purpose in Section 220 Demand

Apr 30 2018

By: James S. Bruce and Taylor B. Bartholomew

In KT4 Partners LLC v. Palantir Technologies, Inc., C.A. No. 2017-0177-JRS (Del. Ch. Feb. 22, 2018), in a post-trial ruling, the Delaware Court of Chancery granted a stockholder limited rights to inspect a corporation’s books and records related to the stated purpose of investigating possible wrongdoing, but the Court denied the stockholder’s request to obtain other books and records related to the purpose of valuing its shares because its initial demand did not explicitly state a valuation purpose.

Chancery Court Finds Credible Basis for Demand to Inspect Books and Records of UnitedHealth in connection with Possible Medicare Overbilling

Apr 16 2018

By: David Forney and Joshua Haft

In In re UnitedHealth Group, Inc. Section 220 Litigation, Consolidated C.A. No. 2017-0681-TMR (Ch. Ct February 28, 2018) certain stockholders (“Plaintiffs”) of UnitedHealth Group, Inc. (“UnitedHealth”) sent a books and records inspection demand to UnitedHealth relying on a complaint in a type of whistleblower (qui tam) action alleging that UnitedHealth engaged in improper Medicare billing, United States ex rel. Poehling v. UnitedHealth Group, Inc. (the “Qui Tam Action”). The Qui Tam Action was based in part on a 5-year investigation by the US Department of Justice (“DOJ”) and included depositions of 20 of UnitedHealth’s employees and production by UnitedHealth of over 600,000 documents. Plaintiffs made their demand in order to investigate mismanagement or misconduct, possible breaches of fiduciary duties and the independence and disinterestedness of the board. UnitedHealth rejected the demand and a trial was held on January 9, 2018. UnitedHealth argued that Plaintiffs were not entitled to inspection of books and records because they lacked a credible basis to infer wrongdoing or mismanagement based on the Qui Tam Action and because the alleged activities of UnitedHealth were not illegal. The Court found that Plaintiffs’ demand stated a proper purpose and a credible basis from which a court could infer mismanagement or wrongdoing.

Transparency is the Best Policy: Teetering on the Edge of Misleading

Feb 07 2018

By Lisa Stark and Rashida Stevens

In Chatham Asset Management, LLC v. Papanier, C.A. No. 2017-008-AGB (Del. Ch. Dec. 22, 2017), the Delaware Court of Chancery found that the plaintiffs, Chatham Asset Management, LLC, Chatham Fund, LP, and Chatham Asset High Yield Master Fund, Ltd. (collectively, “Chatham”), pleaded sufficient facts to avoid dismissal of a claim that the director defendants of Twin River Worldwide Holdings, Inc. (“Twin River”) breached their fiduciary duties by making materially false and misleading statements in tender offer materials. Read More

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

Jan 02 2018

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.

Chancery Court Grants in Part and Denies in Part Motion to Dismiss Brought by Defendant FXCM, Inc. in Derivative Suit Alleging That FXCM Knowingly Violated Regulation 5.16

Nov 21 2017

By: Scott E. Waxman and Daisy Sexton

In Brett Kandell v. Dror Niv et al., the Delaware Chancery Court denied in part and granted in part a motion to dismiss a derivative action brought by a stockholder (“Plaintiff”) against nominal defendant FXCM, Inc. (“FXCM” or “the Company”), a foreign exchange (“FX”) broker. The claim was brought against FXCM directors (“Defendants”) for losses associated with the “Flash Crash” in the value of the euro relative to the Swiss franc, which happened when the Swiss decoupled the two currencies. As a result of these huge losses, FXCM had to obtain a loan under onerous conditions. Two main causes of action were asserted: (1) that the directors’ ability to exercise business judgment with respect to the Flash Crash was impaired, and (2) that the directors knowingly violated 17 C.F.R. § 5.16 (“Regulation 5.16”) which prohibits foreign exchange traders from representing that they will limit clients’ trading losses. Plaintiff did not make a demand on the company prior to bringing suit.

Chancery Court Dismisses Claims Against Defendants and Holds that the Transactional Structure in M&F Worldwide Applies to Conflicted One Sided Controller Transactions

Oct 19 2017

By: Annette Becker and Joshua Haft

In In re Martha Stewart Living Omnimedia, Inc. Stockholder Litigation, Consolidated C.A. No. 11202-VC (Ch. Ct August 18, 2017) former stockholders of Martha Stewart Living Omnimedia, Inc. (“MSLO”) brought a consolidated class action suit against Martha Stewart (“Stewart”), the former controlling stockholder of MSLO, for breach of fiduciary duty and against Sequential Brands Group, Inc. (“Sequential”), the acquirer of MSLO by merger, for aiding and abetting that breach claiming that Stewart leveraged her position as a controller to obtain disparate consideration for herself as compared to the minority stockholders of MSLO in the acquisition of MSLO. Plaintiffs moved to dismiss, with the Court finding that the complaint failed to state a claim for breach of fiduciary duty against Stewart, and on that basis need not reach the question of whether the complaint adequately pleads the elements of aiding and abetting such a breach, and granted the plaintiffs’ motion to dismiss the complaint.

Court of Chancery Applies Corwin Ratification to Merger Involving Private Equity Firm Favored by Company’s Founder

Oct 06 2017

By: Nicholas I. Froio and Taylor B. Bartholomew

In Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. Sept. 28, 2017), the Delaware Court of Chancery held on a motion to dismiss that plaintiff failed to plead facts from which it was reasonably conceivable that a tender of nearly eighty percent of the shares of The Fresh Market (the “Company”) was uninformed or coerced for purposes of surviving ratification under applicable caselaw in connection with the Company’s acquisition by private equity firm Apollo Management, L.P. (“Apollo”).

Too Many Cooks in the Kitchen – Deadlocked Management Leads to LLC Dissolution

Sep 26 2017

By Scott E. Waxman and Reese Brammell

In In re GR BURGR, LLC, C.A. No. 12825-VCS (Aug. 25, 2017), the Delaware Court of Chancery exercised its power under Section 18-802 of the Delaware Limited Liability Company Act to effect the judicial dissolution of GR BURGR, LLC (“GRB”). GRB was a Delaware limited liability company formed by an entity affiliated with celebrity chef Gordon Ramsay (“GRUS”) and Rowan Siebel, each owning a 50% membership interest. This structure, along with the LLC Agreement’s lack of a tiebreaker, effectively turned any action requiring a majority vote of the managers into a unanimous vote. The relationship between the members eventually deteriorated, and the company, formed for the purpose of developing and operating burger restaurants, became locked in a stalemate regarding its future operations. GRUS petitioned for dissolution Section 18-802. The Court found that the undisputed facts entitled GRUS to such relief and, rejecting Siebel’s claims that dissolution was not equitable, granted the same.

Author:admin