Author: Greyson Blue

CHANCERY COURT IMPOSES COSTS OF RECEIVERSHIP ON STOCKHOLDER

By: Scott Waxman and Greyson Blue

In Longoria v. Somers and LC Therapeutics, Inc., C.A. No. 2018-0190-JTL (Del. Ch. May 28, 2019), the Delaware Court of Chancery examined its authority to tax the costs of receivership against the stockholder of an insolvent corporation. The Court’s decision highlights an exception to the general principle that stockholders of a properly maintained corporation are not responsible for costs incurred by the corporation and illustrates a scenario where stockholders may be held liable for a corporation’s obligations.

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CHANCERY COURT DENIES MOTION TO PERFECT SERVICE FOR SERVICE ON DISSOLVED LIMITED LIABILITY COMPANY

By: Scott Waxman and Greyson Blue

In Tratado de Libre Commercio, LLC v. Splitcast Technology, LLC, C.A. No. 2019-0014-JRS (Del. Ch. Mar. 6, 2019), the Delaware Court of Chancery examined the requirements for perfecting service upon a dissolved limited liability company (“LLC”). In ruling that Tratado de Libre Commercio, LLC (“Tratado”) had failed to perfect service of process on a dissolved entity, Splitcast Technology LLC (“Splitcast”), the Court highlighted its broad authority to establish service of process requirements under Court of Chancery Rule 4(d)(7) (“Rule 4(d)(7)”) in claims against defunct entities. The Court’s decision both illustrates the scope of its authority and confirms its willingness to hold that court-mandated standards for delivering service upon defunct corporations also apply in the context of defunct LLCs.

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CHANCERY COURT DENIES MOTION TO DISMISS CLAIM FOR BREACH OF MERGER AGREEMENT EARN-OUT EFFORTS PROVISION

By: Remsen Kinne and Greyson Blue

In Himawan, et al. v. Cephalon, Inc., et al., C.A. No. 2018-0075-SG (Del. Ch. Dec. 28, 2018), the Delaware Court of Chancery in a Memorandum Opinion denied a motion to dismiss a breach of contract claim brought against defendants Cephalon, Inc. (“Cephalon”), Teva Pharmaceutical Industries Ltd. (“Teva”) and Teva’s affiliate Teva Pharmaceuticals USA, Inc. (“Teva USA”) by former shareholders of Ception, Inc. (“Ception”), a biotech company acquired by Cephalon in a merger transaction. The case concerns a dispute over the phrase “commercially reasonable efforts” as used in an earn-out provision in the merger agreement. The decision highlights pleadings requirements for supporting an initial claim for breach of an objective contractual standard.

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CHANCERY COURT GRANTS MOTION FOR PRELIMINARY INJUNCTION REGARDING ENFORCEMENT OF FORUM SELECTION CLAUSE

By: Scott Waxman and Greyson Blue

In Village Green Holding, LLC, et al. v. Jonathan Holtzman, et al., Vice Chancellor Tamika Montgomery-Reeves granted plaintiff Village Green Holding, LLC’s (“Village Green”) motion for preliminary injunction regarding the enforcement of a forum selection clause and defendant Jonathan Holtzman’s (“Holtzman”) attempt to litigate a dispute in a separate forum. In rendering its decision, the Court illustrated the circumstances under which it will enjoin litigation that is pending in an alternate forum pursuant to a contract’s forum selection clause.

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