Author: Tami Mack

Court of Chancery Holds That Sole, Conflicted General Partner Cannot, By Reason of its Conflict, Delegate its Otherwise Valid Power to Manage Derivative Litigation

By: Scott Waxman and Tami Mack

In Wenske v. Blue Bell Creameries, Inc., C.A. No. 2017-0699-JRS (Del. Ch. August 28, 2019), the Court of Chancery held that Blue Bell Creameries, Inc., the sole general partner (the “General Partner”) of Blue Bell Creameries, LP (the “Partnership”), was not a disinterested entity such that it could delegate its otherwise valid power to manage derivative litigation. The Court also held that it was not appropriate to undertake a conflict analysis with respect to the individual members of the board of directors of the General Partner (the “GP Board”), because such analysis would disregard the established policy of respecting the legal fiction of the business entity.

Read More

In a $1.365 Billion Merger, the Target Company “Blindsided” the Proposed Buyer by Terminating the Merger Agreement and the Court Upheld the Termination; Court Requests Further Briefing re the $126.5 Million Reverse Termination Fee

By: Kevin Stichter and Tami Mack

In Vintage Rodeo Parent, LLC et al. v. Rent-A-Center, Inc., C.A. No. 2018-0927-SG (Del. Ch. March 14, 2019), the Delaware Court of Chancery (the “Court”) held that the target company Rent-A-Center, Inc. (“Rent-A-Center”) validly exercised its right to terminate the $1.365 billion merger under the merger agreement (the “Merger Agreement”) among Rent-A-Center and the proposed buyer Vintage Capital Management, LLC and certain affiliates (collectively, “Vintage”), despite Vintage’s claims that the term of the Merger Agreement had already been extended or, alternatively, that Rent-A-Center had not validly terminated.

Read More

Court of Chancery Holds That Plaintiff Failed to Meet Burden of Proof With Respect to Mistake-Based Reformation Claim

By: Scott Waxman and Tami Mack

In Richard B. Gamberg 2007 Family Trust v. United Restaurant Group, L.P., C.A. No. 10994-VCMR (Del. Ch. January 26, 2018), the Court of Chancery held that limited partner, Richard B. Gamberg 2007 Family Trust (the “Plaintiff”), failed to meet its burden of proof with respect to various claims against United Restaurant Group L.P. (the “Partnership”), Atlantic Coast Dining, Inc. (the “General Partner”), and the directors/shareholders of the General Partner (the “Shareholder Defendants”; together with the Partnership and the General Partner, the “Defendants”), which included a mistake-based reformation claim, among other breach of contract and breach of fiduciary duty claims.

Read More

Court of Chancery Holds That Corwin Defense Is Not Appropriate for the Limited Scope and Purpose of a Books and Records Action Under Section 220

By: David Forney and Tami Mack

In Lavin v. West Corporation, C.A. No. 2017-0547-JRS (Del. Ch. December 29, 2017), the Court of Chancery held that stockholder plaintiff Mark Lavin (“Lavin”) had adequately demonstrated a credible basis from which the Court could infer that wrongdoing had occurred regarding the merger of West Corporation (the “Company”) and Apollo Global Management (“Apollo”) in support of Lavin’s Section 220 demand for inspection, and that a Corwin defense (that the transaction at issue was approved by a majority of disinterested and informed stockholders) is not a bar to an otherwise properly supported Section 220 demand for inspection.

Read More

Court of Chancery Holds That Structurally Coercive Stockholder Vote Does Not Ratify Fiduciary Actions Related To Shares Issuance and Proxy Grant To Stockholder

By: Remsen Kinne and Tami Mack

In Sciabacucchi v. Liberty Broadband Corporation, C.A. No. 11418-VCG (Del. Ch. May 31, 2017), the Court of Chancery ruled on a motion to dismiss by defendants Liberty Broadband Corporation (“Liberty”), a stockholder of Charter Communications, Inc. (“Charter”) and officers and directors of Charter.  The Court held that facts alleged by plaintiff, a Charter stockholder, supported the inference that a vote by Charter stockholders approving a shares issuance to and voting proxy agreement with Liberty was structurally coercive.  The Court determined that since the vote was coercive, it did not ratify actions by Liberty and Charter’s directors and officers claimed by plaintiff to have breached fiduciary duties of loyalty.  As a result, the Court held, defendants were not entitled to dismissal of plaintiff’s claims solely on the basis that stockholder vote ratification operated to “cleanse” fiduciary duties breaches.

Read More

Court of Chancery Holds That Shareholder Satisfied Burden of Proof under Section 220 to Show Credible Basis to Infer That Company Misled Shareholders Regarding Biggest Client

By David Forney & Tami Mack

In Elow v. Express Scripts Holding Company, C.A. No.12721-VCMR and Khandhar v. Express Scripts Holding Company, C.A. No. 12734-VCMR (Del. Ch. May 31, 2017), the Court of Chancery held that plaintiff shareholder Clifford Elow’s (“Elow”) demand to inspect certain books and records of Express Scripts Holding Company (the “Company”) met all statutory requirements and stated a proper purpose, while plaintiff (and purported shareholder) Amitkumar Khandhar’s (“Khandhar”) demand did not. Thus, the Court granted Elow’s Section 220 demand subject to a confidentiality agreement and denied Khandhar’s demand.

Read More

Court of Chancery Holds That A Credible Basis to Infer Wrongdoing by One Director is Sufficient to Satisfy Burden of Proof Under Section 220

By: Remsen Kinne and Tami Mack

In Rodgers v. Cypress Semiconductor Corporation, C.A. No. 2017-0070-AGB (Del. Ch. April 17, 2017), the Court of Chancery held that shareholder plaintiff T.J. Rodgers (“Rodgers”) had established several proper purposes for his demand to inspect certain books and records of Cypress Semiconductor Corporation (the “Company”), along with a credible basis to infer wrongdoing by at least one of the Company’s directors.  The Court granted Rodgers’ Section 220 action and directed the parties to meet and submit an order for production of all responsive documents.

Read More

Court of Chancery Upholds Validity of General Release Between Company and Former President, Grants Summary Judgment in Former President’s Favor

By: David Forney and Tami Mack

In Seiden v. Kaneko, C.A. No 9861-VCS (Del. Ch. March 22, 2017), the Court of Chancery held that the general release that Southern China Livestock, Inc. (the “Company”) had entered into with former President Shu Kaneko (“Kaneko”) in exchange for Kaneko’s assistance in recovering certain Company shares was binding and enforceable.  Thus, the Court held that Kaneko had been released from all claims asserted against him by the Company’s receiver (the “Receiver”) and granted summary judgment in Kaneko’s favor.

Read More

Chancery Court Reaffirms Liberal Interpretation of Mandatory Indemnification Statute, Grants Summary Judgment in Favor of Former CFO

By:  Megan Wotherspoon and Tami Mack

In Horne v. OptimisCorp, C.A. No. 12268-VCS (Del. Ch. March 3, 2017) the Chancery Court granted plaintiff William Horne’s motion for summary judgment, holding that his demand for indemnification of fees and costs he incurred in connection with the successful defense of a case brought by defendant OptimisCorp against him and others were reasonable on their face.   The Court granted summary judgment in favor of a plaintiff, awarding in excess of $1 million in litigation fees and expenses incurred in the underlying action and in connection with the prosecution of the indemnification action, and interest on such amounts.

Read More

Copyright © 2019, K&L Gates LLP. All Rights Reserved.