Author: trainor

JD Holdings, L.L.C., et. al. v. The Revocable Trust of John Q. Hammons, et. al., C.A. 7480-VCL (Laster, V.C.)

By Masha Trainor and Ryan Drzemiecki

This case involves a dispute over interpretation of a right of first refusal clause. In 2005, John Q. Hammons, a hotel entrepreneur, entered into a complex transaction (the “2005 Transaction”), structured as a triangular merger, in which Hammons’ publicly traded company, John Q. Hammons Hotels, Inc., emerged as indirect wholly-owned subsidiary of JD Holdings, LLC, which is controlled by Jonathan Eilian. As part of the 2005 Transaction, Hammons granted Eilian a right of first refusal (the “ROFR”) to purchase any interest in a hotel or other real property described therein (each a “JQH Subject Hotel”).

The plaintiffs, entities affiliated with Eilian (“Plaintiff”), originally filed suit to obtain a declaration regarding the meaning of certain provisions of the ROFR Agreement. Subsequently, Hammons died. The parties agreed that, pursuant to the ROFR Agreement, Hammons’ death triggered a 90-day period during which Eilian would negotiate exclusively with JQH Trust and Hammons’ estate (“Defendant”) to determine whether Eilian would buy the JQH Subject Hotels. However, they disagreed about the JQH Trust’s obligations following the expiration of the exclusivity period. Plaintiff argued that the ROFR clause required the JQH Trust to liquidate all of the JQH Subject Hotels for cash within a certain period after Hammons’ death even if the parties did not agree on a transaction during the exclusivity period, and the ROFR would apply to any such sale. In the answer and counterclaim to the amended complaint, Defendant rejected this interpretation of the ROFR, contending, among other things, that the ROFR failed to create any affirmative obligation to sell and, even if it did, would be void under the rule against perpetuities. The parties have cross-moved for judgment on the pleadings on this and other claims and counterclaims.

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David Raul v. Astoria Financial Corporation, C.A. No. 9169-VCG (June 20, 2014) (Glasscock, V.C.)

By Masha Trainor and Dotun Obadina

Raul v. Astoria Financial Corporation involves the question of whether, under the corporate benefit doctrine adopted by Delaware courts, a stockholder can recover, from a corporation, attorneys’ fees incurred as a result of the stockholder’s attorney investigating the corporation’s activities.  In this case, David Raul (“Raul”), as custodian of Malka Raul Utma, NY, a common stockholder of Astoria Financial Corporation (“Astoria”), filed a complaint against Astoria, seeking an equitable assessment of attorneys’ fees incurred in connection with the investigation of potential violations of “say-on-pay” disclosure requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Say-On-Pay Disclosure Requirements”).

The corporate benefit doctrine provides for an award of attorneys’ fees to a stockholder if (1) the stockholder presents a claim to the corporation such that, at the time the claim was presented, a suit based on the actions underlying the claim would have survived a motion to dismiss and (2) a material corporate benefit results.

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