Author: Teresa Teng

COURT OF CHANCERY ORDERS SPECIFIC PERFORMANCE OF MERGER AGREEMENT, FINDING THAT FRAUD CONTAINED IN FDA FILINGS FOR APPROVAL OF TARGET PRODUCT DID NOT RISE TO A “MATERIAL ADVERSE EFFECT”

By: Annette Becker and Teresa Teng

In Channel Medsystems, Inc. v. Boston Scientific Corporation, C.A. No. 2018-0673-AGB (Del. Ch. December 18, 2019), the Delaware Court of Chancery ordered specific performance of a merger agreement, finding that breaches of the representations and warranties arising from the fraud of a key employee of the seller did not rise to the level of a “Material Adverse Effect.” As a result, the buyer was not entitled to terminate the merger agreement and breached the further assurances provision of the merger agreement by failing to meaningfully engage with seller upon seller’s discovery of the fraud.

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COURT OF CHANCERY RULES ON THE APPLICABILITY OF FORUM SELECTION CLAUSES TO NON-SIGNATORIES TO A CONTRACT AND A PLAINTIFF’S BURDEN IN ALLEGING BREACH OF THE “COMMERCIALLY REASONABLE EFFORTS” STANDARD

By: Scott E. Waxman and Teresa Teng

In Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Sep. 18, 2019), the Delaware Court of Chancery granted a motion to dismiss by a defendant parent company, whose subsidiary entered into a purchase agreement containing a Delaware forum selection clause. The court applied the “closely related” test in finding that the plaintiff failed to allege sufficient facts to show that the non-signatory parent entity was “closely related” to the underlying purchase agreement and as a result, plaintiff could not bind the parent entity to the agreement’s forum selection clause.

In the subsequent Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Feb. 27, 2020), the court split its decision in granting the motions to dismiss for lack of personal jurisdiction over one of the defendant officers of the purchaser in the transaction, and for failure to state a claim with respect to all but one count of the plaintiff’s complaint. The court denied the motion to dismiss for lack of personal jurisdiction with respect to another officer of the purchaser who had also served as chairman of the board of the seller. The court also denied such defendant’s motion to dismiss on the cause of action of breach of fiduciary duty.

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COURT OF CHANCERY APPLIES POLITICAL QUESTION DOCTRINE IN DEFERRING TO U.S. PRESIDENT’S RECOGNITION OF VENEZUELAN PRESIDENT AND HOLDS THAT EXTRA-TERRITORIAL EFFECTS DO NOT PRECLUDE APPLICATION OF THE ACT OF STATE DOCTRINE

By: CJ Voss and Teresa Teng

In Jiménez v. Palacios et al., C.A. No. 2019-0490-KSJM (Del. Ch. Aug. 2, 2019), the Delaware Court of Chancery accepted as binding the U.S. President’s recognition of a foreign government and upheld the validity of that government’s appointments to the board of directors of a state-owned oil company. In turn, the state-owned oil company could validly appoint the board of directors of its Delaware subsidiaries. However, the court determined that the consents appointing the boards of directors of the Delaware subsidiaries were not appropriately considered on a motion for judgment on the pleadings and granted the plaintiffs the opportunity to identify facts in dispute foreclosing summary judgment in favor of the defendants. 

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