Topic: Asset Sale

Failure to Make Demand to the Board of Directors Dooms 50% Owner’s Breach of Fiduciary Duty Claims Against Co-Owner

By: Michelle McCreery Repp and Benjamin Kendall

In Dietrichson v. Knott, C.A. No. 11965-VCMR (Del. Ch. Apr. 19, 2017), the Chancery Court dismissed the entire complaint brought by  one member of a limited liability company against another member for paying himself an unauthorized salary and misappropriating the proceeds of a sale of the company’s assets, concluding that the claims made were derivative rather than direct stockholder claims.  The Court also held that plaintiff’s claims were not “dual-natured” (i.e., having both direct and derivative aspects), because the plaintiff failed to plead that the transaction resulted in both an improper transfer of economic value and voting power from the minority equity holders to the controlling equity holder.

Read More

Chancery Court Dismisses Derivative Breach of Fiduciary Duty Claims as Improperly Pled and the Requests for Declaratory Judgment as Not Ripe

By: Annette Becker and Makda Goitom

In Chester County Employees’ Retirement Fund v. New Residential Investment Corp., No. 11058-VCMR (Del. Ch. Oct. 7, 2016), the Court of Chancery granted the motion to dismiss brought by defendants (the members of the board of directors of New Residential Corp. (“New Residential”), its manager, the manager’s owner, and its controlling stockholder: (i) for an improperly pled derivative claim (with leave to replead) brought against the defendants for breach of fiduciary duty by the plaintiff, a stockholder of New Residential, (ii) for plaintiff’s failure to sufficiently plead futility in demanding that the board of New Residential bring the derivative suit, and (iii) as to declaratory judgments sought by plaintiff with respect to the Defendants’ liability under certain documents as not being ripe (with leave to replead).

Read More

Chancery Court Denies Defendant Fund Manager’s Request to Pay Ongoing Legal Fees from Disputed Assets; Permits Payment of Administrative Fees Incurred in Completing Necessary SEC and Tax Filings

By Scott Waxman and Max Kaplan

By letter-order dated November 25, 2015, Vice Chancellor John W. Noble issued a “Status Quo Order” in Capital Link Fund I, LLC v. Capital Point Management, LP. By this order, the court approved disbursement of certain administrative fees sought by defendants from the assets in dispute, but denied defendants’ request to pay its legal fees from the same disputed assets.

Plaintiffs in this action are limited partners to an investment fund of which defendant Capital Point Management, LP (“CPMLP”) is the general partner. In July of 2014, CPMLP caused the partnership to sell all of its assets to defendant Princeton Capital Corporation (“Princeton Capital”)—a CPMLP affiliate. Plaintiffs allege that CPMLP, in violation of the controlling partnership agreement, did so without providing notice to or obtaining approval from the limited partners or the partnership’s Board of Advisors.

Read More

Copyright © 2017, K&L Gates LLP. All Rights Reserved.