In R.A. Feuer on behalf of CBS Corporation v. Sumner M. Redstone (C.A. No. 12575-CB (Del. Ch. April 19, 2018)), R. A. Feuer (“Plaintiff”), a stockholder of CBS Corporation (“CBS”) brought a derivative suit against the directors of CBS Corporation (“Board”) alleging corporate waste, bad faith, and unjust enrichment for compensation in excess of $13 million dollars paid to Sumner Redstone, the controlling stockholder, former executive chairman and chairman emeritus of CBS (“Redstone”). The payments were made under an extreme set of circumstances that resulted in the claims partially surviving a Rule 23.1 motion to dismiss for failure to make a pre-suit demand on the board and a 12(b)(6) motion to dismiss for failure to state a claim upon which relief could be granted. Read More
In MHS Capital LLC v. Goggin, the Delaware Court of Chancery granted a motion to dismiss a breach of fiduciary duty claim against the manager of a Delaware limited liability company because all of the manager’s conduct that could have formed the basis of such claim was covered by the duties of the manager delineated in the limited liability company agreement. The Court also analyzed and dismissed claims for, among other things, fraud, breach of the implied contractual covenant of good faith and fair dealing, unjust enrichment, and misappropriation of trade secrets.
In Carr v. New Enterprise Associates, Inc., C.A. No. 20170381-AGB (Del. Ch. Mar. 26, 2018), the Delaware Court of Chancery, in denying in part and granting in part a motion to dismiss, reaffirmed the principle that a controlling stockholder, when acting outside its capacity as a stockholder, cannot use the corporation to advance the controlling stockholder’s self-interest at the expense of minority stockholders. In the context of defendants’ motion to dismiss, the court found that it was reasonably conceivable that the controlling stockholder of American Cardiac Therapeutics, Inc. (“ACT”) and its conflicted board of directors had breached their duty of loyalty to ACT’s minority stockholders by approving a sale of a warrant to a third party that included an option to acquire ACT, allegedly at an unfairly low price, in order to incentivize the third party to also acquire and invest in the controlling stockholder’s other portfolio companies.
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.
In In re Rouse Properties, Inc. Fiduciary Litigation, C.A. No. 12194-VCS, the George Leon Family Trust and Dr. Robert A Corwin (the “Plaintiffs”) sought to recover damages on behalf of Rouse Properties Inc. (“Rouse”) stockholders, for breach of fiduciary duties and aiding and abetting breaches of fiduciary duties against Brookfield Asset Management Inc. (“Brookfield”) and five Rouse directors individually arising out of a July 2016 merger between two mall real estate holding companies (the “Merger”). The court dismissed all claims finding that Brookfield was not a minority controlling stockholder of Rouse and did not wield undue influence over the board of directors of Rouse in general or during Merger discussions and that the Plaintiffs failed to well plead that the stockholder vote approving the Merger was uninformed or coerced.
In Cumming v. Edens, et al., C.A. No. 13007-VCS (Del. Ch. Feb. 20, 2018), the Court of Chancery denied a motion to dismiss a derivative suit for breach of fiduciary duties brought by a stockholder of New Senior Investment Group, Inc. (“New Senior”) against New Senior’s board of directors (the “Board”) and related parties in connection with New Senior’s $640 million acquisition of Holiday Acquisition Holdings LLC (“Holiday”). The Court made clear that compliance with Section 144 does not necessarily provide a safe harbor against claims for breach of fiduciary duty and invoke business judgment review of an interested transaction. Because the complaint alleged with specificity “that the Board acted out of self-interest or with allegiance to interest other than the stockholders,” the court applied the entire fairness standard of review and concluded that the transaction was not fair to New Senior stockholders. Read More
By Lisa Stark and Rashida Stevens
In Chatham Asset Management, LLC v. Papanier, C.A. No. 2017-008-AGB (Del. Ch. Dec. 22, 2017), the Delaware Court of Chancery found that the plaintiffs, Chatham Asset Management, LLC, Chatham Fund, LP, and Chatham Asset High Yield Master Fund, Ltd. (collectively, “Chatham”), pleaded sufficient facts to avoid dismissal of a claim that the director defendants of Twin River Worldwide Holdings, Inc. (“Twin River”) breached their fiduciary duties by making materially false and misleading statements in tender offer materials. Read More
In Sarissa Capital Domestic Fund LP, et al. v. Innoviva, Inc., C.A. No. 2017-0309-JRS (Del. Ch. Dec. 8, 2017), the Delaware Court of Chancery ruled in favor of dissident stockholder plaintiffs, Sarissa Capital Domestic Fund LP, et al. (“Sarissa”) of Innoviva, Inc. (“Innoviva”), concluding that Sarissa and Innoviva entered into a binding, oral settlement agreement to resolve a proxy contest prior to Innoviva’s 2017 annual stockholder meeting and specific performance of the settlement agreement was warranted. Read More
In In re Martha Stewart Living Omnimedia, Inc. Stockholder Litigation, Consolidated C.A. No. 11202-VC (Ch. Ct August 18, 2017) former stockholders of Martha Stewart Living Omnimedia, Inc. (“MSLO”) brought a consolidated class action suit against Martha Stewart (“Stewart”), the former controlling stockholder of MSLO, for breach of fiduciary duty and against Sequential Brands Group, Inc. (“Sequential”), the acquirer of MSLO by merger, for aiding and abetting that breach claiming that Stewart leveraged her position as a controller to obtain disparate consideration for herself as compared to the minority stockholders of MSLO in the acquisition of MSLO. Plaintiffs moved to dismiss, with the Court finding that the complaint failed to state a claim for breach of fiduciary duty against Stewart, and on that basis need not reach the question of whether the complaint adequately pleads the elements of aiding and abetting such a breach, and granted the plaintiffs’ motion to dismiss the complaint.
In Fortis Advisors LLC v. Shire US Holdings, Inc., No. 12147-VCS (Del. Ch. Aug. 9, 2017), the plaintiff, Fortis Advisors LLC, which was acting as representative (the “Representative”) for the former stockholders of SARcode Bioscience Inc., a private biopharmaceutical company (the “Target”), pursuant to a merger agreement, alleged that the acquiror Shire US Holdings, Inc., a Delaware subsidiary of a global biopharmaceutical company (the “Acquiror”), breached the provisions of a merger agreement by refusing to pay certain milestone payments that were due. The Court of Chancery granted the Acquiror’s motion to dismiss for failure to state a breach of contract claim, concluding that, while the Acquiror’s interpretation of the operative provision at issue was reasonable based on its plain and unambiguous language, the Representative failed to proffer a competing reasonable construction of such provision and thus the Court was required to grant the motion to dismiss.
In H&N Management Group, Inc. & Aff Cos Frozen Money Purchase Plan v. Robert M. Couch et al., No. 12847-VCMR (Del. Ch. Ct. August 1, 2017), the Court of Chancery denied defendants’ motion to dismiss and held that plaintiffs sufficiently alleged a reason to doubt that the board of AGNC Investment Corp (the “Company”) was adequately informed when approving (i) subsequent renewals of a management agreement between the Company and American Capital Mortgage Management, LLC (the “Manager”) as well as (ii) the acquisition of the Manager for a price of $562 million.
In Williams v. Ji, C.A. No. 12729-VCMR (Del. Ch. June 28, 2017), the Delaware Court of Chancery denied Defendants’ motion to dismiss, holding that the option and warrant grants and voting agreements in question were subject to entire fairness and that the Defendant directors had not carried their burden at that stage. The Defendants also moved to stay in favor of an earlier filed case in the Court, but the motion was denied as moot because the earlier filed case had settled.