In Sheldon v. Pinto Technology Ventures, C.A. No. 2017-0838-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery in a Memorandum Opinion granted a motion to dismiss breach of fiduciary duty claims and other allegations brought by the founder and an early stockholder (“Plaintiffs”) of non-party IDEV Technologies, Inc., a Delaware corporation (“IDEV”). The Court found that Plaintiffs’ primary claims were derivative, rejecting Plaintiffs’ assertion that Defendants were judicially estopped by a Texas state court ruling from arguing for that characterization of the claims, and dismissed the complaint for failure to comply with Chancery Court Rule 23.1’s derivative claims demand or demand futility pleading requirements.Read More
In QC Holdings, Inc. v. Allconnect, Inc., C.A. No. 2017-0715-JTL (Del. Ch. August 28, 2018), plaintiff QC Holdings, Inc. (“QC Holdings”), a former stockholder of defendant Allconnect, Inc. (the “Company”), brought a claim against the Company to enforce its right (the “Put Right”) under a Put Agreement to sell its Company shares (the “Put Shares”) to the Company in exchange for $5 million (the “Put Price”). The Company had refused to pay the Put Price on the basis that it was contractually restricted from doing so on the date required under the Put Agreement, and therefore the Put Right was extinguished and never survived a subsequent merger of the Company when those restrictions arguably lifted. The Delaware Court of Chancery held that the Company’s arguments would have resulted in an improper forfeiture of QC Holdings’ contractual rights to the Put Price and that the exercise of the Put Right constituted a redemption of the Put Shares prior to the merger and a continuing contractual obligation by the Company to pay the Put Price. The Court ordered the Company to pay the Put Price to QC Holdings out of an escrow set up at the merger closing for this purpose.
By letter report dated June 8, 2017, Master of Chancery Morgan T. Zurn recommended dismissal of the complaint in Walker v. Cabo Verde Capital, Inc., C.A. No. 11696-MZ (Del. Ch. June 8, 2017), finding that the plaintiff lacked standing to compel inspection of a non-extant Delaware company’s books and records. Citing recent developments in Delaware law, the Court held that the plaintiff could not satisfy the “stockholder” prerequisite for filing a Section 220 action because all stockholder interest had been previously extinguished by the company’s merger into a foreign corporation.
By memorandum-opinion dated February 27, 2017, Vice Chancellor Glasscock dismissed plaintiff’s Verified Complaint to Compel Inspection of Books and Records in Weingarten v. Monster Worldwide, Inc. after finding plaintiff lacked standing to bring such a claim. Specifically, the Court held that, under Section 220 of the Delaware General Corporation Law, only a current stockholder may bring an action to redress the denial of access to a corporation’s books and records, even if the plaintiff had been a stockholder when initially demanding access.
In In Re Riverstone National, Inc. Stockholder Litigation, C.A. No. 9796-VCG (July 28, 2016), the Delaware Court of Chancery held that a board’s approval of a merger agreement containing a release of claims against the directors and entered into while a potential derivative suit for usurpation of corporate opportunity was threatened against such directors warranted entire fairness review.