As the battle over the acquisition of equity in Universata, Inc. continues, the Court of Chancery, in Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021), resolved two general exceptions asserted by Plaintiffs to the Special Master’s Final Report (“Final Report”). In doing so, the Court decided that an escrow fund was properly created pursuant to the Merger Agreement, and further held that the appropriate standard of review regarding actions of the Stockholders’ Representative is “subjective good faith.” However, the ultimate resolution of all the exceptions awaits further briefing by the parties.Read More
By Michael Waller and Molly Mugford
In Franchi v. Firestone, et al., C.A. No. 2020-0503-KSMJ (Del. Ch. May 10, 2020), Defendants’ moved to dismiss Plaintiffs’ action challenging a going-private transaction claiming that the Special Committee set up by the Board of Directors (“Board”) to analyze the merger lacked independence and failed to exercise its duty of care, and the vote of the minority stockholders was not informed. The Chancery Court granted Defendants’ motion to dismiss, relying on the business judgment rule and finding that Plaintiffs’ claims were unsupported and insufficient to undermine “the cleansing effect of the MFW conditions.”Read More
By: Michael J. Ross and Ryan Reilly
In Daniel Feldman et al. v. AS Roma SPV GP, LLC, et al., C.A. No. 2020-0314-PAF (Del. Ch. July 22, 2021), the Delaware Court of Chancery (the “Court”) dismissed a suit brought by minority members (“Plaintiffs”) of AS Roma SPV GP, LLC (the “Company”) for breach of fiduciary duties by the managing member for breach of the Company’s limited liability company agreement (“LLC Agreement”) for failure to disclose material information, and breach of fiduciary duties by the investor committee in connection with pandemic-driven financing and recapitalization efforts. In granting the Defendants’ motion to dismiss for failure to state a claim, the Court emphasized the Defendants’ limited disclosure duties and the Plaintiffs’ failure to adequately plead harm.
By: Scott Waxman and Doug Logan
In Dr. Thomas Markusic et al. v. Michael Blum et al. memorandum opinion 200818, the Delaware Chancery Court (the “Court”) declined to extend the Gentile doctrine. In so doing, the Court held that the counterclaims attempting to rely on it had to be dismissed.
Firefly Space Systems, Inc. (“Original Firefly”) was an aerospace startup founded by Michael Blum, Patrick Joseph King, and Thomas Markusic in late 2013 with the aim of launching small-load rockets into orbit. Counterclaim-Plaintiffs Blum, King, Lauren McCollum, Steven Begleiter, Green Desert N.V., Swing Investments BVBA, Bright Success Capital Ltd., and Wunderkind Space Ltd. (collectively, “Original Firefly Investors”) each owned stock in Original Firefly, with Markusic in the role of CEO and sole board member of Original Firefly at all relevant times.Read More
In In Re Baker Hughes Inc. Merger Litig., C.A. No. 2019-0638-AGB (Del. Ch. Oct. 27, 2020), the Delaware Court of Chancery declined to dismiss claims that the CEO of Baker Hughes Incorporated (“Baker Hughes”) breached his fiduciary duty of care by failing to include unaudited financial statements of the oil and gas segment of the General Electric Company (“GE O&G”) in a proxy statement soliciting the stockholder vote on Baker Hughes merger with GE O&G. As a result, the Court found that (1) the stockholder vote was uninformed, and (2) enhanced scrutiny under Revlon, Inc. v. McAndrews & Forbes Hldgs., Inc., 506 A.2d 173 (Del. 1986). (“Revlon”), not the business judgment review under Corwin v. KKR Financial Holdings LLC (125 A.3d 304, 306 (Del. 2015)), applied to its decision whether plaintiffs had adequately pled a predicate breach of fiduciary duty by the Baker Hughes board for purposes of an aiding and abetting claim asserted against General Electric Company (“GE”). At the time of its decision, none of the Baker Hughes directors were named as defendants in the action except for Baker Hughes’ CEO who was named as a defendant in the action solely in his capacity as an officer of Baker Hughes.Read More
In In re WeWork Litigation, C.A. No. 2020-0258-AGB (Del. Ch. Aug. 21, 2020), a special committee of the board of directors of The We Company (the “Company”) sought to obtain certain privileged communication among management of the Company and its counsel in discovery arising from breach of contract and breach of fiduciary duty case. The Court held that management of a Delaware corporation (“Management”) does not have the authority to unilaterally preclude a director of the corporation from obtaining the corporation’s privileged information, an issue of first impression in the State of Delaware.Read More
In 77 Charters, Inc. v. Gould et al.., C.A. No. 2019-0127-JRS (Del. Ch. May 18, 2020), 77 Charters, Inc. (“Plaintiff”) brought suit against defendants Jonathan Gould (“Gould”), Stonemar MM Cookeville, LLC (“Stonemar MM”), Cookeville Corridor, LLC (the “Preferred Purchaser”) and Eightfold Cookeville Investor, LLC (the “New Investor” and together with Gould, Stonemar MM and the Preferred Purchaser, the “Named Defendants”) for a series of alleged “wrongful acts” in connection with the management and sale of a shopping mall (the “Property”), which also implicated Stonemar Cookeville Partners, LLC (“Cookeville Partners”) and Cookeville Retail Holdings, LLC (“Cookeville Retail”). In delivering its opinion, which centered on the nature of Delaware limited liability companies as creatures of contract, and thus, the controlling nature of the applicable operating agreements and contracts into which the parties had entered, the Delaware Court of Chancery (the “Court”) ruled that only Plaintiff’s claims which could be connected to an alleged wrongful amendment of the operating agreement of Cookeville Retail could survive Defendants’ Motion to Dismiss (the “Motion”).Read More
In Hill et al. v. Myers et al., C.A. No. 2018-0160 (Del. Ch. June 15, 2020), Master in Chancery Selena Molina (“Master”) issued a final report, recommending the Court of Chancery deny defendant’s (decedent’s close friend and confident, and attorney-in-fact during his final years) motion to dismiss claims of undue influence and breach of fiduciary duty. The Master determined that the motion to dismiss brought by family members of the late G. Robert Dickerson, should be denied because the family members provided sufficient factual allegations to support their claims and establish standing.Read More
In Zachman v. Real Time Cloud Services, LLC, the Delaware Court of Chancery analyzed competing expert reports valuing a Delaware limited liability company in connection with a breach of fiduciary duty claim. The Court also denied motions to exclude a valuation report and for sanctions relating to discovery abuses, and denied the Delaware limited liability company’s counterclaims for conversion and tortious interference with contract.Read More
In Shabbouei v. Potdevin, C.A. No. 2018-0847-JRS (Del. Ch. Apr. 2, 2020), the Delaware Court of Chancery dismissed a derivative suit against the board of directors (the “Board”) of lululemon athletica inc. (the “Company”) by a Company stockholder (“Plaintiff”) for failing to plead demand futility. The Court held that Plaintiff did not plead with the requisite particularity that the Board was self-interested in a Separation Agreement with the Company’s CEO Laurent Potdevin (“Potdevin”) negotiated by the Board and that the Board’s decision to settle with, instead of firing, Potdevin for cause was outside the bounds of proper business judgment.Read More
In a Memorandum Opinion, Palisades Growth Capital II, L.P. v. Alex Bäcker and Ricardo Bäcker and QLess, Inc. (Del. Ch. C.A. No. 2019-0931-JRS) the Delaware Court of Chancery found that actions taken at a board meeting were void because the defendant acted inequitably by formulating a secret plan to deceive the other board members into attending the meeting and then seized control. The Court stated that it will not sanction inequitable action by corporate fiduciaries simply because their act is legally authorized. The Court found that, while the defendants’ actions were technically authorized in the Company’s Charter and Bylaws, they took affirmative action to mislead the other board members in order to take control.Read More
The Delaware Court of Chancery granted in part and denied in part Plaintiff’s partial motion to dismiss, finding that the standard for breach of fiduciary duty was not met as against certain directors and officers of the Company based on allegations they failed to disclose facts relating to a tender offer, but was met as against the directors and one of the officers on allegations that they approved a tender offer where they were expected to receive a personal financial benefit.Read More