In FrontFour Capital Group LLC v. Taube, C.A. No. 2019-0100-KSJM (Del. Ch. Mar. 11, 2019), the Delaware Court of Chancery found that, due to their conduct in connection with two mergers of affiliated entities, controlling stockholders and special committee members breached their fiduciary duties to target stockholders under the entire fairness standard of review and failed to provide certain material disclosures to stockholders.Read More
In In Re: Appraisal of Jarden Corporation, C.A. No. 12456-VCS (Del. Ch. Jul. 19, 2019), the Delaware Court of Chancery (the “Court”) determined in a statutory appraisal action that, in connection with a merger, the fair value of Jarden Corporation was best represented by the unaffected market price of the company’s shares.Read More
In Chester County Employees’ Retirement Fund v. KCG Holdings, Inc. et al, C.A. No. 2017-0421-KSJM (Del. Ch. June 21, 2019), the Delaware Court of Chancery denied the defendants’ motion to dismiss claims of breach of fiduciary duty, aiding and abetting, and civil conspiracy brought against the largest stockholder of KCG Holdings, Inc. (“KCG”), its directors, and its long time financial advisor for failure to maximize value for KCG stockholders when negotiating the merger transaction due to certain actions taken by influencers during the sale process. The Court held that the plaintiff stockholders adequately pled their claims against the defendants to avoid dismissal of claims.Read More
By Scott Waxman and Nadia Brooks
In Mehta v. Mobile Posse, Inc., six causes of action were before the Delaware Court of Chancery in Plaintiff’s complaint alleging inadequate stockholder notice and breach of directors’ fiduciary duty of disclosure regarding the merger of Mobile Posse. The defendants, Mobile Posse and its board, asserted motions for judgments on the pleadings for all counts, arguing they were entitled to the judgments because the violations were remedied by the supplemental notice they issued. The Court denied all but one of defendants’ motions, finding numerous deficiencies in the notice process and finding that the merger was not entirely fair.Read More
In Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. No. 2018-0517-KSJM (Del Ch. May 29, 2019) the Court of Chancery held that a privileged communications provision in a merger agreement protected the pre-merger communications between the seller and the seller’s legal counsel in spite of the buyer’s insistence that the privilege had transferred in the merger or had been waived.Read More
In In re Xura, Inc. Stockholder Litigation (C.A. No. 12698-VCS), the Delaware Court of Chancery (the “Court”) denied a motion to dismiss brought by defendants Phillippe Tartavull (“Tartavull”) and Siris Capital Group (“Siris”, and collectively with Tartavull, the “Defendants”) in a case filed by Obsidian Management LLC (“Obsidian” or “Plaintiff”) for breach of fiduciary duty in connection with the sale of Xura, Inc. (“Xura”) to a Siris affiliate. The Court held that Plaintiff pled a viable breach of fiduciary duty claim against Tartavull as CEO of Xura. The Court granted a motion to dismiss as to an aiding and abetting claim brought against Siris holding that Plaintiff failed to plead a viable claim.Read More
In Kendall Hoyd and Silver Spur Capital Partners, LP v. Trussway Holdings, LLC (C.A. No. 2017-0260-SG), the Delaware Court of Chancery (the “Court“) addressed the perennial challenges related to corporate valuations. The central question involved the determination of a corporation’s proper price-per-share in the context of an appraisal action arising from the conversion of a corporation into an LLC by merger. The Court rejected the use of “comparable companies” and “precedent transaction” analyses, defaulting to the use of discounted cash flow (DCF) analyses in the formulation of its corporate valuation.Read More
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 Charles Almond, et al. v. Glenhill Advisors LLC, et al., C.A. No. 10477-CB, Chancellor Bouchard ruled in favor of the defendants, directors of furniture company Design Within Reach Inc. (the “Company”) and Glenhill Capital Management LP (“Glenhill”), on all of the plaintiff-investors’ claims relating to the 2014 acquisition of DWR by Herman Miller, Inc. (“Herman Miller”). In doing so, Chancellor Bouchard judicially validated certain measures taken by Herman Miller to rectify an error that had diluted its ownership stake in the Company. Chancellor Bouchard also dismissed claims challenging transactions through which the Company’s board members received additional equity in the Company before the merger, holding that because these claims were derivative in nature, the plaintiffs’ standing to bring such claims were extinguished because of the merger.
By Joanna Diakos and Tom Sperber
In Kyle Ellis (AbbVie, Inc.) v. Richard A. Gonzalez, et al., the Delaware Chancery Court dismissed a derivative suit for failing to make a demand and to allege particularized facts demonstrating that demand would have been futile. Kyle Ellis (“Plaintiff”) alleged breaches of fiduciary duty by the CEO of AbbVie, Inc. (“AbbVie”), Richard A. Gonzalez (“Gonzalez”), and the individual members of AbbVie’s board of directors (“Director Defendants”) in connection with a proposed but ultimately abandoned corporate inversion between pharmaceutical giants AbbVie and Shire plc (“Shire”). The Court held that because AbbVie’s certificate of incorporation contained a Section 102(b)(7) exculpatory clause, Plaintiff had to allege that a majority of the board faced a substantial likelihood of liability for breaching the duty of loyalty in order for demand to be excused. Ultimately, Plaintiff failed to do that.
At all relevant times, Plaintiff was a minority stockholder of AbbVie, a Delaware corporation headquartered in Chicago, Illinois. Shire was an Island of Jersey biopharmaceutical company with its headquarters in Dublin, Ireland.
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.
In Sciabacucchi v. Liberty Broadband Corp., et al., C.A. No. 11418-VCG (Del. Ch. July 26, 2018), the Delaware Court of Chancery denied in part a motion to dismiss brought by defendants Liberty Broadband Corporation (“Liberty”), Liberty’s largest stockholder, and the board of directors of Charter Communications, Inc. (“Charter,” and collectively “Defendants”), for failure to plead demand futility. The Court ruled that the Plaintiff, a stockholder of Charter, pleaded sufficient facts to support a reasonable inference that the influence of Liberty’s largest stockholder would prevent the Charter board of directors from exercising independent and disinterested business judgment when considering a demand to bring a lawsuit on behalf of the corporation.