Catagory:Uncategorized

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Chancery Court Declines to Expand Gentile Doctrine
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Delaware Chancery Court reaffirms need for factual particularity in assessing demand futility and granted Defendants’ motion to dismiss
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Chancery Court Sustains Derivative Action Alleging Caremark Claims
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An Insolvent Corporations May Transfer All of its Assets to its Creditors without Stockholder Approval
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Music Industry Executive Lawsuit against Record Label Partially Dismissed
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“consistent with longstanding principles of law and capitalism”: chancery court finds that a bidder cannot be liable for directors’ breach of fiduciary duty without knowledge of the breach
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MetLife Stockholders Demand Futility Claims Dismissed
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Chancery Court Enforces Merger Agreement Milestone Payment Despite Time and Cost to Bring Experimental Drug to Market
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CHANCERY COURT APPLIES INTERNAL AFFAIRS DOCTRINE TO DECLARATORY ACTION FOR INSPECTION RIGHTS SOUGHT UNDER CALIFORNIA LAW
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Court Dismisses Contractual Claims for Advancement and Indemnification

Chancery Court Declines to Expand Gentile Doctrine

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.

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Delaware Chancery Court reaffirms need for factual particularity in assessing demand futility and granted Defendants’ motion to dismiss

By: Jessica Pearlman and Mary Nicholas

In a letter opinion, Mark Gottlieb, et al., v. Jonathan Duskin, et al, Civil Action No. 2019-0639-MTZ (Del. Ch. November 20, 2020), the Delaware Court of Chancery granted Defendants’ motion to dismiss Plaintiff’s complaint in its entirety for failure to satisfy, with enough factual particularity, that a demand that the board of directors pursue the corporate claim would have been futile under Rule 23.1.

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Chancery Court Sustains Derivative Action Alleging Caremark Claims

By Scott Waxman and Claire Suni

In Teamsters Local 443 Health Services & Insurance Plan, et al. v. John G. Chou, et al., C.A. No. 2019-0816-SG (Del. Ch. August 24, 2020), the Delaware Court of Chancery (the “Court”) held that stockholders of AmerisourceBergen Corporation (“ABC”), a pharmaceutical sourcing and distribution company, adequately pled facts supporting the inference that certain ABC officers and directors breached fiduciary duties and acted in bad faith to consciously disregard a variety of red flags of illegal activity in connection with ABC’s packaging and distribution of cancer medications. The Court denied in full the defendants’ motion to dismiss for failure to state a claim for relief.

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An Insolvent Corporations May Transfer All of its Assets to its Creditors without Stockholder Approval

By: Lisa R. Stark and Marissa Leon

In Stream TV Networks, Inc. v. SeeCubic, Inc., C.A. No. 2020-0310-JTL (Del. Ch. Dec. 8, 2020), the Court of Chancery of the State of Delaware (the “Court”) ruled that all of the assets of an insolvent 3D television technology company, Stream TV Networks Inc. (“Stream”), could be transferred to its secured creditors even though Stream did not seek  stockholder approval of the sale under Section 271 of the General Corporation Law of the State of Delaware (the “DGCL”) or its certificate of incorporation. Accordingly, the Court enforced an agreement between Stream and its secured creditors pursuant to which Stream agreed to transfer all of its assets to an affiliate of its two secured creditors.

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Music Industry Executive Lawsuit against Record Label Partially Dismissed

By Scott E. Waxman and Marissa Leon

In Todd Moscowitz v. Theory Entertainment LLC (C.A. No. 2019-0780-MTZ), the Court of Chancery of the State of Delaware (the “Court”)  narrowed the claims in a lawsuit challenging the buyout of a music industry executive’s ownership interest in a record label he co-founded.

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“consistent with longstanding principles of law and capitalism”: chancery court finds that a bidder cannot be liable for directors’ breach of fiduciary duty without knowledge of the breach

By: Scott Waxman and Jeremy Crites

In Jacobs v. Meghji, et al. (C.A. No. 2019-1022-MTZ), the Delaware Court of Chancery (the “Court”) dismissed Mark Jacobs’ direct and derivative claims that Ares Management Corporation (“Ares”) aided and abetted breaches of fiduciary duty allegedly committed by directors of Infrastructure &  Energy Alternatives, Inc. (“IEA”) on the grounds that Jacobs failed to plead a necessary element of the claim. Additionally, the Court dismissed Jacobs’ claim of unjust enrichment against Ares, again finding that Jacobs failed to plead a necessary element of the claim.

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MetLife Stockholders Demand Futility Claims Dismissed

By: Scott E. Waxman and Marissa Leon

In the matter of In Re MetLife Inc. Derivative Litigation (Consol. C.A. No. 2019-0452-SG), the Delaware Court of Chancery held that stockholder plaintiffs seeking to hold corporate fiduciaries liable to MetLife, Inc. for failure to adequately oversee the operation of the business failed to plead facts sufficient to imply director liability or otherwise excuse demand under Rule 23.1.

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Chancery Court Enforces Merger Agreement Milestone Payment Despite Time and Cost to Bring Experimental Drug to Market

By: Scott Waxman and Zane Madden

In Shareholder Representative Services LLC v. Shire US Holdings, Inc. and Shire Pharmaceuticals LLC , C.A. No. 2017-0863-KSJM (Del. Ch. October 12, 2020), the Delaware Court of Chancery (the “Court”) held that Shire US Holdings, Inc.’s (together with Shire Pharmaceuticals LLC, “Shire”) failure to initiate Phase III clinical trials for an experimental drug acquired via merger was improper because said failure was due to a series of development delays routine to the pharmaceutical industry and every-day business decisions, in contravention of the language of the merger agreement.

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CHANCERY COURT APPLIES INTERNAL AFFAIRS DOCTRINE TO DECLARATORY ACTION FOR INSPECTION RIGHTS SOUGHT UNDER CALIFORNIA LAW

By: Annette E. Becker and Claire Suni

In Juul Labs, Inc. v. Daniel Grove, C.A. No. 2020-0005-JTL (Del. Ch. August 13, 2020), defendant and e-cigarette maker Juul Labs, Inc. (“Juul”) is a privately held Delaware corporation with its principal place of business in California. The Delaware Court of Chancery (the “Court”) granted in part Juul’s motion for declaratory judgment, which sought confirmation that a stockholder seeking inspection rights was limited to rights and remedies under the Delaware General Corporation Law (“DGCL”), and could not apply California law, among other things. The Court held that inspection rights are a matter of internal affairs under the internal affairs doctrine articulated by the Supreme Court, and thus Delaware law applies.

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Court Dismisses Contractual Claims for Advancement and Indemnification

By: Scott E. Waxman and Marissa Leon

In Nathan Brick v. The Retrofit Source, LLC, et al. (C.A. No. 2020-0254-KSJM), the Court of Chancery in the State of Delaware (the “Court”) dismissed claims for advancement and indemnification by a former officer of an automobile lighting products supplier.

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