In Salberg v. Genworth Financial, Inc., C.A. No. 2017-0018-JRS (Del. Ch. July 27, 2017), the Delaware Court of Chancery denied the demand by the plaintiff stockholders (the “Stockholders”) for books and records from defendant Genworth Financial, Inc. (“Genworth”) under Section 220 of the Delaware General Corporation Law. Genworth asserted the attorney-client privilege and the Stockholders sought to invoke the “celebrated” Garner fiduciary exception. While the § 220 demand was made in the context of a pending merger, influential to the ruling was the fact that the requested books and records were relevant to a separate derivative action among the same parties. Although most of the Garner “good cause” factors weighed in favor of an exception to the privilege, the court held that the unique facts and circumstances surrounding the Stockholders’ demand barred them from accessing privileged information that was shielded from discovery in the derivative suit.
Master in Chancery Kim E. Ayvazian issued a final report in Ambient Heating & Cooling LLC v. Shepard, Jr., C.A. No. 9596-MA (Del. Ch. March 28, 2017), recommending that the Court of Chancery grant injunctive relief to a Delaware limited liability company seeking to enjoin a Delaware partnership from operating a heating, ventilation, and air conditioning (“HVAC”) business under a name and mark similar to its own.
In AM General Holdings v. The Renco Group, C.A. No. 7639-VCS (Del. Ch. Aug. 22, 2016), the Court of Chancery held that Delaware’s three-year statute of limitations barred contract claims brought by one party in a joint venture to produce Humvee automobiles against its joint venture partner.
AM General LLC (“AM General”) manufactured and sold specialized vehicles including the Humvee. Prior to 2004, its sole member was The Renco Group, Inc. (“Renco”). In August 2004, Renco and MacAndrews & Forbes Holdings Inc. (“M&F”) entered into a joint venture with Renco whereby they formed AM General Holdings LLC (“Holdco”). Renco contributed AM General to Holdco and M&F contributed cash. An M&F subsidiary became the managing member of Holdco. A Holdco Agreement set forth the mechanisms for distribution of profits between Renco and M&F and provided for certain contractual protections for Renco, restricting certain related party transactions, management fees, distributions and the like and giving Renco access to books and records of Holdco.
In Joel Z. Hyatt and Albert A. Gore, Jr. v. Al Jazeera America Holdings II, LLC and Al Jazeera International (USA) Inc., the Delaware Court of Chancery reviewed a motion for summary judgment in connection with a dispute regarding the advancement of fees for the litigation of various post-merger indemnification claims. The Chancery Court held that the plaintiffs were entitled to advancement for certain claims, but not for others, depending on whether the underlying facts of each claim required the plaintiffs to defend their actions as former officers or directors.
Plaintiff George Polk served dual roles in relation to RED Parent LLC (the “Company”). Polk was both a manager of the Company and an indirect owner of the Company through his interest in one of the Company’s members. In RED Capital Investment L.P. v. RED Parent LLC, the court held that “[b]ecause Polk made a proper request in his capacity as Manager and stated a proper purpose, and because the requested information is within RED Parent’s control, he is entitled, pursuant to Section 18-305(b), to inspect the requested books and records.”
In Gorman, IV v. Salamone, Halder and Westech Capital Corp. (“Westech”), the Delaware Chancery Court, in ruling on a motion to dismiss, issued another status quo order to temporarily fix the composition of the board of Westech while the ongoing dispute over control of Westech played out.
Plaintiff John Gorman (“Gorman”) a Westech stockholder and board member brought the Section 225 action based on two developments while a prior Section 225 temporarily designating three directors and keeping the CEO was on appeal before the Delaware Supreme Court.
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Chancery Court grants defendant’s motion to dismiss alternative claims of breach of the implied covenant of good faith and fair dealing, fraudulent inducement and negligent misrepresentation in earn-out dispute, holding that merger agreement set the standard to determine whether non-payment of earn-out was improper.
Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. No. 9522-CB (January 30, 2015) involves a dispute over whether earn-out payments are owed to the former equityholders of iWatt, Inc. (“iWatt”) pursuant to an Agreement and Plan of Merger dated as of July 1, 2013 (the “Merger Agreement”) whereby Dialog Semiconductor PLC (“Dialog”) acquired iWatt. Under the Merger Agreement, Dialog was to pay earn-out payments of up to $35 million depending on the post-merger revenues of Dialog’s Power Conversion Business Group, of which iWatt became a part post-closing. In addition, the terms of the Merger Agreement required that Dialog use its “commercially reasonable best efforts” to achieve and pay the earn-out payments in full. Revenues, however, fell short of the threshold amount to trigger the earn-out payments.
In Gassis v. Corkery, Civil Action No. 8868, Bishop Macram Max Gassis challenged his removal as Chairman of the Board and as a director of the Bishop Gassis Sudan Relief Fund, Inc., a Delaware charitable nonstock corporation (the “Fund”) dedicated to helping the people of southern Sudan. The Bishop also challenged the previous removal of two directors from the Fund’s board and the elections of two directors who replaced them.
Bishop Gassis’ removal at a 2013 board meeting came after years of friction with other board members, who contended that the Bishop was difficult to work with, negatively interacted with the Fund’s beneficiaries in Sudan, spent extravagantly on travels, invested in suspicious projects, and acted as though he had a personal interest in the Fund’s assets. These board members further argued that a provision of the Fund’s bylaws providing that the Bishop “shall serve [as Chairman of the Board] until his retirement or resignation” required him to be removed from the board upon his retirement as a Catholic Bishop, which was to occur on his seventy-fifth birthday on September 21, 2013.