Uncategorized – Page 2 – Delaware Docket

CHANCERY COURT FINDS EXCUSABLE NEGLECT AND VACATES DEFAULT JUDGMENT

Oct 22 2020

In James Rivest v. Hauppauge Digital, Inc., C.A. No. 2019-0848-PWG (Del. Ch. Aug. 3, 2020), the Delaware Court of Chancery examined the circumstances in which the Court will set aside a default judgment under Court of Chancery Rule 60(b)(1). The Court’s decision illustrates the context in which a party’s failure to timely respond may warrant relief from a previously issued court order. It also highlights the Court’s willingness to consider the unique challenges imposed by the COVID-19 pandemic in exercising its discretion.

Delaware Chancery Court Parses Valuation Methods in Battle of the Experts

Oct 15 2020

By: David L. Forney and Zane A. Madden

In William Richard Kruse (the “stockholder”), v. Synapse Wireless, Inc. (the “Company”), C.A. No. 12392-VCS (Del. Ch. July 14, 2020), the Delaware Court of Chancery (the “Court”) held that, after its review of the evidence as factfinder, the Company had carried its burden of proving a reliable appraisal of its fair value related to its 2016 merger transaction. As is typical in appraisal disputes, each party’s expert presented wildly different valuations. In this lengthy case, the Court nevertheless analyzed each proposed valuation model on its own merits and did not engage in compromise jurisprudence in order to achieve a sense of fairness for one party. In coming to its conclusion, the Court adopted the Company’s discounted cash flow valuation method, eschewing all other methods as unreliable in this case. The Court’s value was almost half of the merger transaction value upon which the stockholder exercised its appraisal rights.

CHANCERY COURT CLARIFIES MFW PROTECTIONS MUST BE IMPLEMENTED PRIOR TO ANY SUBSTANTIVE ECONOMIC NEGOTIATIONS

Sep 30 2020

By: David Forney and Claire Suni

In In re HomeFed Corporation Stockholder Litigation, C.A. No. 2019-0592-AGB (Del. Ch. July 13, 2020), the Delaware Court of Chancery (the “Court”) found that the controlling stockholder of HomeFed Corporation undertook substantive economic negotiations with its minority stockholders in connection with a proposed squeeze-out merger transaction prior to implementing the procedural protections set forth in Kahn v. M&F Worldwide Corp. (“MFW”). As a result, the Court ruled that the appropriate standard of review for the plaintiff’s claims of breach of fiduciary duty against the controlling stockholder and the board of directors was entire fairness, and not business judgment. The Court further found that two of the company’s directors were not independent and therefore could not avail themselves of exculpatory language in the company’s certificate of incorporation. The Court denied in full the defendants’ motion to dismiss under Rule 12(b)(6) for failure to state a claim for relief.

FAILED BREACH OF CONTRACT CLAIMS UNDERSCORE CHANCERY COURT’S FOCUS ON CONTRACTUAL PLAIN LANGUAGE OVER OUTSIDE EVIDENCE

Sep 17 2020

By: Scott Waxman and Adam Heyd

In Braga Investment & Advisory, LLC v. Yenni Income Opportunities Fund I, L.P., C.A. No. 2017-0393-AGB (Del. Ch. June 8, 2020), Braga Investment & Advisory, LLC (“Braga”), a minority investor in Steven Feller, P.E., LLC (“Newco”) alleged that Yenni Income Opportunities Fund I, L.P. (the “Fund”), the majority investor in Newco, had breached a purchase agreement for interests in Newco when the Fund amended it without Braga’s consent. Braga also contended that the Fund breached its co-investment agreement with Braga when it revoked Braga’s right to receive board packages under that agreement. The Delaware Court of Chancery (the “Court”) concluded that the Fund’s amendment of the purchase agreement did not require Braga’s consent, and that the Fund did not breach Braga’s right to receive board packages based on the ordinary use of that term.

CHANCERY COURT RULES ON AGRIBUSINESS SALE FRAUD SUIT

Sep 16 2020

By: Scott E. Waxman and Marissa Leon

In Agspring Holdco, LLC, et al. v. NGP X US Holdings, L.P., et al. (C.A. No. 2019-0567-AGB), the Delaware Court of Chancery (the “Court”) tolled the statute of limitations on claims by the purchaser of an agricultural commodities company and refused to dismiss the majority of fraud and related claims against officers of the company.

Chancery Court Dismisses Plaintiff’s Claims against Three Former Members of the Board

Aug 26 2020

By: Scott Waxman and Pouya Ahmadi

In Jacob Hasher Hindlin v. Lukasz Gottwald et al., C.A. No. 2019-0586-JRS (Del. Ch. July 22, 2020), the Delaware Court of Chancery (the “Court”) dismissed Plaintiff’s claims against three former members of the board of managers of Core Nutrition, LLC (“Core” or the “Company”) for breach of fiduciary duty and the implied contractual covenant of good faith and fair dealing.

Delaware Court of Chancery Dispenses with Multiple Motions and Claims as Business Partners Take a “Kitchen Sink” Approach to Ascribing Blame and Seeking Recourse in Business Endeavor

Aug 13 2020

By Scott Waxman and Jonathan Shallow

Stone & Paper Investors, LLC, et al., v. Richard Blanch et al., C.A. No. 2018-0394-PAF (Del. Ch. June 29, 2020) involved a barrage of claims and counterclaims among LLC members and managers, including, misappropriation of company funds, breach of LLC agreement, fraud, conversion, unjust enrichment, and aiding and abetting breaches of fiduciary duty. The Court of Chancery resolved a motion to dismiss the counterclaims and third-party claims and, in doing so, provided further guidance on findings of lack of personal jurisdiction, claims for fraudulent inducement and fraud, claims for conversion and aiding and abetting breaches of fiduciary duty.

CHANCERY COURT HONORS SHAREHOLDER REPRESENTATIVE PROVISION HOLDING SELLING STOCKHOLDERS ARE NOT REAL PARTIES-IN-INTEREST

Aug 11 2020

By: Shoshannah Katz and Claire Suni

In Fortis Advisors LLC, v. Allergan W.C. Holding Inc., C.A. No. 2019-0159-NTZ (Del. Ch. May 14, 2020), a shareholder representative appointed pursuant to a merger agreement asserted a claim on behalf of selling stockholders for certain contingent payments. The defendant surviving corporation brought a motion in the Delaware Court of Chancery (the “Court”) to (i) compel the selling stockholders to participate in discovery as parties-in-interest to the action and to be subject to trial subpoenas as parties or (ii) compel the shareholder representative to procure and produce discovery from the selling stockholders. The Court denied the motion in full.

Chancery Court Holds Late Breach of Fiduciary Duty Claim Is Barred By Laches

Aug 04 2020

By: Annette Becker; Pouya Ahmadi; Julia Knitter

In Gallagher Industries, LLC v. William M. Addy, et al., C.A. No. 2018-0106-SG (Del. Ch. May 29, 2020), the Delaware Court of Chancery (the “Court”) held that because Gallagher Industries, LLC (the “Plaintiff”) decided not to pursue an appraisal action following a problematic cash-out merger five years earlier, the Plaintiff’s tolling claim against William M. Addy and Joseph E. Eastin (the “Defendants”) for breach of fiduciary duty for disclosure weaknesses was barred by laches.

Chancery Court Declines to Dismiss Breach of Contract, Implied Covenant and Declaratory Judgment Claims Stemming from Termination Purportedly for Cause

Jul 28 2020

By: Scott E. Waxman, Michael C. Payant, and Julia M. Knitter

In William Patrick Sheehan, et al. v. AssuredPartners, Inc., et al., C.A. No. 2019-0333-AML (Del. Ch. May 29, 2020), the Delaware Court of Chancery (the “Court”) granted in part and denied in part a motion to dismiss brought by insurance brokerage firm, AssuredPartners, Inc. (“AP Inc.”), and its private equity backers (collectively, the “Defendants”) finding that plaintiffs’ claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment survived under the minimal pleading standard for a motion to dismiss.

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