Delaware Docket

Timely, brief summaries of cases handed down by the Delaware Court of Chancery and the Delaware Supreme Court.

 

DELAWARE COURT OF CHANCERY DENIES MOTIONS TO DISMISS CLAIMS ALLEGING BREACH OF CONTRACT

By Whitney J. Smith and Mehreen Ahmed

In Re WeWork Litigation, C.A. No. 2020-0258-AGB (Del. Ch. Oct. 30, 2020), concerns a transformative transaction involving The We Company, a real estate company specializing in shared workspaces more commonly known as WeWork. Adam Neumann (“Neumann”), the CEO of WeWork, brought a case against both SoftBank Group (“SBG”) and SoftBank Vision Fund (AIV MI) L.P. (“Vision Fund”) for two counts of breach of contract and breach of fiduciary duty as controlling stockholders. SBG and Vision Fund filed partial motions to dismiss the complaint. Vision Fund, but not SBG, sought to dismiss the contract claim against it, whereas, both SBG and Vision Fund sought to dismiss the fiduciary duty claim. In a memorandum opinion, the Delaware Court of Chancery denied Vision Fund’s motion to dismiss the contract claim, except as to one provision, and granted the motion to dismiss the fiduciary duty claim as that claim was duplicative of the contract claims against them.

Read More

WHAT’S SELECTED TO HAPPEN IN VEGAS, STAYS IN VEGAS: CHANCERY COURT ENFORCES FORUM SELECTION CLAUSE IN RE-DOMESTICATED NEVADA CORPORATION BYLAWS, DESPITE ALLEGED VIOLATIONS OCCURRING WHILE ENTITY WAS A DELAWARE CORPORATION

By David L. Forney and Lauren McFadden

In Sylebra Capital Partners Master Fund, Ltd., and P Sylebra Ltd. v. Ronald O. Perelman et al., C.A. No. 2019-0843-JRS (Del. Ch. October 9, 2020), Sylebra Capital Partners Master Fund, Limited and P Sylebra Ltd. (together, “Plaintiff”), had sued Scientific Games, a Nevada corporation (“Company”), and its controlling stockholder and members of its Board (“Defendants”) for breaches of fiduciary duty and violations of the Delaware General Corporation Law (“DGCL”). The Company’s Nevada bylaws, however, contained a provision requiring stockholders to bring claims for breach of fiduciary duty in the courts of Clark County, Nevada. The Delaware Court of Chancery (the “Court”) granted Defendants’ motion to dismiss and held that Plaintiff’s claims were subject to the forum selection provision in the bylaws of the Company and must be brought in Nevada courts.

Read More

“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.

Read More

Delaware Court of Chancery Finds Oral Agreement to Form a Joint Venture Enforceable

By: Scott Waxman and Serena Hamann

In Leonard F. Iacono Sr. et al. v. Estate of Joseph M. Capano et al, C.A. No. 11841-VCL (Del. Ch. June 29, 2020), the Delaware Court of Chancery denied the defendants’ motion for summary judgment because the evidence, construed in favor of the Plaintiffs, could support a finding that an enforceable oral agreement to form a joint venture existed between the parties.

Read More

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.

Read More

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.

Read More

DIRECT AND DERIVATIVE? CHANCERY COURT CERTIFIES INTERLOCUTORY APPEAL, ASKS SUPREME COURT TO CLARIFY DUAL CHARACTER STOCKHOLDER CLAIMS

By Scott E. Waxman and Cate H. Gelband

In In re Terraform Power, Inc. Stockholders Litigation, C.A. No. 2019-0757-SG (Del. Ch. November 24, 2020), the Delaware Court of Chancery (the “Court”) granted defendants’ Application for Certification of Interlocutory Appeal, giving the Delaware Supreme Court (the “Supreme Court”) an opportunity to clarify its decision in Gentile v. Rossette (“Gentile”) under which stockholders’ claims for a specific type of breach of fiduciary duty can have “dual character” as both derivative and direct. The Court relied on two factors under Delaware Supreme Court Rule 42 (“Rule 42”)—whether consideration of the appeal may end the litigation, and whether review of the appeal may serve considerations of justice—and held that the matter presented “a rare case” in which an interlocutory appeal was justified.

Read More

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.

Read More

MANAGEMENT CANNOT UNILATERALLY PRECLUDE DIRECTORS FROM OBTAINING PRIVILEGED COMMUNICATIONS

By: Rich Minice and Annette Becker

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

CHANCERY COURT DISMISSES COMPLAINT, HOLDING THAT DIRECTORS WERE NOT CONFLICTED IN APPROVING A MERGER SIMPLY DUE TO THE THREAT OF A LOOMING PROXY CONTEST

By: Lisa Stark and Thomas Meyer

In Rudd v. Brown, et al, C.A. No. 2019-0775 MTZ (Del. Ch. Sept. 11, 2020), the Delaware Court of Chancery (the “Court”) dismissed the plaintiff’s claim that the board members and the chief financial officer of Outerwall, Inc. (the “Company”) disloyally pursued and disclosed a two-step merger, finding that the plaintiff failed to show that the defendants were conflicted, despite the potential that the director defendants would lose their seats in connection with a threatened proxy contest.

Read More

Can’t Have It Both Ways: Court Grants Grupo México’s 12(b)(2) Motion To Dismiss for Lack of Personal Jurisdiction

By Joanna Diakos and Ian Edwards

In Lacey v. Mota-Velasco, et al. (C.A. No. 2019-0312-SG), the Delaware Court of Chancery (the “Court”) dismissed Grupo México S.A.B, de C.V (“Grupo México”) from a derivative lawsuit filed by a stockholder of Southern Copper Corporation (“Southern Copper”) on the grounds that the Court lacked personal jurisdiction over Mexico-based Grupo México.

Read More

Court of Chancery Allows for Interim Distribution to Stockholders of Altaba, Inc., with Some Conditions

By Scott E. Waxman and B. Ashby Hardesty, Jr.

In In re Altaba, Inc., C.A. No. 2020-0413-JTL, Vice Chancellor Laster authorized Altaba, Inc. (the “Company”), a company pursuing dissolution under Sections 280 and 281(a) of the Delaware General Corporation Law (the “DGCL”), to make an interim distribution to its stockholders, on the condition that it reserved funds for lawsuits pending in Canada resulting from data breaches that the Company disclosed in 2016 (the “Canadian Actions Claim”). Vice Chancellor Laster also allowed the Company to hold back less than the full amount of security requested by Carsten Rosenow, an individual who filed a breach of privacy lawsuit against the Company (the “Rosenow Claim”).

Read More

Copyright © 2019, K&L Gates LLP. All Rights Reserved.