Delaware Docket

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


Oracle Special Litigation Committee Defeats Motion to Compel Production of Protected Work Product

By: Remsen Kinne and Michael C. Payant

In In re Oracle Corporation Derivative Litigation, Consolidated C.A. No. 2017-0337-SG (Del. Ch. July 9, 2020), the Delaware Court of Chancery (the “Court”) determined that a special litigation committee (the “SLC”) of the board of directors (the “Board”) of Oracle Corporation (“Oracle”) had properly asserted work production protection and denied lead plaintiff’s motion to compel production on the basis of (i) sufficient need and unavailability of information, (ii) waiver, or (iii) breach of fiduciary duty by the SLC.

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

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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Court Relies on Canons of Construction to find LLC Agreement Consent Right Inapplicable to Contemplated Sale of Subsidiary Stock

By: Scott E. Waxman and Michael C. Payant

In AM General Holdings LLC v. The Renco Group, Inc., et al., CA. No. 7639 and The Renco Group, Inc. v. MacAndrews AMG Holdings, LLC, et al., C.A. No. 7668-VCS (Del. Ch. June 26, 2020), the Delaware Court of Chancery (the “Court”) considered the latest dispute in a nearly decade-long litigation between The Renco Group, Inc. (“Renco”) and MacAndrews AMG Holdings LLC (“MacAndrews”), regarding interpretation of the Limited Liability Company Agreement (the “Agreement”) for AM General Holdings LLC (“Holdco”). Relying on canons of construction, the Court determined the Agreement did not provide Renco a consent right with respect to a contemplated subsidiary sale, and granted MacAndrews’ motion for judgment on the pleadings.

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By Scott E. Waxman and Caitlin M. Velasco

In In re Swisher Hygiene, Inc., 2020 WL 3125415 (Del. Ch. June 12, 2020), the Delaware Court of Chancery granted Swisher Hygiene, Inc.’s (“Swisher”) Motion for Interim Distribution and rejected Honeycrest Holdings, Ltd.’s (“Honeycrest”) opposition, holding that the proposed amount of funds to be held in a reserve for a pending lawsuit between the two parties (the “Honeycrest Litigation”) was sufficient security pursuant to Section §280(c)(1) of the Delaware General Corporation Law (the “DGCL”).

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By Scott E. Waxman and Sara M. Kirkpatrick

In Salladay v. Lev, C.A. No. 2019-0048-SG (Del. Ch. Feb. 27, 2020), the Delaware Court of Chancery held that former stockholders of Intersections, Inc. (“Intersections”) adequately pled facts that supported a pleading stage inference that WC SACD’s take-private merger of Intersections (the “Merger”) was subject to entire fairness review, because half of Intersections’ board stood on both sides of the transaction, and that it was reasonably conceivable that the merger was not entirely fair.

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Delaware Court of Chancery holds that directors on a special committee are interested in a going-private merger when the merger effectively extinguishes their personal liability from viable derivative litigation

By: Scott E. Waxman and Chris Fry

In Re AmTrust Financial Services, Inc. Stockholder Litigation, No. 2018-0396AGB (Del. Ch. 2020), George Karfunkel, Leah Karfunkel, and Barry Zyskind, the controlling stockholders of AmTrust Inc. (respectively, the “Controlling Stockholders” and “AmTrust”), teamed up with private equity firm, Stone Point Capital LLC (“Stone Point”), to take AmTrust private through a squeeze-out merger (the “Merger”), which closed in November 2018. Former stockholders (the “Plaintiffs”) challenged the Merger, asserting several claims for breach of fiduciary duty and aiding and abetting against the Controlling Stockholders, Stone Point, and AmTrust’s Board of Directors (the “Board”), among other participants in the Merger (collectively, the “Defendants”). DeCarlo, Gulkowitz, Fisch, and Rivera sat on both the Board and the special committee (the “Special Committee”), which negotiated the Merger and made recommendations to the Board regarding the same. The Delaware Court of Chancery (the “Court”) upheld the claims against the Board finding that the Controlling Stockholders and members of the Special Committee, except Rivera, were, among other issues, interested in the transaction, and therefore the Merger failed to comply with the procedures outlined in controlling precedent to obtain the benefit of a business judgment review, subjecting the Merger to the entire fairness standard of review. 

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out of the fire? the delaware court of chancery dismisses an action for lack of personal jurisdiction

By: Scott E. Waxman and Chris Fry

In Extell DV LLC v. Van A. Hemeyer and Blue Ledge Resort LLC, No. 2019-0683-SG (Del. Ch. 2020), Extell DV LLC, as majority equity-holder on behalf of three subsidiaries (respectively, the “Plaintiff” and the “Subsidiaries” and together, the “Plaintiffs”), brought suit alleging that the minority equity-holder in the Subsidiaries, Blue Ledge Resort LLC, and its principal, Van Hemeyer (respectively, “Blue Ledge” and “Hemeyer” and together, the “Defendants”) usurped a business opportunity of the Subsidiaries by seeking to purchase real property (the “Property”) in violation of the Subsidiaries’ limited liability company agreements (collectively, the “LLC Agreements”).

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By: Scott Waxman and Zack Sager

In Riker v. Teucrium Trading, LLC, the Delaware Court of Chancery granted in part and denied in part a member’s demand for books and records under Section 18-305 of the Delaware Limited Liability Company Act (the “LLC Act”).  The Court also denied the member’s request for attorneys’ fees.

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Court Finds Defendants Did Not Breach Fiduciary Duties by Causing Company to Accumulate Cash in Anticipation of Stock Redemption Rather than Investing in Long-Term Growth

By: David L. Forney and Michael C. Payant

In The Frederick Hsu Living Trust v. Oak Hill Capital Partners III, L.P., et al., C.A. No. 12108-VCL (Del. Ch. May 4, 2020), the Delaware Court of Chancery (the “Court”) held that the controlling stockholder, directors, and named officers of ODN Holding Corporation (the “Company”) had not breached their fiduciary duties to the Company when they chose to pursue a cash-accumulation strategy in anticipation of redeeming preferred shares, rather than investing in the Company’s business for long-term growth for the possible benefit of common stockholders.

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Chancery Court Reaffirms Delaware Policy of Broad Section 220 Stockholder Inspection Rights

By: Christopher J. Voss and Zane A. Madden

In Lebanon County Employees’ Retirement Fund and Teamsters Local 443 Health Services & Insurance Plan v. AmerisourceBergen Corp., C.A. No 2019-0527-JTL (Del. Ch. Jan. 13, 2020), the Delaware Court of Chancery (the “Court”) granted the plaintiffs’ demand to inspect the defendant’s books and records.  In so doing, the Court upheld the plaintiffs’ stated justifications for seeking review of the books and records as a proper purpose under Delaware law.

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Court of Chancery Hesitates to Dismiss Lawsuit, Stays Litigation Pending Texas Lawsuit

By: Scott E. Waxman and Marissa Leon

In EnVen Energy Corporation v. David M. Dunwoody, Jr., et al. (C.A. No. 2019-0579-KSJM), the Delaware Court of Chancery (the “Court”) stayed litigation pending the outcome of a separate lawsuit filed in Texas to give deference to a plaintiff’s chosen forum, to avoid wasting judicial resources and to foreclose potential conflicting rulings.

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