In JJS, Ltd., et al., v. Steelpoint CP Holdings, LLC, et al., No. 2019-0072-KSJM (Del. Ch. 2019), the Delaware Court of Chancery (the “Court”) held that John Sarkisian, individually and on behalf of JJS, Ltd. and PPS Investors Ltd., L.P. (together, the “Plaintiffs”) successfully stated a claim for breach of fiduciary duty against a venture capital fund and its appointed board members in approving a transaction for the asset sale of Pro Performance Sports, LLC (the “Company”) where the common unitholders receive no compensation, the board members are under common ownership or employment with the venture capital fund, and one board member received an extraordinary severance package. The Court dismissed the Plaintiffs’ remaining claims, which turned on the interpretation of the voting rights provision of the limited liability company (“LLC”) agreement of the Company, finding that the operative language was not ambiguous and that a careful reading of the agreement would have given Plaintiffs notice of the voting rights mechanics.Read More
In Dietrichson v. Knott, C.A. No. 11965-VCMR (Del. Ch. Apr. 19, 2017), the Chancery Court dismissed the entire complaint brought by one member of a limited liability company against another member for paying himself an unauthorized salary and misappropriating the proceeds of a sale of the company’s assets, concluding that the claims made were derivative rather than direct stockholder claims. The Court also held that plaintiff’s claims were not “dual-natured” (i.e., having both direct and derivative aspects), because the plaintiff failed to plead that the transaction resulted in both an improper transfer of economic value and voting power from the minority equity holders to the controlling equity holder.