In Terramar Retail Centers, LLC v. Marion #2-Seaport Trust U/A/D/ June 21, 2002, Civil Action No. 12875-VCL (Del. Ch. May 22, 2019), Terramar Retail Centers, LLC (“Terramar”), the manager and 50% member of Seaport Village Operating Company, LLC, a Delaware limited liability company (the “Company”), filed an action, seeking a declaration that it may dissolve the Company and sell its assets, and that Terramar appropriately determined the allocation of the sale proceeds. The Delaware Court of Chancery held that Terramar appropriately exercised its dissolution right under the Company’s operating agreement, because the fair market value and purchase price proposed by Terramar reflected its honest opinion and Terramar did not negotiate in bad faith. The Court further held that Terramar’s waterfall determination was correct because a settlement release and the statute of limitations barred the counterclaims raised, and Terramar did not breach its contractual obligations or fiduciary duties. The Court ruled in favor of Terramar on all claims, supporting Terramar’s ability to dissolve the Company, sell its assets, and distribute the proceeds in accordance with Terramar’s allocation of the sale proceeds.Read More
In In re Tangoe, Inc. Stockholders Litigation, C.A. No. 2017-0650-JRS (Del. Ch. Nov. 20, 2018), the Delaware Court of Chancery denied the director defendants’ motion to dismiss the stockholder plaintiffs’ claim for breach of fiduciary duties on the basis that the stockholder vote approving the transaction was not informed and the defendants were therefore not entitled to business judgment rule deference at the pleading stage. The Court also found that the plaintiffs had adequately pled a breach of the fiduciary duty of loyalty against each of the director defendants, which would not be covered by the exculpatory clause in the company’s certificate of incorporation.Read More
In a memorandum opinion, Samuel Zalmanoff v. John A. Hardy et. al, Civil Action No. 12912-VCS (Del. Ch. November 13, 2018), the Delaware Court of Chancery granted summary judgment in favor of the defendant board of directors of Equus Total Return, Inc. (“Equus”), ruling that the board of directors (the “Board” or “Defendants”) adequately fulfilled their disclosure obligations because the facts allegedly omitted from the operative proxy statement (the “Proxy”) were indisputably contained in the Form 10-K (the “10-K”), which the Board provided to stockholders in the same mailing as the Proxy.Read More
In In re PLX Technology, Inc. Stockholders Litigation, C.A. No. 9880-VCL (Del. Ch. October 16, 2018), the Delaware Chancery Court found that the actions of an activist stockholder in the context of a sale transaction aided and abetted the defendant board of directors in a breach of its fiduciary duty of disclosure but that there was insufficient evidence that the breach ultimately resulted in damages.
By Joanna Diakos and Tom Sperber
In Kyle Ellis (AbbVie, Inc.) v. Richard A. Gonzalez, et al., the Delaware Chancery Court dismissed a derivative suit for failing to make a demand and to allege particularized facts demonstrating that demand would have been futile. Kyle Ellis (“Plaintiff”) alleged breaches of fiduciary duty by the CEO of AbbVie, Inc. (“AbbVie”), Richard A. Gonzalez (“Gonzalez”), and the individual members of AbbVie’s board of directors (“Director Defendants”) in connection with a proposed but ultimately abandoned corporate inversion between pharmaceutical giants AbbVie and Shire plc (“Shire”). The Court held that because AbbVie’s certificate of incorporation contained a Section 102(b)(7) exculpatory clause, Plaintiff had to allege that a majority of the board faced a substantial likelihood of liability for breaching the duty of loyalty in order for demand to be excused. Ultimately, Plaintiff failed to do that.
At all relevant times, Plaintiff was a minority stockholder of AbbVie, a Delaware corporation headquartered in Chicago, Illinois. Shire was an Island of Jersey biopharmaceutical company with its headquarters in Dublin, Ireland.
In Jennifer L. Stritzinger v. Dennis Barba, et al. Civil Action No. 12776-CB, the Delaware Court of Chancery granted the defendants’ motion to dismiss Stritzinger’s derivative lawsuit for breach of fiduciary duty for alleged mismanagement of Newark Country Club (the “Club”), a private corporation located in Newark, Delaware. The Court dismissed Stritzinger’s suit finding Stritzinger failed to establish demand futility before filing suit against the Club.
In The Cirillo Family Trust v. Aram Moezinia, Lewis Tepper, Mark Walter, and DAVA Pharmaceuticals, Inc., C.A. No. 10116-CB (Del. Ch. Jul. 11, 2018), the Delaware Chancery Court granted the defendants’ motion dismissing certain claims arising from the 2014 merger between DAVA Pharmaceuticals, Inc. (“DAVA”) and an affiliate of Endo Pharmaceuticals, Inc. (such affiliate, “Endo”). The Court held that Section 205 of the Delaware General Corporation Law (the “DGCL”) validated deficiencies in the written consents to the merger (the “Written Consents”) and a director’s reasonable, good faith reliance on the advice of legal counsel hired for specific expertise can exculpate the director for a fiduciary duty breach. The Court also granted part of the plaintiff’s motion to amend the complaint to add a claim against certain directors in their capacities as officers of DAVA.
In In re Hansen Medical, Inc. Stockholders Litigation, C.A. No. 12316-VCMR (Del. Ch. June 18, 2018), the Delaware Court of Chancery found that plaintiffs had stated a reasonably conceivable claim that the acquisition of Hansen Medical, Inc. (“Hansen”) by Auris Surgical Robotics, Inc. (“Auris”) should be reviewed under the entire fairness standard of review because the transaction involved a controlling stockholder group which extracted benefits from the transaction not shared with the minority. The Court denied motions to dismiss filed by the alleged control group and Hansen’s directors and officers.
In Steinberg on behalf of Hortonworks, Inc. v. Bearden, C.A. No. 2017-0286-AGB (Del. Ch. May 30, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the stockholder plaintiff’s derivative claims for breach of fiduciary duties under Court of Chancery Rule 23.1, because the plaintiff failed to make a pre-suit demand or demonstrate that doing so would be futile. The Court found that the plaintiff failed to plead particularized facts sufficient to raise reasonable doubt that a majority of the directors on the Hortonworks, Inc. board could have exercised their independent and disinterested business judgment in responding to a pre-suit demand. Read More
In Richard B. Gamberg 2007 Family Trust v. United Restaurant Group, L.P., C.A. No. 10994-VCMR (Del. Ch. January 26, 2018), the Court of Chancery held that limited partner, Richard B. Gamberg 2007 Family Trust (the “Plaintiff”), failed to meet its burden of proof with respect to various claims against United Restaurant Group L.P. (the “Partnership”), Atlantic Coast Dining, Inc. (the “General Partner”), and the directors/shareholders of the General Partner (the “Shareholder Defendants”; together with the Partnership and the General Partner, the “Defendants”), which included a mistake-based reformation claim, among other breach of contract and breach of fiduciary duty claims.
In Cumming v. Edens, et al., C.A. No. 13007-VCS (Del. Ch. Feb. 20, 2018), the Court of Chancery denied a motion to dismiss a derivative suit for breach of fiduciary duties brought by a stockholder of New Senior Investment Group, Inc. (“New Senior”) against New Senior’s board of directors (the “Board”) and related parties in connection with New Senior’s $640 million acquisition of Holiday Acquisition Holdings LLC (“Holiday”). The Court made clear that compliance with Section 144 does not necessarily provide a safe harbor against claims for breach of fiduciary duty and invoke business judgment review of an interested transaction. Because the complaint alleged with specificity “that the Board acted out of self-interest or with allegiance to interest other than the stockholders,” the court applied the entire fairness standard of review and concluded that the transaction was not fair to New Senior stockholders. Read More
In Christopher Miller, et al., v. HCP & Company, et al., memorandum opinion 180201, the Court of Chancery granted a motion to dismiss because the underlying Limited Liability Company Agreement did not contain a “gap” for an implied covenant of good faith and fair dealing to fill. Rather, the Court of Chancery held that the Limited Liability Company Agreement contained negotiated investor favorable provisions regarding good faith and fair dealing, thus undercutting any argument that the Court of Chancery should read an implied covenant into the operating agreement.