Tag: Breach of Fiduciary Duty

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.

Read More

Chancery Court Rules on Fraud Claims and Breach of Fiduciary Duty Claim against a Solar Project Fund and its Manager

By: Scott E. Waxman and Marissa Leon

In HOMF II Investment Corp., et al v. Joaquin Altenberg, et al. (C.A. No. 2017-0293-JTL), the Delaware Chancery Court (the “Court”) ruled in favor of the plaintiffs on a breach of fiduciary duty claim, in favor of the defendant on a fraud in the inducement claim due to the plaintiffs’ failure to give defendant procedural notice and in favor of the defendant on plaintiff’s second claim of fraud due to the plaintiffs’ failure to prove fraud while operating a fund.

Read More

Court of Chancery Defers to Board of Director’s Business Judgment in Response to Stockholder’s Dividend Demand

By: James S. Bruce and Marissa Leon

In Buckley Family Trust v. Charles Patrick McCleary, et al. (C.A. No. 2018-0903-AGB), the Delaware Court of Chancery (the “Court”) granted defendants’ motion to dismiss a stockholder’s claims to compel the company to pay a dividend and also dismissed the stockholder’s claim alleging breach of fiduciary duty of care regarding decisions made by the board of directors of the company.

Read More

ATTEMPT TO SEIZE CONTROL OF A BEVERAGE COMPANY? COURT OF CHANCERY FINDS INSUFFICIENT EVIDENCE OF CIVIL CONSPIRACY

By: C. Cartwright Bibee and Claire Suni

In Todd O’Gara and Wanu Water, Inc. v. Sheldon Coleman, et al., C.A. No. 2018-0708-KSJM (Del. Ch. Feb. 14, 2020), the Delaware Court of Chancery (the “Court”) granted a motion to dismiss claims made in connection with an alleged conspiracy to seize control of a beverage company by certain former directors and current stockholders. The founder and the company itself filed the complaint asserting claims for breach of fiduciary duty, tortious interference with business relations and contract, civil conspiracy, and libel. The Court found that the complaint failed to plead facts satisfying the essential elements of each claim and, furthermore, did not establish personal jurisdiction over certain of the defendants.

Read More

Chancery Orders Accounting for Payments to Former Director and CEO Affiliate; Rejects Most Breach of Fiduciary Duty Claims

By: Remsen Kinne and Pouya Ahmadi

In Avande, Inc. v. Shawn Evans, C.A. No. 2018-0203-AGB (Del. Ch. Aug. 13, 2019), the Court of Chancery rejected most of the claims brought by Avande, Inc. (“Avande”) against Avande’s former director and chief executive officer (“CEO”) Shawn Evans (“Evans”) other than a claim for breach of fiduciary duty for engaging in self-interested transactions, authorizing improper expenditures and failure to maintain appropriate documentation of expenditures. The Court awarded Avande only $21,817.70 of the more than $5.3 million in damages sought to recover from Evans. The Court held that DC Risk Solutions, Inc. (“DC Risk”), an affiliate of Evans that provided Avande insurance broker services and bookkeeping services, would be liable as an aider and abettor for any damages that are assessed as a result of the accounting ordered by the Court as to payments made to DC Risk.

Read More

Stockholder’s Breach of Fiduciary Duty Claim against Chairman of Barnes & Noble Education, Inc. Dismissed by Delaware Court of Chancery

By: Joanna Diakos and Marissa Leon

In Bay Capital Finance, L.L.C. v. Barnes and Noble Education, Inc. (C.A. No. 2019-0539-KSJM), the Delaware Court of Chancery (the “Court”) enforced a company’s advance notice provision in its bylaws, dismissed a stockholder’s breach of fiduciary claim against a company’s chairman and ordered the stockholder to pay the defendants’ attorneys’ fees as a result of its bad faith litigation conduct.  

Read More

Court of Chancery Applies Entire Fairness Standard to PennyMac’s Reorganization Transaction

By: Annette Becker and Marissa Leon

In Robert Garfield v. BlackRock Mortgage Ventures, LLC, et al (the “Defendants”) (C.A. No. 2018-9017-KSJM), the Court of Chancery denied a motion to dismiss claims of breach of fiduciary duties filed by Robert Garfield (the “Plaintiff”), an investor that claims a reorganization of Private National Mortgage Acceptance Company, LLC (“PennyMac, LLC”) was unfair to certain stockholders.  The Court of Chancery found that the complaint stated a claim when evaluated under the entire fairness standard of review where stockholders constituting a “control group” stood to benefit from the transaction.

Read More

CHANCERY COURT FINDS PLAINTIFF’S CLAIMS OF FRAUD, BREACH OF FIDUCIARY DUTY, AND RELATED CLAIMS, PASS MUSTER UNDER 12(b)(6)

By: Scott E. Waxman and Douglas A. Logan

In Simon Ogus v. SportTechie, Inc., memorandum opinion 200131, C.A. No. 2018-0869-AGB, the Delaware Court of Chancery (the “Court”), generally held that Simon Ogus (the “Plaintiff”), pled sufficiently claims for fraud, breach of fiduciary duty, aiding and abetting, civil conspiracy and breach of contract against  Oak View Group, LLC (“Oak View”) and individuals Taylor Bloom, Francesca Bodie, Daniel Kaufman (each a “Defendant” and together the “Defendants”). The claims stemmed from the Plaintiff’s termination and subsequent forced sale of shares in SportTechie, Inc. (“SportTechie or the “Company”), and the Court allowed most of the Plaintiff’s claims to survive the 12(b)(6) motion but dismissed a small number as well.

Read More

CHANCERY COURT ALLOWS CLAIMS DUE TO MANAGER’S ALLEGIANCE TO PARTICULAR EQUITY HOLDERS OVER THE COMPANY

By: Scott E. Waxman and Douglas A. Logan

In Klein and Cambridge Therapeutic Technologies, LLC, v. Wasserman et al., C.A. No. 2017-0643-KSJM (May 29, 2019), the Delaware Court of Chancery addressed claims of breach of fiduciary duties, tortious interference, and civil conspiracy. Defendants’ motion to dismiss the claims was granted in part and denied in part.

Read More

Chancery Court Dismisses Uber Derivative Suit for Failure to Make Demand or Plead Demand Futility

By Annette Becker and Will Smith

In McElrath v. Kalanick, C.A. No. 2017-0888-SG (Ch. Del. April 1, 2019), the Delaware Court of Chancery (the “Court”) dismissed a derivative suit brought by a stockholder of Uber Technologies, Inc. (“Uber”) for damages arising from its acquisition of Ottomotto, LLC (“Otto”), an autonomous vehicle technology company. Plaintiff did not make demand on the defendant board of directors of Uber (the “Board”) for action prior to pursuing litigation. The Court dismissed the derivative suit finding that a majority of the Board that would have evaluated a demand was disinterested and independent, and therefore, had plaintiff made demand of the Board, such a demand would not have been futile.

Read More

Court of Chancery Grants Summary Judgment For Dissolution of Limited Liability Company Where Two Minority Members Failed To Purchase The Majority Member’s Limited Liability Interest, As Required By The Operating Agreement

By: Scott Waxman and Caitlin Velasco

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

Chancery Court Denies Dismissal of Breach of Fiduciary Duty Claims after Concluding that Stockholder Vote was Not Informed

By: David Forney and Rachel P. Worth

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

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