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
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
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
In Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Sep. 18, 2019), the Delaware Court of Chancery granted a motion to dismiss by a defendant parent company, whose subsidiary entered into a purchase agreement containing a Delaware forum selection clause. The court applied the “closely related” test in finding that the plaintiff failed to allege sufficient facts to show that the non-signatory parent entity was “closely related” to the underlying purchase agreement and as a result, plaintiff could not bind the parent entity to the agreement’s forum selection clause.
In the subsequent Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Feb. 27, 2020), the court split its decision in granting the motions to dismiss for lack of personal jurisdiction over one of the defendant officers of the purchaser in the transaction, and for failure to state a claim with respect to all but one count of the plaintiff’s complaint. The court denied the motion to dismiss for lack of personal jurisdiction with respect to another officer of the purchaser who had also served as chairman of the board of the seller. The court also denied such defendant’s motion to dismiss on the cause of action of breach of fiduciary duty.Read More
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 PWP Xerion Holdings III LLC v. Red Leaf Resources Inc., C.A. No. 2017-0235-JTL (Del. Ch. Oct. 23, 2019), the Delaware Court of Chancery (the “Court”) granted Xerion Holdings III LLC’s (“Xerion”) motion for partial summary judgement on a breach of contract claim, holding that the Red Leaf Resources, Inc. (“Red Leaf” or the “Company”) breached Xerion’s contractual right to consent as the holder of a majority of the shares of the Company’s Series A preferred stock.Read More
In Howland v. Kumar, C.A. no. 2018-0804-KSJM, the Delaware Chancery Court issued a Memorandum Opinion under Chancery Rule 12(b)(6) denying a motion to dismiss claims of breach of fiduciary duty and unjust enrichment on the basis that the defendants repriced stock options that they held immediately prior to making a public announcement that was sure to increase the stock price. The Court also ruled under Chancery Rule 23.1 that the plaintiff adequately plead demand excusal. Thomas S. Howland, Jr. (“Plaintiff”), a stockholder of Anixa Biosciences, Inc. (“Anixa”), brought two derivative claims against Anixa and its directors and officers. The Anixa board of directors consisted of Chairman, President, and CEO Amit Kumar (“Kumar”), Lewis H. Titterton, Jr. (“Titterton”), Arnold M. Baskies (“Baskies”), John Monahan (“Monahan”), and David Cavalier (“Cavalier”). The officers included Kumar, John A. Roop (“Roop”), Michael J. Catelani (“Catelani”) and Anthony Campisi (“Campisi”, collectively, “Individual Defendants,” and, collectively with Anixa, “Defendants”).Read More
In the consolidated stockholder derivative litigation, In re Fitbit, Inc., CA No. 2017-0402-JRS (Del. Ch. Dec. 14, 2018), the Delaware Court of Chancery denied the Defendants’ motion to dismiss Plaintiffs’ insider trading and breach of fiduciary duty claims. The claims stem from alleged insider knowledge of members of Fitbit’s Board of Directors (the Board) and chief financial officer that Fitbit’s PurePulse™ technology was not as accurate as the company claimed. Plaintiffs alleged that members of the Board structured the company’s Initial Public Offering (IPO) and Secondary Offering (together, “the Offerings”) to benefit Fitbit insiders and voted to waive employee lock-up agreements, thereby allowing those insiders, to prematurely sell stock in the Secondary Offering. As a result of their sales, the alleged insiders sold about 6.2 million shares for over $115 million in the IPO and about 9.62 million shares for over $270 million in the Secondary Offering.Read More
In Sheldon v. Pinto Technology Ventures, C.A. No. 2017-0838-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery in a Memorandum Opinion granted a motion to dismiss breach of fiduciary duty claims and other allegations brought by the founder and an early stockholder (“Plaintiffs”) of non-party IDEV Technologies, Inc., a Delaware corporation (“IDEV”). The Court found that Plaintiffs’ primary claims were derivative, rejecting Plaintiffs’ assertion that Defendants were judicially estopped by a Texas state court ruling from arguing for that characterization of the claims, and dismissed the complaint for failure to comply with Chancery Court Rule 23.1’s derivative claims demand or demand futility pleading requirements.Read More
In Full Value Partners, L.P. v. Swiss Helvetia Fund, Inc., et. al., C.A. No. 2017-0303-AGB (Del. Ch. June 7, 2018), the Delaware Court of Chancery granted the plaintiff stockholder’s motion for an award of attorney’s fees under the corporate benefit doctrine because the plaintiff’s claim in the underlying stockholder litigation was meritorious when filed and produced a benefit to the defendant corporation.
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