Albert Carroll on Breach of Duty

Chancery Dismisses All Claims in Stockholder Challenge to Cash-Out Merger Transaction

Harcum v. Lovoi, C.A. No. 2020-0398-PAF (Del. Ch. Jan. 3, 2022) - In Harcum, the Delaware Court of Chancery dismissed all claims brought in a stockholder suit alleging fiduciary breaches in connection with the $1 billion...more

4/29/2022 / Board of Directors , Breach of Duty , Controlling Stockholders , Duty of Loyalty , Fiduciary Duty , Mergers

Chancery Finds General Partner Breached Partnership Agreement in Exercising Call Right, and Awards Limited Partners Nearly $700...

Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, C.A. No. 2018-0372-JTL (Del. Ch. Nov. 12, 2021) - If a partnership agreement requires an opinion of counsel as a condition precedent, such opinion must be rendered...more

2/18/2022 / Breach of Contract , Breach of Duty , Fiduciary Duty , Partnership Agreements , Partnerships

Chancery Dismisses Breach of Fiduciary Duty Claims Involving Bio-Tech Company Developing a COVID-19 Vaccine

In re Vaxart, Inc. Stockholder Litigation, Consol. C.A. No. 2020-0767-PAF (Del. Ch. Nov. 30, 2021) - Plaintiffs challenged amendments to warrant agreements between Vaxart and its former controlling stockholder, Armistice,...more

2/14/2022 / Board of Directors , Breach of Duty , Fiduciary Duty , Insider Trading , Investors , Shareholders

Delaware Corporate and Commercial Case Law Year in Review

Our 2021 Top 10 list summarizes decisions from the Delaware courts likely to affect business transactions and business litigation going forward. Our criteria for selection are that the decision either meaningfully changed...more

2/1/2022 / Board of Directors , Breach of Duty , Business Litigation , Commercial Litigation , Corporate Counsel , DE Supreme Court , Demand Futility , Derivative Suit , Fiduciary Duty

Chancery Dismisses Time-Barred Complaint Against Zillow

Chertok v. Zillow, Inc., C.A. No. 2019-0849-LWW (Del. Ch. Oct. 18, 2021) - Plaintiffs, a former co-founder and director of NMD Interactive (“Chertok”) and an LLC that he managed, brought a breach of contract action against...more

1/25/2022 / Board of Directors , Breach of Contract , Breach of Duty , Fiduciary Duty , Mergers , Statute of Limitations

Delaware Supreme Court Overrules Gentile, Resolving Tension in Legal Test To Determine Whether a Claim Is Direct or Derivative

Brookfield Asset Mgmt., Inc. v. Rosson, No. 406, 2020 (Del. Sept. 20, 2021) - Seeking to bring clarity to the issue of whether a claim is direct or derivative—a potentially outcome-determinative issue—the Delaware Supreme...more

12/17/2021 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Addresses Indemnification Rights Following CEO’s Partial Success On Underlying Claims, Including Success Based on...

Evans v. Avande, Inc. , C. A. No. 2018-0454-LWW (Del. Ch. Sept. 23, 2021) - The departure of a company’s CEO was contentious. After his termination, the company filed an action in the Court of Chancery, alleging that the...more

12/17/2021 / Attorney's Fees , Breach of Duty , CEOs , Fiduciary Duty , Indemnification , Litigation Fees & Costs

CCLD Rejects Several Defenses to Insurance Coverage of a Settlement Paid By Investment Fund

Sycamore Partners Management, L.P. v. Endurance American Insurance Co., C.A. No. N18C-09-211 AML CCLD (Del. Super. Sept. 10, 2021) - Prior to the closing of a leveraged buyout of a company (the “Merger”) whereby the...more

11/23/2021 / Breach of Contract , Breach of Duty , Derivative Suit , Fiduciary Duty , Mergers , Shareholders

Delaware Supreme Court Upholds Contractual Waiver of Statutory Appraisal Rights

Manti Holdings, LLC, et al. v. Authentix Acquisition Co., Inc., No. 354, 2020 (Del. Sept. 13, 2021) - This decision arose out of the acquisition of Authentix Acquisition Company, Inc. and a subsequent appraisal proceeding...more

11/23/2021 / Appraisal , Appraisal Rights , Breach of Duty , Fair Market Value , Fair Valuation , Fiduciary Duty , Mergers , Shareholders

Chancery Examines Cornerstone Standard for Establishing Non-Exculpated Fiduciary Duty Claims

In Re BGC Partners, Inc. Derivative Litigation, Consol. C.A. No. 2018-0722-LWW (Del. Ch. Sep. 20, 2021) - A director protected by an exculpatory provision is entitled to dismissal in a breach of fiduciary duty action...more

11/16/2021 / Acquisitions , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Motion for Summary Judgment

Chancery Rejects MFW Defense Based on Failure to Disclose That a Conflicted Controller Participated in Arbitration Proceedings...

Ligos v. Isramco, Inc., C.A. No. 2020-0435-SG (Del. Ch. Aug. 31, 2021) - Under MFW, a conflicted controller transaction may get the benefit of business judgment review when conditioned on two procedural protections...more

11/10/2021 / Board of Directors , Breach of Duty , Fiduciary Duty , Mergers , Shareholders

Chancery Declines to Order Production of Privileged Document

Drachman v. BioDelivery Sciences International, Inc., C.A. No. 2019-0728-LWW (Del. Ch. Aug. 25, 2021) - Drachman addresses the attorney-client privilege, certain exceptions thereto, including the Garner doctrine, and...more

11/10/2021 / Attorney-Client Privilege , Breach of Duty , Discovery , Electronically Stored Information , Fiduciary Duty , Motion to Compel , Motion to Dismiss , Privileged Documents , Shareholders

Chancery Rejects Inadequate Disclosure Contentions and Grants Corwin Dismissal

Kihm v. Mott, C.A. No. 2020-0938-MTZ (Del. Ch. Aug. 31, 2021) - Under the Corwin doctrine, a fully informed and uncoerced approval of a board decision by the corporation’s disinterested stockholders can downgrade an...more

11/1/2021 / Board of Directors , Breach of Duty , Conflicts of Interest , Controlling Stockholders , Corwin Doctrine , Fiduciary Duty , Mergers

Chancery Declines to Dismiss Narrow Claims Relating to Entity’s Dissolution In Favor of Pending Related Action

Hawkins v. Daniel, C.A. No. 2021-0453-JTL (Del. Ch. Aug. 24, 2021) - The Delaware courts utilize several doctrines to address motions to dismiss or stay in favor of related litigation, including McWane and Cryo-Maid, all...more

10/19/2021 / Breach of Duty , Corporate Dissolution , Derivative Suit , Fiduciary Duty , Partnerships

Chancery Addresses Common Interest and Privilege Log Issues in Matter Involving Special Discovery Matter

Buttonwood Tree Value Partner, L.P. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del Ch. Jul. 30, 2021) - With increasing frequency, the Court of Chancery is appointing Special Discovery Masters and Discovery...more

9/30/2021 / Breach of Duty , Discovery , Electronically Stored Information , Fiduciary Duty , Privilege Logs

Chancery Finds LLC Managers Liable for Self-Dealing Scheme Depleting Nearly All Investment Capital

Stone & Paper Investors, LLC v. Blanch, C.A. No. 2018-0394-PAF (Del. Ch. July 30, 2021) - This post-trial opinion involves a particularly egregious set of facts. Two LLC managers were accused of breaching their contractual...more

9/29/2021 / Breach of Contract , Breach of Duty , Fiduciary Duty , Fraudulent Concealment

Chancery Addresses Whether LLC Agreement Modified or Eliminated Fiduciary Duties

In Re Cadira Group Holdings, LLC Litigation, Consolidated C.A. No. 2018-0616-JRS (Del. Ch. July 12, 2021) - The Delaware Limited Liability Company Act provides that “the fiduciary duties of a member, manager, or other...more

9/10/2021 / Breach of Contract , Breach of Duty , Fiduciary Duty , Limited Liability Company (LLC) , LLC Agreements

Chancery Upholds Well-Pled Claims Relating to Former Fiduciaries’ Retention of Derivative Arbitration Award

Optimiscorp v. Atkins, C.A. No. 2020-0183-MTZ (Del. Ch. July 15, 2021) - In Optimiscorp, the Court upheld claims against former directors and officers of plaintiff Optimiscorp arising out of the defendants’ failure to turn...more

9/8/2021 / Arbitration , Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Addresses Claims Arising Out of LLC Dispute Involving Parallel Venture

Largo Legacy Group, LLC v. Evens Charles, C.A. No. 2020-0105-MTZ (Del. Ch. June 30, 2021) - In this LLC dispute, an investor in a hotel development company alleged that the company principals breached the operating...more

8/17/2021 / Breach of Contract , Breach of Duty , Fiduciary Duty , Limited Liability Company (LLC) , Motion to Dismiss

Chancery Upholds Fiduciary Duty Claims Arising Out Of Deal Involving an Alleged Control Group That Included Non-Stockholders and a...

In re Pattern Energy Grp. Inc. Stockholders Litig., C.A. No. 2020-0357-MTZ (Del. Ch. May 6, 2021) - This decision mostly denying a motion to dismiss examines several important issues in post-closing M&A fiduciary duty...more

7/6/2021 / Aiding and Abetting , Board of Directors , Breach of Duty , Controlling Stockholders , Duty of Loyalty , Entire Fairness Standard , Fiduciary Duty , Mergers

Implied Covenant of Good Faith and Fair Dealing Saves Employee’s Claim for Improper Termination Under Company’s LLC Agreement

Smith v. Scott, C.A. No. 2020-0263-JRS (Del. Ch. Apr. 23, 2021) - The Delaware LLC Act provides that fiduciary duties may be expanded or limited by the provisions of an LLC agreement. If the agreement is silent, then...more

6/7/2021 / Breach of Contract , Breach of Duty , Covenant of Good Faith and Fair Dealing , Fiduciary Duty , Implied Covenants , Limited Liability Company (LLC) , LLC Agreements

Chancery Denies Claim Arising Out of Controller’s Announced Intention to Oppose a Transaction Unfavorable to His Interests

RCS Creditor Trust v. Schorsch et al., C.A. No: 2017-0178-SG (Del. Ch. Mar. 18, 2021) - Controlling shareholders of a Delaware corporation owe fiduciaries duties, but those duties do not require controllers to sacrifice...more

4/20/2021 / Breach of Duty , Controlling Stockholders , Fiduciary Duty , Independent Directors

Superior Court Applies “Law Most Favorable” Choice of Law Provision and Finds Investment Fund’s Settlement of a Fraudulent...

Sycamore Partners Management, L.P. v. Endurance American Insurance Company, C.A. No. N18C-09-211 AML CCLD (Del. Super. Feb. 26, 2021) - The bankruptcy estate of Nine West accused investment firm Sycamore Partners of...more

3/31/2021 / Breach of Duty , Choice-of-Law , Fiduciary Duty , Fraudulent Transfers , Investment Funds

Chancery Dismisses Derivative Breach of Contract Claim Against Directors for Alleged Violations of Certificate of Incorporation

Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021) - A corporate charter represents a contractual agreement between the corporation and its stockholders. In Lacey, the Court of Chancery addressed...more

3/31/2021 / Board of Directors , Breach of Contract , Breach of Duty , Fiduciary Duty , Motion to Dismiss

Chancery Allows McDonald’s to Pursue Claims Against Ex-CEO, Finding Separation Agreement’s Integration Clause Does Not Bar Them

McDonald’s Corp. v. Easterbrook, C.A. 2020-0658-JRS (Del. Ch. Feb. 2, 2021) - Delaware has a strong public policy against fraud. Consequently, parties who seek to bar extra-contractual fraud claims must expressly provide...more

3/3/2021 / Breach of Duty , Fiduciary Duty , Fraud , Separation Agreement

Albert Carroll

Morris James LLP

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