May 2020 – Page 2 – Delaware Docket

EQUITABLE RELIEF GRANTED TO STOP BOARD COUP

May 06 2020

By David L. Forney and Annamarie C. Larson

In a Memorandum Opinion, Palisades Growth Capital II, L.P. v. Alex Bäcker and Ricardo Bäcker and QLess, Inc. (Del. Ch. C.A. No. 2019-0931-JRS) the Delaware Court of Chancery found that actions taken at a board meeting were void because the defendant acted inequitably by formulating a secret plan to deceive the other board members into attending the meeting and then seized control. The Court stated that it will not sanction inequitable action by corporate fiduciaries simply because their act is legally authorized. The Court found that, while the defendants’ actions were technically authorized in the Company’s Charter and Bylaws, they took affirmative action to mislead the other board members in order to take control.

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

May 05 2020

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.

COURT OF CHANCERY DISMISSES EXCESSIVE PAY CLAIMS

May 05 2020

By: Scott Waxman and Claire Suni

In Dahle et al. v. Pope et al., C.A. No. 2019-0136-SG (Del. Ch. 2020), the Delaware Court of Chancery (the “Court”) dismissed a derivative suit by stockholders of R.R. Donnelly & Sons Company (the “Company”) under Delaware Chancery Rule 23.1 (“Rule 23.1”) alleging excessive pay of the Company’s board of directors (the “Board’). The Court found that a letter from the stockholders (the “Letter”) to the Board constituted a pre-suit litigation demand that had been rejected by the Board, and as a result, Plaintiffs’ claim was not entitled to proceed derivatively under Delaware law. {Hard Return}

Chancery Court Calls Plaintiffs’ Bet by Granting in Part and Denying in Part Partial Motion to Dismiss Breach of Fiduciary Duty Claims in Case Alleging Failure to Disclose Material Facts and Structuring a Transaction for Defendants’ Personal Financial Benefit

May 05 2020

By Joanna Diakos and Alidad Vakili

The Delaware Court of Chancery granted in part and denied in part Plaintiff’s partial motion to dismiss, finding that the standard for breach of fiduciary duty was not met as against certain directors and officers of the Company based on allegations they failed to disclose facts relating to a tender offer, but was met as against the directors and one of the officers on allegations that they approved a tender offer where they were expected to receive a personal financial benefit.

DELAWARE COURT OF CHANCERY LIMITS MEMBER’S SOLE AND EXCLUSIVE RIGHT TO CAUSE COMPANY TO UNDERTAKE A QUALIFIED IPO TO MERE RIGHT OF APPROVAL

May 04 2020

By: Scott Waxman & Ernest Simons

In Williams Field Services Group, LLC v. Caiman Energy II, LLC, et al., C.A. No. 2019-0350-JTL (Del. Ch. Sep. 25, 2019), the Delaware Court of Chancery considered the parties’ competing requests for declaratory judgments. The dispute reduced to disagreements over the parties’ respective rights under an LLC agreement with respect to a proposed initial public offering. In this post-trial decision, the Court ruled that the defendants had the authority to implement certain steps in the proposed IPO, but not others, and ordered the parties to prepare a form of final order consistent with its rulings.

Archive:May 2020