August 2020 – Delaware Docket

Chancery Court Dismisses Plaintiff’s Claims against Three Former Members of the Board

Aug 26 2020

In Jacob Hasher Hindlin v. Lukasz Gottwald et al., C.A. No. 2019-0586-JRS (Del. Ch. July 22, 2020), the Delaware Court of Chancery (the “Court”) dismissed Plaintiff’s claims against three former members of the board of managers of Core Nutrition, LLC (“Core” or the “Company”) for breach of fiduciary duty and the implied contractual covenant of good faith and fair dealing.

Chancery Court Denies Assignor’s Inspection Demand under Real Party in Interest Rule, Prohibits Substitute Plaintiff

Aug 26 2020

By: Scott E. Waxman and Michael C. Payant

In SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. No 2020-0064-JRS (Del. Ch. July 24, 2020), the Delaware Court of Chancery (the “Court”) examined an alleged breach of contract based on the denial of inspection rights to which SolarReserve CSP Holdings, LLC (“SR”) was allegedly entitled under the LLC Agreement (the “LLCA”) of Tonopah Solar Energy, LLC (the “Company”). The Court entered judgment for the Company, finding (i) SR was not a real party in interest under Chancery Court Rule 17 because it had made a complete assignment of its rights under the LLCA, and (ii) the real party in interest assignee was not entitled to inspection rights under the LLCA.

Chancery Court Looks Past “Sham” Paper Trail to Determine Ownership of Holding Company for Argentina Media Conglomerate

Aug 19 2020

By: Scott E. Waxman and Michael C. Payant

In Carlos Eduardo Lorefice Lynch, et al. v. R Angel Gonzalez Gonzalez, et al., C.A. No. 2019-0356-MTZ (Del. Ch. July 31, 2020), the Delaware Court of Chancery (the “Court”) examined an extensive paper trail purportedly documenting the transfer of majority beneficial ownership in an Argentinian company from a media mogul to his attorney, before holding that the media mogul should nevertheless be deemed the owner of the interest in question, because the documents (i) did not constitute a binding contract for the purported transfer to the attorney, (ii) were fraudulently induced by the attorney, and (iii) were the product of unclean hands such that it would be unjust to grant ownership to the attorney.

Specific Language of Operating Agreements Key in Chancery Court Dismissal of “Laundry List” of Claims Against LLC Managers

Aug 18 2020

By: Scott Waxman and Rich Minice

In 77 Charters, Inc. v. Gould et al.., C.A. No. 2019-0127-JRS (Del. Ch. May 18, 2020), 77 Charters, Inc. (“Plaintiff”) brought suit against defendants Jonathan Gould (“Gould”), Stonemar MM Cookeville, LLC (“Stonemar MM”), Cookeville Corridor, LLC (the “Preferred Purchaser”) and Eightfold Cookeville Investor, LLC (the “New Investor” and together with Gould, Stonemar MM and the Preferred Purchaser, the “Named Defendants”) for a series of alleged “wrongful acts” in connection with the management and sale of a shopping mall (the “Property”), which also implicated Stonemar Cookeville Partners, LLC (“Cookeville Partners”) and Cookeville Retail Holdings, LLC (“Cookeville Retail”). In delivering its opinion, which centered on the nature of Delaware limited liability companies as creatures of contract, and thus, the controlling nature of the applicable operating agreements and contracts into which the parties had entered, the Delaware Court of Chancery (the “Court”) ruled that only Plaintiff’s claims which could be connected to an alleged wrongful amendment of the operating agreement of Cookeville Retail could survive Defendants’ Motion to Dismiss (the “Motion”).

Delaware Court of Chancery Dispenses with Multiple Motions and Claims as Business Partners Take a “Kitchen Sink” Approach to Ascribing Blame and Seeking Recourse in Business Endeavor

Aug 13 2020

By Scott Waxman and Jonathan Shallow

Stone & Paper Investors, LLC, et al., v. Richard Blanch et al., C.A. No. 2018-0394-PAF (Del. Ch. June 29, 2020) involved a barrage of claims and counterclaims among LLC members and managers, including, misappropriation of company funds, breach of LLC agreement, fraud, conversion, unjust enrichment, and aiding and abetting breaches of fiduciary duty. The Court of Chancery resolved a motion to dismiss the counterclaims and third-party claims and, in doing so, provided further guidance on findings of lack of personal jurisdiction, claims for fraudulent inducement and fraud, claims for conversion and aiding and abetting breaches of fiduciary duty.

CHANCERY COURT HONORS SHAREHOLDER REPRESENTATIVE PROVISION HOLDING SELLING STOCKHOLDERS ARE NOT REAL PARTIES-IN-INTEREST

Aug 11 2020

By: Shoshannah Katz and Claire Suni

In Fortis Advisors LLC, v. Allergan W.C. Holding Inc., C.A. No. 2019-0159-NTZ (Del. Ch. May 14, 2020), a shareholder representative appointed pursuant to a merger agreement asserted a claim on behalf of selling stockholders for certain contingent payments. The defendant surviving corporation brought a motion in the Delaware Court of Chancery (the “Court”) to (i) compel the selling stockholders to participate in discovery as parties-in-interest to the action and to be subject to trial subpoenas as parties or (ii) compel the shareholder representative to procure and produce discovery from the selling stockholders. The Court denied the motion in full.

Court of Chancery Addresses Direct-Derivative Suit Distinction In The Context of a Merger Transaction

Aug 05 2020

By: Scott Waxman, Kristin Taylor, and Trevor Kennedy

In Brokerage Jamie Goldenberg Komen Rev Tru v. Breyer, C.A. No. 2018-0773-AGB (Del. Ch. June 26, 2020), the Delaware Court of Chancery (the “Court”) held that the plaintiff shareholder’s (the “Plaintiff”) claims were derivative in nature and that Plaintiff lacked standing to bring such claims. Accordingly, the Court dismissed the complaint for failure to state a claim for relief.

Chancery Court Holds Late Breach of Fiduciary Duty Claim Is Barred By Laches

Aug 04 2020

By: Annette Becker; Pouya Ahmadi; Julia Knitter

In Gallagher Industries, LLC v. William M. Addy, et al., C.A. No. 2018-0106-SG (Del. Ch. May 29, 2020), the Delaware Court of Chancery (the “Court”) held that because Gallagher Industries, LLC (the “Plaintiff”) decided not to pursue an appraisal action following a problematic cash-out merger five years earlier, the Plaintiff’s tolling claim against William M. Addy and Joseph E. Eastin (the “Defendants”) for breach of fiduciary duty for disclosure weaknesses was barred by laches.

Delaware Court of Chancery Rejects Business Judgment Rule Protection for Stockholder-Negotiated Redemption

Aug 04 2020

By: Joanna A. Diakos Kordalis and Monica Romero

In In re Dell Tech. Inc. Class V. Stockholders Litig., Consol. C.A. No. 2018-0816-JTL (Del. Ch. Jun. 11, 2020), the Delaware Court of Chancery denied defendants’ motion to dismiss the breach of fiduciary duty claim asserted against them finding that the complaint alleged facts that made it “reasonably conceivable” that the safe harbor established by Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014), would not apply and defendants would not get the benefit of the business judgment rule.

Master in Chancery Dismissive of Fiduciary Seeking Dismissal, Applies Familiar 12(b)(6) Standard

Aug 03 2020

By: Rich Minice and Annette Becker

In Hill et al. v. Myers et al., C.A. No. 2018-0160 (Del. Ch. June 15, 2020), Master in Chancery Selena Molina (“Master”) issued a final report, recommending the Court of Chancery deny defendant’s (decedent’s close friend and confident, and attorney-in-fact during his final years) motion to dismiss claims of undue influence and breach of fiduciary duty. The Master determined that the motion to dismiss brought by family members of the late G. Robert Dickerson, should be denied because the family members provided sufficient factual allegations to support their claims and establish standing.

Archive:August 2020