2020 – Page 7 – Delaware Docket

DELAWARE DENIES INTERLOCUTORY APPEAL OF ORDINARY ADVANCEMENT ENTITLEMENT DECISION

Apr 16 2020

In Sider et al. v. Hertz Global Holdings, Inc., C.A. No. 2019-0237-KSJM; C.A. No. 2019-0240-KSJM; C.A. No. 2019-0243-0243-KSJM; CA. No. 2019-0246-KSJM (Del. Ch. June 17, 2019), the Delaware Court of Chancery re-affirmed its support for advancement consistent with corporate bylaw provisions and denied the Hertz Global Holdings, Inc. (the “Defendant”) motion seeking immediate appellate review of advancement entitlement. The Court held that Defendant’s concern that plaintiffs would be unable to repay any advanced expenses, which they could later be found not to have been entitled to, did not outweigh Delaware’s preference for advancement. Defendant’s recourse for recouping advanced expenses is via “indemnification or on appeal after issues of reasonableness have been resolved.”

Delaware Court of Chancery Dismisses Petition for Equitable Dissolution of an LLC by a Non-Member

Apr 15 2020

By Scott E. Waxman and Jessica A. Pingleton

In SolarReserve CSP Holdings v. Tonopah Solar Energy, LLC, C.A. No. 2019-0791-JRS (Del. Ch. Mar. 18, 2020), the Delaware Court of Chancery (the “Court”) dismissed a non-member/non-manager’s petition for equitable dissolution of a limited liability company where there was no statutory basis for dissolution and insufficient evidence of wrongdoing by the members or managers of the limited liability company to warrant such an extreme remedy.

Delaware Court of Chancery Applies Narrow Arbitration Provision in Member Dispute; Stays Claims Pending Arbitration

Apr 14 2020

By Scott E. Waxman and Jessica A. Pingleton

In 360 Campaign Consulting, LLC et al. v. Diversity Communication, LLC, et al., C.A. No. 2019-0807-MTZ (Del. Ch. Mar. 20, 2020), the Delaware Court of Chancery (the “Court”) applied a middle ground approach based on the plain language of an arbitration provision in a governing limited liability company agreement (the “LLC Agreement”), holding that only disputes, controversies or claims between Members arising out of or relating to the LLC Agreement were arbitrable. The Court granted a stay of all remaining claims pending resolution of the arbitration.

Delaware Court of Chancery Finds That “Blocking Rights” Exercised By Minority Investors May Amount to an “Actual Control” Position

Apr 09 2020

By Scott E. Waxman and Frank J. Mazzucco

In Skye Mineral Investors, LLC and Clarity Copper, LLC v. DXS Capital (U.S.) Limited et al., C.A. No. 2018-0059-JRS (Del. Ch. Feb. 24, 2020), the Delaware Court of Chancery allowed claims to survive a motion to dismiss when such claims sufficiently pled that, by exercising certain “blocking rights,” minority members of an LLC achieved an actual control position over the LLC and, in bankrupting the LLC’s subsidiary in order to purchase its assets at a reduced price, breached their related fiduciary duties.

Caremark Claim Dismissed Due to Inadequate Pleading of Demand Futility

Apr 07 2020

By: Michelle McCreery and Zane Madden

In Hubert Owens, Derivatively on Behalf of Esperion Therapeutics, Inc. v. Tim M. Mayleben, et al., C.A. No. 12985-VCS (Del. Ch. February 13, 2020), the Delaware Court of Chancery (the “Court”) granted the defendants’ motion to dismiss the plaintiff’s complaint (the “complaint”) for failure to adequately plead demand futility. After analyzing the allegations in the complaint, the Court concluded that plaintiff’s claims failed because the facts alleged did not demonstrate at the dismissal stage that a majority of the board of directors (the “board”) could not exercise independent and disinterested judgment with regard to a litigation demand. The plaintiff was at all relevant times a stockholder of the Company. The members of the board and the Chief Medical Officer of the Company were the defendants.

COURT OF CHANCERY ORDERS SPECIFIC PERFORMANCE OF MERGER AGREEMENT, FINDING THAT FRAUD CONTAINED IN FDA FILINGS FOR APPROVAL OF TARGET PRODUCT DID NOT RISE TO A “MATERIAL ADVERSE EFFECT”

Apr 01 2020

By: Annette Becker and Teresa Teng

In Channel Medsystems, Inc. v. Boston Scientific Corporation, C.A. No. 2018-0673-AGB (Del. Ch. December 18, 2019), the Delaware Court of Chancery ordered specific performance of a merger agreement, finding that breaches of the representations and warranties arising from the fraud of a key employee of the seller did not rise to the level of a “Material Adverse Effect.” As a result, the buyer was not entitled to terminate the merger agreement and breached the further assurances provision of the merger agreement by failing to meaningfully engage with seller upon seller’s discovery of the fraud.

IN A SECTION 262 APPRAISAL RIGHTS PROCEEDING, CHANCERY COURT ACCEPTS A MODIFIED VERSION OF PETITIONERS’ VALUATION OF A MERGING COMPANY’S STOCK

Apr 01 2020

By: Christopher Bellavia and Adam Heyd

In Manichaean Capital, LLC, et al. v. SourceHOV Holdings, Inc., C.A. No. 2017-0673-JRS (Del. Ch. January 30, 2019), certain minority stockholders of a merging company filed a petition with the Delaware Court of Chancery (the “Court”) to exercise their appraisal rights under Section 262 of the Delaware General Corporate Law (“Section 262”). After reviewing competing valuations prepared by experts of the Company and the minority stockholders respectively, the Court adopted a modified version of the minority stockholders’ expert valuation. In doing so, the Court reiterated its significant discretion to discharge its independent obligation to determine fair market value and instead select one of the parties’ valuation models as a guide.

Court of Chancery Finds Deal Price Exceeded Fair Value, but Company Nonetheless Not Entitled to Refund for Prepayment of Deal Price to Dissenting Stockholders

Mar 31 2020

By: Eric Freedman and Serena Hamann

In a memorandum opinion in the case of In re Appraisal of Panera Bread Company, C.A. No. 2017-0593-MTZ (Del. Ch. Jan. 31, 2020), the Delaware Court of Chancery ruled that deal price, minus the value of synergies, was the correct metric to value the stock of Panera Bread Company (“Panera”), because the process that yielded the deal price bore sufficient objective indicia of reliability. The Court found that under this metric, the dissenting stockholders received more than fair value for each share of Panera stock but that nonetheless, because Panera prepaid the entire deal price to dissenting stockholders without deducting any value for synergies, and did not negotiate a clawback, Panera had no right to a refund under the appraisal statute, Delaware General Corporation Law (“DGCL”) § 262.

COURT OF CHANCERY RULES ON THE APPLICABILITY OF FORUM SELECTION CLAUSES TO NON-SIGNATORIES TO A CONTRACT AND A PLAINTIFF’S BURDEN IN ALLEGING BREACH OF THE “COMMERCIALLY REASONABLE EFFORTS” STANDARD

Mar 30 2020

By: Scott E. Waxman and Teresa Teng

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.

CHANCERY COURT FINDS THAT RES JUDICATA BARS PLAINTIFF’S DEMAND FOR INFORMATION RIGHTS UNDER MERGER AGREEMENT

Mar 29 2020

By: Annette Becker and Caitlin Velasco

In the Memorandum Opinion, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 2018-0933-JRS (Del. Ch. Feb. 13, 2020), the Court of Chancery granted Shire US Holdings, Inc.’s motion to dismiss under the doctrine of res judicata because the breach of contract claim brought by Fortis Advisors LLC arises from the same transaction that was the subject of a prior action (the “2016 Action”) between the parties, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 12147-VCS (Del. Ch. Aug. 9, 2017).

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