Breach of Fiduciary Duty – Page 8

CHANCERY COURT GRANTS CERTAIN BOOKS AND RECORDS DEMANDS BY MINORITY STOCKHOLDER RELATED TO A MERGER AND VALUATION OF UNDERLYING ASSETS

Aug 24 2018

In Mudrick Capital Management, L.P. v. Globalstar, Inc., C.A. No. 218-0351-TMR (Del. Ch. July 30, 2018), plaintiff Mudrick Capital Management L.P. (“Mudrick Capital”), a minority stockholder of defendant Globalstar, Inc. (the “Company”), brought a demand under Section 220 of the Delaware General Corporate Law (“Section 220”) to inspect certain communications and documents relating to the Company’s proposed merger with Thermo Acquisitions, Inc. (“Thermo”). The Delaware Court of Chancery granted Mudrick Capital’s demand for certain emails, communications and valuation materials relating to the merger, and denied Mudrick Capital’s demand for certain internal draft materials.

Chancery Court Finds Breach of Fiduciary Duties in Insurance Business Gone Awry

Aug 20 2018

By: Scott Waxman and Will Grossenbacher

In Triple H Family L.P. v. Jerry Neal , C.A. No. 12294-VCMR (Del. Ch. July 31, 2018), the Delaware Court of Chancery held that the member-manager of Omni Insurance Group, LLC (“Omni”) breached his fiduciary duties to the company when he misled Omni’s largest customer about lapses in the customer’s insurance coverage. Additionally, the court held that although the other member of Omni owed fiduciary duties to Omni as a de facto manager, that member did not breach his fiduciary duties when he directed business away from Omni after the parties had already agreed to dissolve. Finally, the court held that judicial dissolution of Omni was not required because the members had previously agreed to dissolve Omni, and, as such, all that was required was a winding-up of Omni’s business. Read More

Court of Chancery Dismisses Derivative Suit for Failure to Demonstrate Demand Futility because Plaintiff Failed to Allege Particularized Facts

Jul 19 2018

By: Charles Carter and Caitlin Velasco

In Steinberg on behalf of Hortonworks, Inc. v. Bearden, C.A. No. 2017-0286-AGB (Del. Ch. May 30, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the stockholder plaintiff’s derivative claims for breach of fiduciary duties under Court of Chancery Rule 23.1, because the plaintiff failed to make a pre-suit demand or demonstrate that doing so would be futile. The Court found that the plaintiff failed to plead particularized facts sufficient to raise reasonable doubt that a majority of the directors on the Hortonworks, Inc. board could have exercised their independent and disinterested business judgment in responding to a pre-suit demand. Read More

Chancery Court Awards Damages for Breach of Fiduciary Duty Stemming from Director’s Refusal to Sign Self-Help Documents

Jul 16 2018

By: C.J. Voss and Rich Minice

In CertiSign Holding, Inc. v. Sergio Kulikovsky, C.A. No. 12055-VCS, the Court found that Sergio Kulikovsky (“Kulikovsky”), a former director of CertiSign Holding, Inc. (“CertiSign”), had breached his fiduciary duty of loyalty to CertiSign by actively sabotaging corporate self-help efforts in a bid to advance his own personal objectives. The Court also denied Kulikovsky’s counterclaims for judicial validation of certain stock option grants and the assumption by CertiSign of a debt owed to Kulikovsky, and awarded Certisign damages in the amount of $390,455.20 for the “legal fees and expenses incurred by CertiSign in connection with its efforts to remedy its defective capitalization and board issues.”

Chancery Court Clarifies “Constituent Corporation”

Jul 13 2018

By: Stephan H. Coonrod and Stephanie S. Liu

In City of North Miami Beach General Employees’ Retirement Plan, et al. v. Dr Pepper Snapple Group, Inc., et al., (C.A. No. 2018-0227-AGB (Del. Ch. June 1, 2018)), the Court of Chancery held that the term “constituent corporation” as used in Section 262 of the Delaware General Corporation Law means only an entity that actually is being merged or combined with another entity in a merger or consolidation and does not include a parent of such entities. Thus, the Court ruled that the Dr Pepper stockholder plaintiffs are not entitled to appraisal rights because Dr Pepper is not a constituent corporation, but rather the parent of one of two corporations to be merged in connection with the proposed transaction.

MOTION FOR A TEMPORARY RESTRAINING ORDER OF CONTROLLING STOCKHOLDERS DENIED AS NO EXTRAORDINARY CIRCUMSTANCES FOUND

Jun 26 2018

By Annette Becker and Caitlin Velasco

In CBS Corporation, et al. v. National Amusements, Inc., et al., Civil Action No. 2018-0342-AGB, the Court of Chancery denied a motion for temporary retraining order brought by CBS Corporation (“CBS”) and five independent directors of CBS (the “Plaintiffs”) to restrain controlling shareholders, Shari Redstone, her father Sumner Redstone, National Amusements, Inc. (“NAI”), NAI Entertainment Holdings LLC, and the Sumner M. Redstone National Amusements Trust (the “Defendants”) from taking certain actions that would interfere with the governance of CBS or other proposed actions of the board of directors of CBS. The Court found that there was no precedent for the type of relief requested by Plaintiff and that no extraordinary circumstances existed to warrant the grant of such relief. Read More

Chancery Court Denies In Part Motion to Dismiss Breach of Contract and Breach of Fiduciary Duties Claims

Jun 14 2018

By Shoshannah Katz and Priya Chadha

In Feldman v. Soon-Shiong, et al. (C.A No. 2017-0487-AGB), the Delaware Court of Chancery denied in part and granted in part a motion to dismiss claims involving, among other things, breach of contract and breach of the fiduciary duty of loyalty, following a defendant’s withdrawal of $47 million from a company bank account.

Court of Chancery Dismisses Breach of Fiduciary Duty Claim as Duplicative of Breach of Contract Claim

By: Scott Waxman and Zack Sager

In MHS Capital LLC v. Goggin, the Delaware Court of Chancery granted a motion to dismiss a breach of fiduciary duty claim against the manager of a Delaware limited liability company because all of the manager’s conduct that could have formed the basis of such claim was covered by the duties of the manager delineated in the limited liability company agreement. The Court also analyzed and dismissed claims for, among other things, fraud, breach of the implied contractual covenant of good faith and fair dealing, unjust enrichment, and misappropriation of trade secrets.

CONTROLLING STOCKHOLDER CANNOT ADVANCE ITS OWN SELF-INTEREST AT EXPENSE OF MINORITY STOCKHOLDERS

May 25 2018

By: C. J. Voss and Rich Minice

In Carr v. New Enterprise Associates, Inc., C.A. No. 20170381-AGB (Del. Ch. Mar. 26, 2018), the Delaware Court of Chancery, in denying in part and granting in part a motion to dismiss, reaffirmed the principle that a controlling stockholder, when acting outside its capacity as a stockholder, cannot use the corporation to advance the controlling stockholder’s self-interest at the expense of minority stockholders. In the context of defendants’ motion to dismiss, the court found that it was reasonably conceivable that the controlling stockholder of American Cardiac Therapeutics, Inc. (“ACT”) and its conflicted board of directors had breached their duty of loyalty to ACT’s minority stockholders by approving a sale of a warrant to a third party that included an option to acquire ACT, allegedly at an unfairly low price, in order to incentivize the third party to also acquire and invest in the controlling stockholder’s other portfolio companies.

Catagory:Breach of Fiduciary Duty