Demand Refusal – Delaware Docket

Court of Chancery Holds That Sole, Conflicted General Partner Cannot, By Reason of its Conflict, Delegate its Otherwise Valid Power to Manage Derivative Litigation

Apr 24 2020

In Wenske v. Blue Bell Creameries, Inc., C.A. No. 2017-0699-JRS (Del. Ch. August 28, 2019), the Court of Chancery held that Blue Bell Creameries, Inc., the sole general partner (the “General Partner”) of Blue Bell Creameries, LP (the “Partnership”), was not a disinterested entity such that it could delegate its otherwise valid power to manage derivative litigation. The Court also held that it was not appropriate to undertake a conflict analysis with respect to the individual members of the board of directors of the General Partner (the “GP Board”), because such analysis would disregard the established policy of respecting the legal fiction of the business entity.

Stockholder Letter Requesting Remedial Action Deemed a Pre-Suit Demand

Dec 20 2019

By: Joanna Diakos Kordalis and Zack Sager

In Solak v. Welch, the Court of Chancery found that a letter from a stockholder to the board of directors, which requested remedial action to address allegedly excessive non-employee director compensation, was a pre-suit demand and dismissed the stockholder’s complaint for failing to allege wrongful demand refusal.

CHANCERY COURT DISMISSES STOCKHOLDER CLAIM FOR BREACH OF FIDUCIARY DUTY, DESPITE BOARD’S INACCURATE DISCLOSURES

Apr 01 2019

By: Holly Hatfield and Adam Heyd

In Steven H. Busch v. Edward J. Richardson et. al. and Richardson Electronics, Ltd., C.A. No. 2017-0868-AGB (Del. Ch. November 14, 2018), the Delaware Court of Chancery (the “Court”) dismissed a plaintiff’s stockholder suit against certain board members of Richardson Electronics Ltd. (the “Company”) for breach of fiduciary duty. The Court found that the Company’s board (the “Board”) exercised valid business judgment in rejecting the plaintiff’s demand to unwind certain Company transactions, despite the Board’s failure to disclose certain related party transactions to the plaintiff and other stockholders.

CHANCERY COURT GRANTS MOTION TO DISMISS SECTION 220 DEMAND MADE DURING A PENDING PLENARY CLAIM DUE TO LACK OF SPECIAL CIRCUMSTANCES

Mar 21 2019

By: Remsen Kinne and Stephanie Winkler

In CHC Investments, LLC v. FirstSun Capital Bancorp, C.A. No. 2018-0610-KSLM (Del. Ch. January 24, 2019), the Court of Chancery (the “Court”), in a motion to dismiss, found that CHC Investments, LLC’s (“CHC” and “Plaintiff”) pending plenary claims rendered CHC’s purpose for demanding inspection corporate books and records pursuant to Section 220 of the Delaware General Corporate Law (“Section 220”) improper, and granted FirstSun Capital Bancorp’s (“FirstSun” and “Defendant”) motion to dismiss.

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

Aug 24 2018

By: Jessica Pearlman and Adam Heyd

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.

Court of Chancery Holds That Shareholder Satisfied Burden of Proof under Section 220 to Show Credible Basis to Infer That Company Misled Shareholders Regarding Biggest Client

Jul 10 2017

By David Forney & Tami Mack

In Elow v. Express Scripts Holding Company, C.A. No.12721-VCMR and Khandhar v. Express Scripts Holding Company, C.A. No. 12734-VCMR (Del. Ch. May 31, 2017), the Court of Chancery held that plaintiff shareholder Clifford Elow’s (“Elow”) demand to inspect certain books and records of Express Scripts Holding Company (the “Company”) met all statutory requirements and stated a proper purpose, while plaintiff (and purported shareholder) Amitkumar Khandhar’s (“Khandhar”) demand did not. Thus, the Court granted Elow’s Section 220 demand subject to a confidentiality agreement and denied Khandhar’s demand.

Chancery Court Dismisses Derivative Claim Over Board’s Defensive Measures Against a Takeover as Stockholder Failed to Plead Specific Facts

Jun 14 2017

By Rem Kinne and Peter Soskin

In Ryan v. Armstrong, et al., C.A. No. 12717-VCG (Del. Ch. May 15, 2017), the Delaware Chancery Court dismissed the derivative action brought by a Plaintiff-shareholder (“Plaintiff”) against specified members of the board of directors (“Defendants”) of nominal defendant The Williams Companies (“Williams”). Plaintiff brought his claim against the Defendants without first demanding that the board pursue an action following Williams’ decision to allegedly undertake defensive measures against a takeover. The court granted Defendants’ motion to dismiss holding that Plaintiff failed to plead facts demonstrating that an exception to the demand requirement of Court of Chancery Rule 23.1 applied.

Court of Chancery Holds That A Credible Basis to Infer Wrongdoing by One Director is Sufficient to Satisfy Burden of Proof Under Section 220

May 04 2017

By: Remsen Kinne and Tami Mack

In Rodgers v. Cypress Semiconductor Corporation, C.A. No. 2017-0070-AGB (Del. Ch. April 17, 2017), the Court of Chancery held that shareholder plaintiff T.J. Rodgers (“Rodgers”) had established several proper purposes for his demand to inspect certain books and records of Cypress Semiconductor Corporation (the “Company”), along with a credible basis to infer wrongdoing by at least one of the Company’s directors. The Court granted Rodgers’ Section 220 action and directed the parties to meet and submit an order for production of all responsive documents.

Chancery Court Rejects Stockholder’s Demand for Books and Records

Apr 05 2017

By: Whitney Smith and Kevin Szu-Tu

In Haque v. Tesla Motors, Inc., C.A. No. 12651-VCS (Feb. 2, 2017), Vice Chancellor Slights declined to compel the defendant, Tesla Motors, Inc. (“Tesla”), to produce certain books and records demanded by Plaintiff stockholder in an action brought under Section 220 of the Delaware General Corporate Law (“Section 220”). Applying well settled Delaware law that a stockholder’s right to inspect books and records under Section 220 is broad but not unlimited, Vice Chancellor Slights denied Plaintiff’s demand, ruling that the Plaintiff failed to demonstrate a credible basis from which the Court could infer wrongdoing.

Catagory:Demand Refusal