Duty of Good Faith – Page 2

In Re Comverge, Inc. Shareholders Litigation

Dec 03 2014

In Re Comverge, Inc. Shareholders Litigation involves a stockholder challenge to a merger between Comverge, Inc. and H.I.G Capital, L.L.C. The plaintiff stockholders of Comverge contend that the Comverge board of directors (the “Board”) breached their fiduciary duties by: (1) conducting a flawed sales process and not suing HIG for an alleged breach of a non-disclosure agreement between the parties (the “NDA”); and (2) agreeing to deal protection measures that precluded the possibility of a topping bid. On November 25, 2014, Vice Chancellor Parsons granted HIG’s motion to dismiss with respect to the first claim, but denied the motion on the second claim. Furthermore, Vice Chancellor Parsons dismissed Plaintiffs’ claim that HIG aided and abetted the Board’s breaches of fiduciary duties, stating that even if there was a predicate breach of fiduciary duties by the Board, the Plaintiffs only allege conclusory facts that do not support a claim that HIG participated in those breaches.

In re: El Paso Pipeline Partners L.P. Derivative Litigation, C.A. No. 7141-VCL (June 12, 2014)

Jul 01 2014

By Eric Feldman and Porter Sesnon

In In re: El Paso Pipeline Partners L.P. Derivative Litigation, the Delaware Court of Chancery granted summary judgment in favor of the defendants on claims for breach of contract and breach of the implied contractual covenant of good faith and fair dealing in connection with a conflicted transaction.

In March 2010, El Paso Pipeline Partners, L.P., a Delaware limited partnership that operates as a publicly traded master limited partnership (the “MLP”), purchased a 51% interest in two entities that owned certain liquid natural gas (“LNG”) assets (the “Drop-down”) from its parent corporation that “sponsored” the MLP, El Paso Corporation (the “Parent”). Parent also indirectly owned the general partner of the MLP, El Paso Pipeline GP, L.L.C. (the “General Partner”), giving it control over and an economic interest in the MLP. As a result, the proposed Drop-down created a conflict of interest for the General Partner.

Frank v. Elgamal, C.A. No. 6120-VCN (March 10, 2014) (Noble, V.C.)

Mar 14 2014

By Annette Becker and Claire White

In this opinion, Vice Chancellor Noble considered defendants’ motion for summary judgment in connection with various breach of fiduciary duty claims asserted by a former stockholder, Richard Frank, against the Board of Directors and two employees of American Surgical Holdings, Inc. (“ASH”), a public company, in connection with the merger of ASH with an affiliate of Great Point Partners I, L.P. (“GPP”). In connection with the motion the Chancery Court examined:

• the “entire fairness” standard of review;

• the effect of a special committee on the standard of review;

• the standard of review for Revlon claims upon a motion for summary judgment, particularly where the target’s charter includes an exculpatory clause;

• a special committee’s examination of projections underlying a fairness opinion, including where multiple sets of projections are prepared; and

• the interaction between a shareholder’s unjust enrichment and breach of fiduciary duty claims upon a motion for summary judgment.

Catagory:Duty of Good Faith