Uncategorized – Page 5 – Delaware Docket

Caremark Claim Dismissed Due to Inadequate Pleading of Demand Futility

Apr 07 2020

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.

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 DENIES PURCHASER’S THEORY OF RECOUPMENT WITH TIME-BARRED CLAIMS TO OFFSET POST-MERGER EARN-OUT PAYMENTS

Mar 26 2020

By: David L. Forney and Marissa Leon

The Delaware Court of Chancery (the “Court”) recently rejected a Purchaser’s theory of recoupment with claims of breach of contract and fraudulent inducement that were time-barred by the statute of limitations. Claros Diagnostics, Inc. Shareholders Representative Committee v. OPKO Health, Inc., C.A. No. 2019-0262-SG, 2020 WL 829361 (Del. Ch. February 19, 2020).

DEMAND FOR BOOKS AND RECORDS UNDER SECTION 220 TO AID IN PROXY CONTEST IS NOT A PROPER PURPOSE, CHANCERY COURT FINDS

Mar 20 2020

By: C.J. Voss and Adam Heyd

In High River Limited Partnership, Icahn Partners Master Fund LP, and Icahn Partners LP v. Occidental Petroleum Corporation, C.A. No. 2019-0403-JRS (Del. Ch. November 14, 2019), the Delaware Court of Chancery (the “Court”) dismissed a demand by stockholders of Occidental Petroleum Corporation (“Occidental”) under Section 220 of the Delaware General Corporate Law (“Section 220”) for documents and information relating to Occidental’s acquisition of Anadarko Petroleum and related transactions. The Court held that the stockholders’ demand for books and records to aid in a proxy contest did not constitute a proper purpose, and that a broad demand for corporate records was not necessary and essential to the stockholders’ purpose of challenging company management over its decision to enter into a transaction.

Transactions Involving Controlling Stockholder as a Result of Actual or Inherent Coercion are Subject to Entire Fairness Standard of Review

Mar 19 2020

By: Annette Becker and Rich Minice

In In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VC (Del. Ch. Feb. 4, 2020), the Delaware Court of Chancery rejected the defendants’ (Elon Musk and the Tesla, Inc. (“Tesla”) board of directors (“Defendants”)) novel position that “inherent coercion” doctrine–as it relates to a controlling stockholder–evaporates when a case for breach of fiduciary duty moves beyond the pleading stage and stockholder ratification exists, and re-affirmed the Delaware principle that entire fairness is the appropriate standard of review. The Court rejected motions for summary judgment by both parties finding that there remained issues of material fact to be determined as to whether stockholder ratification was fully informed and uncoerced, and whether a majority of the Tesla board of directors approving the merger was independent.

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.

Delaware Court of Chancery Upholds Forum Selection Clause in LLC Agreement Under State Law

Oct 31 2019

By Scott E. Waxman and Frank J. Mazzucco

In Li v. LoanDepot.com, LLC, C.A. No. 2019-0026-JTL (Del. Ch. Apr. 24, 2019), the Delaware Court of Chancery upheld the enforceability of a forum selection clause in a company’s operating agreement.

rejecting a suit seeking a 43.9% higher payout, the delaware chancery court declared that the $18 per share price paid for stillwater was the fair value.

Oct 25 2019

By Scott E. Waxman and Pouya Ahmadi

In In Re: Appraisal of Stillwater Mining Company, Consol. C.A. No. 2017-0385-JTL (Del. Ch. Aug 21, 2019), the Delaware Court of Chancery (the “Court”) held that the fair value of Stillwater Mining Company (“Stillwater”) at the time of its acquisition through a reverse triangular merger with Sibanye Gold Limited (“Sibanye”) was $18 per share, equal to the merger consideration.

Termination Fee is Not Exclusive Remedy for Breach of No-Shop

Oct 17 2019

By Sara Kirkpatrick and Lisa Stark

On September 9, 2019, the Delaware Court of Chancery held that Genuine Parts Company (“GPC”) adequately pled facts that supported a pleading stage inference that Essendant Inc. breached its merger agreement with GPC by terminating the agreement to pursue a transaction with non-party Sycamore Partners (“Sycamore”) pursuant to a superior proposal termination right. The Court further found that GPC adequately pled that its acceptance of a termination fee from Essendant did not preclude GPC from pursuing breach of contract claims against Essendant for its alleged breaches of the parties’ merger agreement.

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