Delaware Docket – Page 37 – Timely, brief summaries of cases handed down by the Delaware Court of Chancery and the Delaware Supreme Court.

Chancery Court Finds Clear Disclaimer of Reliance on Extra-contractual Statements in Dismissing Buyer’s Fraud Claim; Allows Certain Breach of Contract Claims to Proceed

Dec 12 2016

In IAC Search, LLC, v. Conversant LLC (f/k/a ValueClick, Inc.), C.A. No. 11774-CB (Del. Ch. Ct. November 30, 2016) the Chancery Court granted the defendant’s motion to dismiss plaintiff’s fraud claim based on the inclusion of provisions in the purchase agreement that disclaimed reliance on extra-contractual statements that bar plaintiff’s fraud claim. The Court also granted defendant’s motion to dismiss one breach of contract claim, but denied the motion with respect to several other breach of contract claims.

Chancery Court Compels Arbitration Based On Email Communications That Included All Essential Terms

Dec 09 2016

By: Scott E. Waxman and Trevor M. Gates

In Gomes v. Karnell, No. 11814-VCMR (Del. Ch. Nov. 30, 2016), the Delaware Court of Chancery granted the defendants’ motion to compel arbitration and held that an email exchange between the parties’ attorneys formed a valid arbitration agreement. The plaintiff, Mark Gomes (“Gomes”), an investment analyst with thousands of followers, alleged breaches of fiduciary duty, breaches of contract, waste, and aiding and abetting breaches of fiduciary duty.

REVLON AND UNOCAL ENHANCED SCRUTINY REJECTED FOR DISSOLUTION PLAN

Nov 05 2016

By Kevin P. Stichter and Nathan Harrill

In Huff Energy Fund v. Gershen, C.A. No. 11116-VCS, the Delaware Court of Chancery dismissed a stockholder’s challenge to the board of director’s decision to dissolve the company following an asset sale. The Court ruled that the enhanced scrutiny standards of Revlon and Unocal do not supplant the business judgment rule in the context of a company’s decision to dissolve.

CHANCERY COURT DISMISSES POST-CLOSING DISCLOSURE CLAIMS AGAINST DIRECTORS OF MILLENNIAL MEDIA, INC.

Nov 01 2016

By Merrick Hatcher and Andrew Lloyd

In An Nguyen v. Michael G. Barrett, et al., C.A. No. 11511-VCG (Del. Ch. Sept. 28, 2016), Vice Chancellor Glasscock granted defendants’ motion to dismiss claims brought by a stockholder against members of the board of directors of Millennial Media, Inc., a Delaware corporation (“Millennial”), finding that plaintiff’s allegations failed to state a non-exculpated claim of breach of fiduciary duty with respect to alleged disclosure violations in connection with Millennial Media’s acquisition by AOL, Inc. (“AOL”). Read More

Delaware Chancery Court Dismisses Revlon Claims Based on Fully Informed, Uncoerced Stockholder Vote

Oct 25 2016

By Lisa Stark and Jonathan Miner

In In Re OM Group, Inc. Stockholder Litigation, C.A. No. 11216-VCS (Del. Ch. Oct. 12, 2016), the Delaware Court of Chancery dismissed Revlon claims, on the basis that the challenged merger had been approved by a disinterested, uncoerced and fully-informed majority vote of the target’s stockholders and therefore the business judgment rule applied.

DELAWARE CHANCERY COURT APPLIES MFW FRAMEWORK TO DISMISS SUIT BY MINORITY STOCKHOLDERS IN CONNECTION WITH SQUEEZE-OUT MERGER

Oct 25 2016

By Annette Becker and Joseph Phelps

In In re Books-A-Million, Inc. Stockholders Litigation, No. 11343-VCL (Del. Ch. Oct. 10, 2016), the plaintiffs, minority stockholders of Books-A-Million, Inc. (the “Company”), alleged that the Company’s directors, controlling stockholders and several of its officers breached their fiduciary duties in connection with a squeeze-out merger effected by the controlling stockholders in 2015 to take the Company private. The Court of Chancery held that the plaintiffs failed to plead facts to take the transaction outside the six-pronged framework approved by the Delaware Supreme Court in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2014) (“MFW”), and, consequently, the business judgment rule, rather than the entire fairness test, applied in reviewing the merger. Upon application of the business judgment rule, the Court dismissed the case.

Chancery Court Dismisses Derivative Breach of Fiduciary Duty Claims as Improperly Pled and the Requests for Declaratory Judgment as Not Ripe

Oct 14 2016

By: Annette Becker and Makda Goitom

In Chester County Employees’ Retirement Fund v. New Residential Investment Corp., No. 11058-VCMR (Del. Ch. Oct. 7, 2016), the Court of Chancery granted the motion to dismiss brought by defendants (the members of the board of directors of New Residential Corp. (“New Residential”), its manager, the manager’s owner, and its controlling stockholder: (i) for an improperly pled derivative claim (with leave to replead) brought against the defendants for breach of fiduciary duty by the plaintiff, a stockholder of New Residential, (ii) for plaintiff’s failure to sufficiently plead futility in demanding that the board of New Residential bring the derivative suit, and (iii) as to declaratory judgments sought by plaintiff with respect to the Defendants’ liability under certain documents as not being ripe (with leave to replead).

DELAWARE CHANCERY COURT DISMISSES CLAIMS DUE TO A PRIOR BROAD SETTLEMENT RELEASE

Oct 04 2016

By Scott Waxman and Thomas Meyer

In Geier v. Mozido, LLC, C.A. No. 10931-VCS (Del. Ch. Sept. 29, 2016) (Slights, V.C.), the Delaware Court of Chancery granted the motion of Mozido LLC (“LLC”) and Mozido, Inc., a subsidiary of LLC (“Inc.” and together with LLC, “Defendants”), to dismiss claims relating to incentive options promised, but not delivered, to a former director of LLC (“Plaintiff”).

Chancery Court Finds Statute of Limitations Bars Humvee Joint Venture Breach of Contract Claims

Sep 26 2016

By Scott Waxman and Mark Hammes

In AM General Holdings v. The Renco Group, C.A. No. 7639-VCS (Del. Ch. Aug. 22, 2016), the Court of Chancery held that Delaware’s three-year statute of limitations barred contract claims brought by one party in a joint venture to produce Humvee automobiles against its joint venture partner.

AM General LLC (“AM General”) manufactured and sold specialized vehicles including the Humvee. Prior to 2004, its sole member was The Renco Group, Inc. (“Renco”). In August 2004, Renco and MacAndrews & Forbes Holdings Inc. (“M&F”) entered into a joint venture with Renco whereby they formed AM General Holdings LLC (“Holdco”). Renco contributed AM General to Holdco and M&F contributed cash. An M&F subsidiary became the managing member of Holdco. A Holdco Agreement set forth the mechanisms for distribution of profits between Renco and M&F and provided for certain contractual protections for Renco, restricting certain related party transactions, management fees, distributions and the like and giving Renco access to books and records of Holdco.

Plaintiff’s Counsel Recovery in a Derivative Case Settling Under the Transitive Property Limited to Actual Benefit to Plaintiffs

Sep 21 2016

By: Nicholas Froio and David Noll

In Baker v. Sadiq, C.A. No. 9464-VCL (Del. Ch. August 16, 2016), the Court held that the proper calculation of an attorney’s contingency fee for a derivative action settled using the transitive property is based upon the actual settlement value. Baker concerned fees owed to plaintiff’s counsel (“Counsel”) after the settlement of a derivative action by minority shareholders for misappropriation by the majority shareholder. The settlement of those claims was a buyout of the minority shareholders at a better pro rata value than could be expected from the derivative action. By holding that the appropriate measure of fees is based upon actual cash payments, Plaintiff’s counsel received approximately one ninth of its expected award to be collected from an entity with no assets.