Motion to Dismiss – Page 2

CHANCERY COURT VALIDATES A DEFECTIVE MERGER AND REAFFIRMS RELIANCE ON OUTSIDE LEGAL COUNSEL UNDER DELAWARE LAW

Sep 20 2018

In The Cirillo Family Trust v. Aram Moezinia, Lewis Tepper, Mark Walter, and DAVA Pharmaceuticals, Inc., C.A. No. 10116-CB (Del. Ch. Jul. 11, 2018), the Delaware Chancery Court granted the defendants’ motion dismissing certain claims arising from the 2014 merger between DAVA Pharmaceuticals, Inc. (“DAVA”) and an affiliate of Endo Pharmaceuticals, Inc. (such affiliate, “Endo”). The Court held that Section 205 of the Delaware General Corporation Law (the “DGCL”) validated deficiencies in the written consents to the merger (the “Written Consents”) and a director’s reasonable, good faith reliance on the advice of legal counsel hired for specific expertise can exculpate the director for a fiduciary duty breach. The Court also granted part of the plaintiff’s motion to amend the complaint to add a claim against certain directors in their capacities as officers of DAVA.

A Conflicted Controller Transaction Survives a Motion to Dismiss

Aug 31 2018

By: Lisa R. Stark and Samira F. Torshizi

In In re Hansen Medical, Inc. Stockholders Litigation, C.A. No. 12316-VCMR (Del. Ch. June 18, 2018), the Delaware Court of Chancery found that plaintiffs had stated a reasonably conceivable claim that the acquisition of Hansen Medical, Inc. (“Hansen”) by Auris Surgical Robotics, Inc. (“Auris”) should be reviewed under the entire fairness standard of review because the transaction involved a controlling stockholder group which extracted benefits from the transaction not shared with the minority. The Court denied motions to dismiss filed by the alleged control group and Hansen’s directors and officers.

Court of Chancery Holds That Plaintiff Failed to Meet Burden of Proof With Respect to Mistake-Based Reformation Claim

May 15 2018

By: Scott Waxman and Tami Mack

In Richard B. Gamberg 2007 Family Trust v. United Restaurant Group, L.P., C.A. No. 10994-VCMR (Del. Ch. January 26, 2018), the Court of Chancery held that limited partner, Richard B. Gamberg 2007 Family Trust (the “Plaintiff”), failed to meet its burden of proof with respect to various claims against United Restaurant Group L.P. (the “Partnership”), Atlantic Coast Dining, Inc. (the “General Partner”), and the directors/shareholders of the General Partner (the “Shareholder Defendants”; together with the Partnership and the General Partner, the “Defendants”), which included a mistake-based reformation claim, among other breach of contract and breach of fiduciary duty claims.

MULTI-BILLION DOLLAR INVESTMENT MANAGER AND DIRECTORS REMAIN AT RISK

By: Kevin Stichter and Samira Torshizi

In Cumming v. Edens, et al., C.A. No. 13007-VCS (Del. Ch. Feb. 20, 2018), the Court of Chancery denied a motion to dismiss a derivative suit for breach of fiduciary duties brought by a stockholder of New Senior Investment Group, Inc. (“New Senior”) against New Senior’s board of directors (the “Board”) and related parties in connection with New Senior’s $640 million acquisition of Holiday Acquisition Holdings LLC (“Holiday”). The Court made clear that compliance with Section 144 does not necessarily provide a safe harbor against claims for breach of fiduciary duty and invoke business judgment review of an interested transaction. Because the complaint alleged with specificity “that the Board acted out of self-interest or with allegiance to interest other than the stockholders,” the court applied the entire fairness standard of review and concluded that the transaction was not fair to New Senior stockholders. Read More

COURT OF CHANCERY HOLDS THERE MUST BE A GAP IN AGREEMENT FOR AN IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

Feb 11 2018

By: Scott E. Waxman and Douglas A. Logan

In Christopher Miller, et al., v. HCP & Company, et al., memorandum opinion 180201, the Court of Chancery granted a motion to dismiss because the underlying Limited Liability Company Agreement did not contain a “gap” for an implied covenant of good faith and fair dealing to fill. Rather, the Court of Chancery held that the Limited Liability Company Agreement contained negotiated investor favorable provisions regarding good faith and fair dealing, thus undercutting any argument that the Court of Chancery should read an implied covenant into the operating agreement.

CHANCERY COURT DISMISSES BREACH OF FIDUCIARY CLAIMS FOLLOWING THE CLOSING OF A MERGER INVOLVING INSIDER SIDE DEALS

Oct 02 2017

By Joanna Diakos and Dean Brazier

In Alan Kahn v. Michael D. Stern, et al., C.A. No. 12498-VCG (Del. Ch. Aug. 28, 2017), the Delaware Chancery Court granted a motion to dismiss the stockholder plaintiff’s claims that the director defendants breached their fiduciary duties when they approved a merger that included side deals. The Court noted that the plaintiff had the burden of proving either that the board was not disinterested or that the board acted in bad faith with respect to the disclosures in the information statement released to stockholders. The Court concluded that the plaintiff failed to state a claim upon which relief could be granted.

Chancery Court Holds that Express Merger Provisions Prevail Over Alleged Extra-Contractual Misrepresentations

Sep 21 2017

By Josh Gaul and Will Smith

In Sparton Corporation v. Joseph F. O’Neil et al., Civil Action No. 12403-VCMR (Del. Ch. August 9, 2017), the Delaware Court of Chancery granted the defendants’ motion to dismiss in its entirety because the plaintiff failed to state a claim for fraud and breach of contract. Seeking extra-contractual relief from a merger agreement, the plaintiff-buyer claimed, among other losses, $1.8 million in damages caused by the sellers’ misrepresentation of the target company’s working capital. The plaintiff argued that the defendant-sellers’ alleged extra-contractual misrepresentations warranted judicial intervention despite express anti-reliance and exclusive remedy provisions in the merger agreement.

Court of Chancery finds personal jurisdiction over out-of-state trust due to trustor’s involvement in the formation of Delaware LLC

Sep 19 2017

By: Scott E. Waxman and J. Tyler Moser

In Terramar Retail Centers, LLC v. Marion #2-Seaport Trust U/A/D/ June 21, 2002, Civil Action No. 12875-VCL (Del. Ch. August 18, 2017), the Delaware Court of Chancery denied an out-of-state defendant’s motion to dismiss for lack of personal jurisdiction, finding that defendant’s trustor was actively involved in negotiating both the underlying business deal and the terms of the operating agreement of the Delaware limited liability company at issue. Read More

CHANCERY COURT DECLINES TO DISMISS FIDUCIARY CLAIMS ARISING FROM A SELF-TENDER OFFER

Sep 14 2017

By Lisa Stark and Dean Brazier

In Buttonwood Tree Value Partners L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del. Ch. July 24, 2017), the Delaware Chancery Court denied, in part, a motion to dismiss claims for breach of the fiduciary duty of loyalty brought by minority stockholders in R. L. Polk and Co., Inc. (“Polk”) against the directors of Polk and members of the Polk family, who controlled Polk, in connection with a self-tender offer. In this case, the Court held that it was reasonably conceivable that the Polk directors who were affiliated with the Polk family deliberately caused Polk to conduct a self-tender offer at a low price to enable Polk family insiders to maximize their proceeds from a future sale of Polk.

CHOICE OF LAW PROVISION IN STOCKHOLDERS’ AGREEMENT INSUFFICIENT TO CREATE PERSONAL JURISDICTION OVER DELAWARE CORPORATION’S FORMER CEO

Aug 15 2017

By Shoshannah D. Katz and Max E. Kaplan

By order dated August 4, 2017, Vice Chancellor Slights dismissed the complaint seeking to enforce non-compete and non-solicitation provisions in a stockholders’ agreement in EBP Lifestyle Brands Holdings, Inc. v. Boulbain, C.A. No. 2017-0269-JRS (Del. Ch. Aug. 4, 2017), finding that the Delaware Chancery Court lacked personal jurisdiction over the defendant. Specifically, the Court held that defendant’s execution of a stockholders’ agreement governed by Delaware law and concerning a Delaware corporation was insufficient to satisfy the statutory and constitutional requirements to establish personal jurisdiction over an individual not resident or transacting business in Delaware.

Tag:Motion to Dismiss