Edward McNally on Breach of Duty

Court of Chancery Addresses the Scope of Summary Control Disputes and Effectiveness of Written Consents

Brown v. Kellar, C.A. No. 2018-0687-MTZ (Del. Ch. Dec. 21, 2018) - Control disputes, like those under Section 225 of the DGCL, are summary, narrow proceedings limited to the issues regarding title to office. The Court of...more

12/31/2018 / Board of Directors , Breach of Contract , Breach of Duty , Fiduciary Duty , Shareholder Litigation , Shareholders

Court of Chancery Invalidates Federal Court Forum-Selection Provision for Securities Cases

Sciabacucchi v. Salzberg, C.A. No. 2017-0031-JTL (Del. Ch. Dec. 19, 2018) - Delaware law permits a Delaware corporation to include a forum-selection provision in its certificate of incorporation governing all “internal...more

12/21/2018 / Board of Directors , Breach of Duty , Fiduciary Duty , Forum Selection , Initial Public Offering (IPO) , Registration Statement , Securities Act of 1933 , Shareholders

Court of Chancery Declines to Expand Dual-Natured Direct and Derivative Claims Under Gentile

Klein v. H.I.G. Capital LLC, C.A. No. 2017-0862-AGB (Del. Ch. Dec. 19, 2018) - Under the Delaware Supreme Court’s Gentile decision, a claim may be dual-natured, meaning partially derivative on behalf of the corporation and...more

12/21/2018 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholder Litigation , Shareholders

Court of Chancery Addresses Overlapping Appraisal and Fiduciary Duty Action

In re Xura Stockholder Litigation, C.A. No. 12608-VCS (Del. Ch. Dec. 10, 2018) - Lately, the Delaware Supreme Court has given great weight to the deal price in appraisal cases. As a result, plaintiffs have put a greater...more

12/17/2018 / Board of Directors , Breach of Duty , Duty to Preserve , Fiduciary Duty , Mergers , Shareholder Litigation , Shareholders

Court of Chancery Addresses Fiduciary Insider Trading Claims Under Brophy in Fitbit Litigation

In re Fitbit Inc. Stockholder Derivative Litigation, C.A. No. 2017-0402-JRS (Del. Ch. Dec. 14, 2018) - Delaware law recognizes a claim for breach of fiduciary duty based on insider trading under the Brophy decision....more

12/17/2018 / Board of Directors , Breach of Duty , Fiduciary Duty , Fitbit , Insider Trading , Shareholders

Court Of Chancery Limits Zapata Test To Properly Filed Complaint

Busch v. Richardson, C.A. 2017-0868-AGB (November 14, 2018) - A derivative complaint that meets the demand requirements of Rule 23.1 may be subject to later dismissal at the request of a properly formed and functioning...more

11/21/2018 / Board of Directors , Breach of Duty , Derivative Suit , Directors , Fiduciary Duty , Shareholder Litigation , Shareholders

Court Of Chancery Resolves 2 Significant Indemnification Issues

Creel v. Ecolab Inc., C.A. 12917-VCMR (October 31, 2018) - This decision resolves indemnification issues that regularly arise. First, when there are two possible indemnitors and one pays up, may the indemnitee still seek...more

11/1/2018 / Board of Directors , Breach of Duty , Fiduciary Duty , Indemnification , Motion for Summary Judgment , Motion to Dismiss

Court Of Chancery Dismisses Complaint Alleging Aiding and Abetting Claim

Tilden v. Cunningham, C.A. 2017-0837-JRS (October 26, 2018) - This is an interesting decision for many reasons. It includes a comprehensive analysis of when demand on a board is not excused, when ignoring a forum selection...more

10/29/2018 / Board of Directors , Breach of Duty , Derivative Suit , Directors , Fiduciary Duty , Shareholder Litigation , Shareholders

Court Of Chancery Explains Limits On Duty To Know

Marchland v. Barnhill, C.A. 2017-0586-JRS (September 27, 2018) - When something bad occurs in a business, it now seems inevitable that the directors may be sued. The most popular form of suit now seems to be a securities...more

10/3/2018 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Limited Partnerships , Shareholders

Delaware District Court Explains Tolling Based on Books and Records Inspection

Norman v. Elkin, C.A. No. 06-005-LPS (D. Del. Sept. 4, 2018) - Litigation seeking to inspect a corporation’s records under Section 220 of the DGCL might toll the statute of limitations for certain claims under the right...more

9/6/2018 / Books & Records , Breach of Contract , Breach of Duty , Damages , Fiduciary Duty , Section 220 Request , Shareholders

Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims

In re Appraisal of Columbia Pipeline Group, Inc., C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018) - It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the...more

9/6/2018 / Appraisal , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Mergers

Court of Chancery Addresses Contractual Fiduciary Duties, Secondary Liability, and Banker Liability in the MLP Context

Mesirov v. Enbridge Energy Company, C.A. No. 11314-VCS (Del. Ch. Aug. 29, 2018) - This is the latest decision in a long-running saga in the master limited partnership (MLP) context involving Enbridge Energy....more

9/6/2018 / Breach of Duty , Failure To State A Claim , Fiduciary Duty , Master Limited Partnerships , Motion to Dismiss , Remand , Reversal

Court of Chancery Validates Cure of Defective Corporate Acts Affecting Herman Miller’s Acquisition of DWR

Charles Almond Trustee v. Glenhill Advisors LLC, C.A. No. 10477-CB (Del. Ch. Aug. 17, 2018)- Sections 204 and 205 of the DGCL permit corporations to cure and validate defective corporate acts under the right circumstances....more

8/21/2018 / Breach of Duty , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers , Shareholder Litigation , Shareholders

Court of Chancery Addresses Contract Formation

CSH Theatres L.L.C. v. Nederlander of San Francisco Associates, C.A. No. 9380-VCMR (Del. Ch. July 31, 2018) - This drama arises from a dispute involving the Curran Theatre in San Francisco. The decision mostly deals with...more

8/3/2018 / Board of Directors , Breach of Contract , Breach of Duty , Fiduciary Duty , LLC Agreements

Delaware District Court Stays Twitter Derivative Case Pending Securities Action

In re Twitter Inc. Shareholder Derivative Litigation, C.A. No. 18-62-VAC-MPT (D. Del. July 23, 2018) - Several Court of Chancery decisions discuss the appropriateness of staying a derivative action pending a related...more

7/30/2018 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Securities Exchange Act , Shareholder Litigation , Shareholders

Court of Chancery Explains MFW Requirements

Olenik v. Lodzinski, C.A. No. 2017-0414-JRS (Del. Ch. July 20, 2018) - Transactions between a Delaware company and its controlling stockholder usually are subject to rigorous entire fairness review. But, under the MFW...more

7/23/2018 / Board of Directors , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Shareholder Litigation , Shareholders

Court of Chancery Explains Burden Needed to Support Inspection for Suspected Wrongdoing

Barnes v. Sprouts Farmers Market Inc., C.A. No. 2017-0735-MTZ (Del. Ch. July 18, 2018) - An investor seeking books and records for the purpose of investigating wrongdoing or mismanagement must establish a “credible basis”...more

7/23/2018 / Books & Records , Breach of Duty , Fiduciary Duty , Mismanagement , Section 220 Request , Shareholder Litigation , Shareholders

Court Of Chancery Upholds Contract Claim Based On The Standard Of Conduct In An Agreement

Wenske v. Blue Bell Creameries Inc., C.A. 2017-0699-JRS (July 6, 2018) - When the parties to a LLP agree on the standard of conduct the general partner should follow, its failure to live up to that standard is a breach of...more

7/18/2018 / Breach of Contract , Breach of Duty , Fiduciary Duty , Limited Partnership Agreements

Court of Chancery Imposes Over $20 Million in Damages on Investment Fund and Its Manager

Basho Technologies Holdco B LLC v. Georgetown Basho Investors LLC, C.A. No. 11802-VCL (Del. Ch. July 6, 2018) - This notable decision issued by the Court of Chancery holds an investment fund and its manager liable for over...more

7/12/2018 / Board of Directors , Breach of Duty , Fiduciary Duty , Shareholder Litigation , Shareholders

Court of Chancery Requires Bad Faith Disclosure Violations for Demand Futility

Ellis v. Gonzalez, C.A. No. 2017-0342-SG (Del. Ch. July 10, 2018) - The pre-suit demand on the board requirement for derivative litigation usually is not excused solely by a sufficiently pled disclosure violation....more

7/11/2018 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Duty of Loyalty , Fiduciary Duty , Mergers , Shareholder Litigation , Shareholders

Delaware Supreme Court Reverses Corwin Dismissal and Stresses Importance of Disclosures

Morrison v. Berry, No. 445, 2017 (Del. July 9, 2018) - Corwin holds that approval of a transaction by a fully-informed, uncoerced majority of the disinterested stockholders invokes the deferential business judgment...more

7/10/2018 / Books & Records , Breach of Duty , Business Judgment Rule , Corwin Doctrine , DE Supreme Court , Fiduciary Duty

Court Of Chancery Explains When Claim Is Direct And Survives A Merger

In re Straight Path Communications Inc. Consolidated Stockholder Litigation, C.A. No. 2017-0486-SG (Del. Ch. June 25, 2018) - When a merger closes, stockholders of the acquired company generally lose standing to pursue...more

6/27/2018 / Breach of Duty , Business Judgment Rule , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers , Shareholder Litigation , Shareholders

Court Of Chancery Enforces Agreement To Waive Corporate Opportunity Claims

Alarm.Com Holdings Inc. v. ABS Capital Partners Inc., C.A. 2017-0583-JTL (June 15, 2018) - Under 8 Del C. Section 122(17) a corporation may waive any claim that a corporate opportunity was wrongfully taken by a fiduciary....more

6/22/2018 / Breach of Duty , Confidential Information , Dismissals , Fiduciary Duty , Misappropriation , Preemption , Trade Secrets , Uniform Trade Secrets Acts

Court Of Chancery Explains Who Is A Controller

In Re Hansen Medical Inc. Stockholders Litigation, C.A. 12316-VCMR (June 18, 2018) - This is another decision in a series of recent decisions where the Court of Chancery had to decide if a less-than-50% stockholder...more

6/22/2018 / Board of Directors , Breach of Duty , Fiduciary Duty , Mergers , Minority Shareholders , Shareholders

Court of Chancery Finds Breach of Fiduciary Duty By Director Selfishly Opposing Cure of Defective Corporate Acts

CertiSign Holding Inc. v. Kulikovsky / Kulikovsky v. CertiSign Holding Inc., C.A. No. 12055-VCS (Del. Ch. June 7, 2018) - When a corporation accidentally issues defective stock or takes some other defective corporate act,...more

6/12/2018 / Board of Directors , Breach of Duty , Controlling Stockholders , Duty of Loyalty , Fiduciary Duty , Shareholders

Edward McNally

Morris James LLP

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