Lewis Lazarus on Breach of Duty

Chancery Rejects Challenge to Director’s Appointment and Dismisses Derivative Claims

Simons v. Brookfield Asset Mgmt., Inc., C.A. No. 2020-0841-KSJM (Del. Ch. Jan. 21, 2022) - If a derivative plaintiff does not make a pre-suit demand on the board, then under Court of Chancery Rule 23.1, the plaintiff must...more

4/22/2022 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty

Delaware Supreme Court Permits Substitution of Bankruptcy Trustee as Plaintiff to Resolve “Procedural Conundrum”

Lenois v. Lawal, No. 33, 2021 (Del. Dec. 9, 2021) - A company’s bankruptcy filing during an appeal of a dismissal of a derivative action presents questions of who, if anyone, has the standing to pursue the company’s...more

3/31/2022 / Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholder Litigation , Shareholders

Chancery Awards $9.5 Million Mootness Fee for Reduction of Voting Control and Other Benefits

Hollywood Firefighters Pension Fund v. Malone, C.A. 220-0880-SG (Nov. 8, 2021) - A plaintiff may be entitled to a mootness fee if it shows that its action had merit and produced a corporate benefit. This case outlines the...more

2/24/2022 / Attorney's Fees , Breach of Duty , Fee Awards , Fiduciary Duty , Mergers

Chancery Dismisses Derivative Action Based On Alleged Liability Under DGCL § 174 For Stock Repurchases and Dividends

In re The Chemours Co. Deriv. Litig., C.A. 2020-0786-SG (Del. Ch. Nov. 1, 2021) - Broadly speaking, Sections 160 and 173 of the DGCL prohibit a corporation from repurchasing stock or issuing dividends if doing so would...more

2/24/2022 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholders

Delaware Corporate and Commercial Case Law Year in Review

Our 2021 Top 10 list summarizes decisions from the Delaware courts likely to affect business transactions and business litigation going forward. Our criteria for selection are that the decision either meaningfully changed...more

2/1/2022 / Board of Directors , Breach of Duty , Business Litigation , Commercial Litigation , Corporate Counsel , DE Supreme Court , Demand Futility , Derivative Suit , Fiduciary Duty

Chancery Examines Cornerstone Standard for Establishing Non-Exculpated Fiduciary Duty Claims

In Re BGC Partners, Inc. Derivative Litigation, Consol. C.A. No. 2018-0722-LWW (Del. Ch. Sep. 20, 2021) - A director protected by an exculpatory provision is entitled to dismissal in a breach of fiduciary duty action...more

11/16/2021 / Acquisitions , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Motion for Summary Judgment

Chancery Explains Pleading Standard and Sustains Unjust Enrichment Claim Related to Plaintiff’s Forfeiture of LLC Acquisition...

Angel v. Warrior Met Coal, Inc., C.A. No. 2019-0235-SG (Del. Ch. Jun. 30, 2021) - Under Delaware’s notice pleading standard, a plaintiff’s claim will survive a motion to dismiss if it is “reasonably conceivable” that the...more

8/20/2021 / Breach of Contract , Breach of Duty , Fiduciary Duty , Limited Liability Company (LLC) , Pleading Standards , Unjust Enrichment

Chancery Finds Breach of Fiduciary Duty Where Defendant Resorted to Extra-Contractual Self-Help

Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Post-trial Memorandum Opinion) Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Letter...more

8/17/2021 / Board of Directors , Breach of Duty , Bylaws , Fiduciary Duty , Shareholders

Chancery Rejects Plaintiff’s Attempt to Recharacterize Pre-Suit Demands

The Raj & Sonal Abhyanker Fam. Tr. v. Blake, C.A. No. 2020-0521-KSJM (June 17, 2021) - Court of Chancery Rule 23.1 presents a would-be derivative plaintiff with two exclusive options: make a pre-suit demand on the board to...more

7/13/2021 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Shareholders

Delaware Court of Chancery Applies Direct/Derivative Distinction In Voting Context

Clifford Paper, Inc. v. WPP Investors, LLC, 2021 WL 2211694 (Del. Ch. Jun. 1, 2021) - The disenfranchisement of an investor with voting or consent rights often is considered to be a direct harm, thus permitting the...more

6/23/2021 / Breach of Contract , Breach of Duty , Duty of Loyalty , Fiduciary Duty , Investors

Chancery Holds Prior Rulings in Appraisal and Securities Litigation Do Not Bar New Columbia Pipeline Fiduciary Duty Action

In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (Del. Ch. Mar. 1, 2021) Certain judicial doctrines, including collateral estoppel and stare decisis, promote efficiency and finality by barring...more

4/6/2021 / Appraisal , Breach of Duty , Collateral Estoppel , Fiduciary Duty , Mergers

Chancery Allows McDonald’s to Pursue Claims Against Ex-CEO, Finding Separation Agreement’s Integration Clause Does Not Bar Them

McDonald’s Corp. v. Easterbrook, C.A. 2020-0658-JRS (Del. Ch. Feb. 2, 2021) - Delaware has a strong public policy against fraud. Consequently, parties who seek to bar extra-contractual fraud claims must expressly provide...more

3/3/2021 / Breach of Duty , Fiduciary Duty , Fraud , Separation Agreement

Chancery Modifies Confidentiality Order to Permit Assertion of Plenary Claims in Appraisal Action

Harris v. Harris FRC Corp., C.A. No. 2019-0736-JTL (Del. Ch. Jan. 7, 2021) - Under Rule 5.1, the Court of Chancery may enter a confidentiality order upon a showing of good cause that such an order is necessary to protect...more

2/9/2021 / Appraisal , Books & Records , Breach of Duty , Confidentiality Agreements , Fiduciary Duty , Section 220 Request

Chancery Rejects Conspiracy Jurisdiction Over Foreign Defendant

Lacey v. Mota-Velasco, C.A. No. 2019-312-SG (Del. Ch. Oct. 6, 2020) - Under Istituto Bancario, a foreign defendant alleged to be part of a conspiracy may be subject to personal jurisdiction in Delaware, but only if the...more

11/25/2020 / Breach of Contract , Breach of Duty , Fiduciary Duty , Foreign Defendants , Long Arm Statute , Motion to Dismiss , Personal Jurisdiction

Court of Chancery Dismisses Claim of Aiding and Abetting Against a Minority Stockholder

A claim for aiding and abetting a breach of fiduciary duty fails if a plaintiff cannot allege an underlying breach. In that circumstance there is no breach to aid and abet. Where a plaintiff sufficiently alleges a breach,...more

10/22/2020 / Aiding and Abetting , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Minority Shareholders , Unjust Enrichment

Chancery Upholds Class Claims Alleging Breaches of Fiduciary Duty in Alleged Controlling Stockholder’s Tender Offer

In re Coty Inc. Stockholder Litigation, C.A. No. 2019-0336-AGB (Del. Ch. Aug. 17, 2020) - JAB Holding Company S.à.r.l. and its affiliates (together “JAB”) completed a partial tender offer (the “Tender Offer”) for shares...more

10/12/2020 / Breach of Contract , Breach of Duty , Controlling Stockholders , Fiduciary Duty

Entire Fairness Standard Applies Where Controller Has Substantive Discussions with Minority Stockholders before Agreeing to MFW...

In re HomeFed Corporation Stockholder Litigation, C.A. 2019-0592-AGB (Del. Ch. July 13, 2020) - This case illustrates that the Court of Chancery will apply the entire fairness standard to review a squeeze-out merger by a...more

8/26/2020 / Breach of Duty , Business Judgment Rule , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers , Standard of Review

CCLD Bars Tort Claims Overlapping with Contract Claims under Economic Loss Doctrine

GEA Sys. N. Am. LLC v. Golden State Foods Corp., C.A. No. N18C-11-242 EMD CCLD (Del. Super. Ct. June 8, 2020) - This case illustrates the extent to which the economic loss doctrine bars tort claims arising out of the same...more

7/29/2020 / Breach of Contract , Breach of Duty , Economic Loss Doctrine , Fraud , Fraudulent Inducement

Delaware Supreme Court Clarifies Materiality Standard for Director Disclosure

A plaintiff challenging a merger when a majority of the board approving the transaction is disinterested and independent and there is no controlling stockholder on both sides cannot state a cognizable claim of breach of...more

7/16/2020 / Board of Directors , Breach of Duty , Controlling Stockholders , Corporate Counsel , DE Supreme Court , Executive Compensation , Fiduciary Duty

Chancery Finds Employment Agreement’s Forum Selection Clause Did Not Reach Fiduciary Duty Claims, But Stays Case Pending...

EnVen Energy Corp. v. Dunwoody, C.A. No. 2019-0579-KSJM (Del. Ch. May 28, 2020) - This case illustrates Delaware’s approach in interpreting contractual forum selection provisions and in considering whether to stay a...more

7/7/2020 / Breach of Duty , Fiduciary Duty , Forum Selection , Motion to Dismiss

Chancery Dismisses Claims that Minority Stockholders who Rolled Over Equity in a Controlling Stockholder Merger Joined a “Control...

Gilbert v. Perlman, C.A. No. 2018-0453-SG (Del. Ch. Apr. 29, 2020) - Delaware law imposes fiduciary duties upon controlling stockholders who use their power to control the corporate machinery. For that reason, determining...more

6/2/2020 / Breach of Duty , Controlling Stockholders , Fiduciary Duty , Mergers , Minority Shareholders

Chancery Allows Fiduciary Duty Claims to Proceed against Minority Members Who Blocked Financings in Order to Bankrupt Company and...

Skye Mineral Investors, LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. Feb. 24, 2020) (Slights, V.C.). Where parties to an LLC agreement do not unambiguously disclaim fiduciary duties, then Delaware law...more

4/6/2020 / Breach of Duty , Fiduciary Duty , Shareholder Litigation , Shareholders

Chancery Dismisses Stockholder Claims that a Minority Owner was a Controlling Stockholder or that a Majority of the Board was...

In re: Essendant, Inc. Stockholder Litigation, C.A. No. 2018-0789-JRS (Del. Ch. Dec. 30, 2019). When as here a Delaware corporation’s charter contains an exculpation provision under Section 102(b)(7) of the Delaware...more

1/29/2020 / Board of Directors , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Merger Agreements , Mergers , Shareholder Litigation

Chancery Denies Motion for Reargument, Finding No Change to Delaware Legal Principles for Existence of “Control Group” of...

Silverberg v. Padda, C.A. No. 2017-0250-KSJM (Del. Ch. Oct. 18, 2019) - Delaware courts recognize that a group of stockholders can constitute a “control group” when those stockholders “are connected in some legally...more

11/20/2019 / Board of Directors , Breach of Duty , Fiduciary Duty , Shareholders

Complaint Dismissed Against Managers of a Del. LLC Where Plaintiffs Fail to Allege Standard of Conduct Violation

Court Finds Parties Eliminated Common-Law Fiduciary Duties - Under Delaware law, the members of a limited liability company may eliminate or modify the common-law fiduciary duties of loyalty and care in their operating...more

11/4/2019 / Breach of Duty , Fiduciary Duty , Limited Liability Company (LLC) , Standard of Conduct

Lewis Lazarus

Morris James LLP

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