Justia Delaware Court of Chancery Opinion Summaries

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The Court of Chancery granted Defendants' motion to dismiss two counts arising from the dilution of Plaintiff's equity and voting interests under Court of Chancery Rule 12(b)(6), holding that the complaint failed to state a claim. Plaintiff owned common stock of NexBank Capital, Inc. Plaintiff filed this complaint alleging that NexBank's board of directors and their trusts comprised a control group with concomitant fiduciary obligations to the minority stockholders of NexBank. Plaintiff took issue with 2016 and 2017 stock offerings that were allegedly offered at a discounted price to participants and alleged that his equity and voting interests were diluted because of the stock offerings. Count I claimed that the defendants breached their fiduciary duties and controllers, and Count II claimed that NexBank board members named as defendants breached their fiduciary duties as directors. The Court of Chancery held that the complaint failed to state a claim under Gentile v. Rossette, 906 A.2d 91 (Del. 2006), as to either stock offering and thus dismissed the complaint. View "Daugherty v. Dondero" on Justia Law

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The Court of Chancery denied Defendants' motion to dismiss breach of fiduciary duty claims brought by a Tesla, Inc. stockholder against Telsa's chief executive officer, Elon Musk, and members of Tesla's board of directors regarding a stockholder vote approving an incentive-based compensation plan for Musk, holding that, on the pled facts, it was reasonably conceivable that the award was unfair. After approving the award, the Board submitted the award to Tesla's stockholders for approval. The stockholders approved the award, after which Tesla implemented the award. Thereafter, Plaintiff brought direct and derivative claims against Musk and members of the Board alleging that the award was excessive and the product of breaches of fiduciary duty. Defendants moved to dismiss the complaint. The Court of Chancery denied the motion, holding (1) entire fairness is the standard by which the award must be reviewed; and (2) under the circumstances of this case, Defendants' motion to dismiss the breach of fiduciary duty claims must be denied. View "Tornetta v. Musk" on Justia Law

Posted in: Business Law
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In this derivative action, the Court of Appeals denied a motion to stay claims brought by Blue Bell Creameries, LLP (the Partnership) against Blue Bell Creameries, Inc. (BBGP), holding that the motion was not proper because it was brought by a special litigation committee with no authority to bring it. This action arose from BBGP's alleged failure to operate the Partnership in compliance with the governing standards set forth in the Partnership's limited partnership agreement. Plaintiffs brought claims against the Blue Bell entities after a listeria outbreak infected scores of Blue Bell customers and Blue Bell's operations underwent a temporary shutdown. After the Court denied Defendants' motion to dismiss Plaintiffs' showcase breach of contract claim against BBGP, the lone general partner, BBGP's board of directors formed a special litigation committee to "manage and control" the Partnership's claims against BBGP. The special litigation committee then moved to stay this derivative action to allow it time to conduct an investigation and make a determination. The Court of Chancery denied the request, holding that because BBGP was not fit to decide how to manage the Partnership's claims against Defendants, its special litigation committee, as agent, was likewise disabled. View "Wenske v. Blue Bell Creameries, Inc." on Justia Law

Posted in: Business Law
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The Court of Chancery held that it was without jurisdiction to address Plaintiff's claim seeking equitable relief for alleged common-law slander on the basis that equity will not enjoin a libel. Plaintiff brought this complaint against Defendants, business competitors, alleging tortious interference with prospective business relations and common-law defamation. As to the defamation claim, Plaintiff sought to enjoin future defamatory utterances. Defendants filed a motion to dismiss. The Court of Chancery granted the motion to dismiss the defamation count, subject to transfer to the superior court, holding that, under this Court's precedent, equity in general will not enjoin future defamation, and no exception to the general rule applies in this case. View "Preston Hollow Capital LLC v. Nuveen LLC" on Justia Law

Posted in: Business Law
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In this case disputing who comprised the boards of directors of the nominal defendants the Court of Chancery treated Defendants' motion for judgment on the pleadings as one for summary judgment and granted Plaintiffs an opportunity to submit an affidavit identifying disputed facts foreclosing summary judgment in Defendants' favor, holding that the consents appointing the directors were not appropriately considered on a motion for judgment on the pleadings. After the National Assembly of Venezuela declared the presidency of Nicolas Maduro illegitimate it appointed Jan Guaido as Interim President. When Guaido assumed office his government appointed a new board of directors to govern Petroleos de Venezuela S.A. (PDVSA), Venezuela's state-owned oil company. Guaido's newly appointed directors reconstituted the boards of directors of the nominal defendants - Delaware entities owned by PDVSA. Plaintiffs, who previously served as directors of the nominal defendants, sought a declaration that they comprised the rightful boards of the nominal defendants. The directors appointed by Guaido's PDVSA board counterclaimed. All parties cross-moved for judgment on the pleadings. The Court of Chancery accepted as binding the United States President's recognition of the Guaido government and assumed the validity of the Guaido government's appointments to the PDVSA board but stayed the motions to permit Plaintiffs to submit an affidavit under Ct. Ch. R. 56(e). View "Jimenez v. Palacios" on Justia Law

Posted in: Business Law
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The Court of Chancery granted in part and denied in part Defendants' motion to dismiss Plaintiff's complaint brought in an effort to collect on an unpaid judgment, holding that one claim must be dismissed as untimely. JPMorgan Chase Bank, N.A. sued Data Treasury Corporation (DTC) and obtained a final judgment against DTC for $69 million. JPMorgan bought this action in an effort to collect on its judgment. DTC moved to dismiss all of JPMorgan's claims on a variety of grounds. JPMorgan claimed that DTC's directors should be liable for dividends DTC paid its stockholders after DTC licensed its patents to someone other than JPMorgan in violation of DTC's obligation to tell JPMorgan under a license agreement. JP Morgan also claimed it was entitled to recover the distributions because they were fraudulent transfers. The Court of Chancery held (1) JPMorgan had standing as a creditor of DTC to assert a claim under Section 174 to recover for itself and other creditors of DTC the dividends DTC paid; (2) the six-year limitations period in 8 Del. C. 174 is a statute of repose. The court thus finds that JPMorgan’s Section 174 claim must be dismissed as untimely; and (3) all of JPMorgan’s fraudulent transfer claims were timely filed. View "JPMorgan Chase Bank, N.A. v. Ballard" on Justia Law

Posted in: Business Law, Contracts
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The Court of Chancery granted in part Defendant's motion to dismiss as to the count alleging a violation of the federal Computer Fraud and Abuse Act (CFAA) but denied Defendant's motion as to the remainder of the non-contractual claims against him, holding that Plaintiff's CFAA claim was legally viable only as to Defendant's post-resignation conduct and that the dismissal of Plaintiffs' other claims was inappropriate. Defendant was the managing partner of Plaintiffs' Paris office and was a party to a limited liability partnership agreement that contained confidentiality obligations. Shortly before his resignation and then shortly after his resignation, Defendant accessed Plaintiffs' business files. Plaintiffs later sued for breach of the confidentiality provisions of the limited liability partnership agreement, asserting violations of the Delaware Uniform Trade Secrets Act (DUTSA), for common law conversion, and for violating CFAA. Defendant filed a motion to dismiss. The Court of Chancery granted the motion in part as to the CFAA claims but denied it as to the remaining claims, holding that under the narrow approach set forth in LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009), Defendant's actions while he was employed by Plaintiffs did not support a claim under the CFAA. View "AlixPartners, LLP v. Benichou" on Justia Law

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The Court of Chancery granted Defendant’s motion to dismiss Plaintiff’s complaint to vacate or modify an arbitration award for failure to state a claim, holding that there was no reasonably conceivable evident material miscalculation or evident material mistake in the arbitrator’s report. In 2017, Plaintiff and Company entered into a Securities Purchase Agreement. In 2018, under the dispute resolution provision of the agreement, Plaintiff and the Company engaged in mandatory, binding arbitration regarding the Company’s total accounts receivable reserve (the Total AR Reserve). The arbitrator issued a report determining the Total AR Reserve was $661,165. Plaintiff then filed a complaint to vacate or modify the arbitration award, arguing that the arbitrator made an evident material miscalculation or evident material mistake in his determination of the Total AR Reserve. The Court of Chancery disagreed and granted Defendant’s motion to dismiss. View "CLP Toxicology, Inc. v. Casla Bio Holdings LLC" on Justia Law

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In this construction dispute, the Court of Chancery granted Defendant’s motion to dismiss Plaintiffs’ complaint seeking to vacate or modify an arbitration award for failure to state a claim and denying Plaintiffs’ motion for summary judgment, holding that the arbitrator did not exceed the scope of his authority or act in manifest disregard of the law when he awarded Defendant damages. In their first claim, Plaintiffs argued that the arbitrator’s interpretation of the provisions in the contract between the parties regarding the total cost of the construction project evidences a manifest disregard for the law. In their second claim, Plaintiffs argued that the arbitrator exceeded his authority and acted in manifest disregard of the law when he issued an award for fees and expenses to Defendant. The Court of Chancery disagreed, holding that the arbitrator did not act in manifest disregard of the law in either respect. View "Stempien v. Marnie Properties, LLC" on Justia Law

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In this dispute regarding the commercialization of a patent covering a method for pooling insurance policies the Court of Chancery granted Defendants’ motion for judgment on the pleadings in which they argued that they did not owe any of the contractual or fiduciary obligations that Plaintiff sought to enforce, holding that Defendants were entitled to judgment as a matter of law. Plaintiff brought this action asserting claims for breach of contract and breach of fiduciary duties related to Defendants’ business development of a patent-holding entity and Defendants’ failure to provide certain information to Plaintiff. The Court of Chancery granted Defendants’ motion for judgment on the pleadings, thus mooting Plaintiff’s motion to compel and motion for default judgment, holding That Defendants carried their burden to show that Plaintiff could prove no set of facts in support of his claims that would entitle him to relief and that Defendants were entitled to judgment as a matter of law. View "Ross v. Institutional Longevity Assets LLC" on Justia Law