OTK Assocs., LLC v. Friedman

In 2013, the Board of Directors of Morgans Hotel Group Co. (the Company) approved a two-part recapitalization involving the Yucaipa Companies, LLC. Stockholder OTK Associates filed a complaint alleging that Yucaipa, three affiliated entities, the investor who controlled Yucaipa, and the directors who approved the recapitalization breached their fiduciary duties and engaged in acts of wrongdoing when pursuing and approving the recapitalization. Counts I-VIII of the complaint sought to recover from Defendants the damages the Company suffered, and Count IX sought a declaration that the agreements governing the recapitalization were invalid. Several defendants filed motions to dismiss. The Court of Chancery held (1) the motion to dismiss on the basis that Counts I-VIII were moot was denied because OTK could recover damages on the Company’s behalf; (2) Count IX was dismissed pursuant to Rule 23.1 to the extent it contended that Yucaipa and its affiliates repudiated the transaction agreements; and (3) two of the defendant directors’ motions to dismiss in reliance on an exculpatory provision in the Company’s certificate of incorporation was denied, as the Court could not apply the exculpatory provision summarily at the pleadings stage to enter judgment in their favor. View "OTK Assocs., LLC v. Friedman" on Justia Law