Articles Posted in Business Law

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The Court of Chancery denied the appeal of Philip Gentile from the determination that Gentile’s claim for $497,739 against Fund.com Inc. (the Company) was time-barred. After a Receiver was appointed for the Company, it commenced a process for marshaling the Company’s assets, determining its liabilities, and winding up its affairs. Gentile, the Company’s former CEO, contended that he was entitled to recover the amount sought as a result of various breaches of his employment agreement with the company. The Receiver rejected the claim as time-barred. The Court of Chancery adopted the Receiver’s determination as a decision of the court, holding that the Receiver correctly determined that Gentile’s claim was barred by the statute of limitations. View "B.E. Capital Management Fund LP v. Fund.com Inc." on Justia Law

Posted in: Business Law

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Plaintiff, a stockholder of Kaazing Corporation (Defendant), filed this 8 Del. C. 220 action seeking to inspect certain books and records of Defendant. Plaintiff argued that his proper purposes seeking inspection of twenty-six categories of documents were to value his membership interest in Defendant and the investigation of mismanagement, waste or wrongdoing. The Court of Chancery held (1) Plaintiff adequately demonstrated a credible basis to suspect wrongdoing that justified further investigation into mismanagement, and therefore, Plaintiff demonstrated proper purposes; and (2) Plaintiff was entitled to inspect some, but not all, of the books and records he sought. View "Mehta v. Kaazing Corp." on Justia Law

Posted in: Business Law

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The Court of Chancery dismissed a case brought by Plaintiff, a stockholder in The Fresh Market, alleging a breach of fiduciary duty by the Market’s directors and that Brett Berry, a former CEO and former vice chairman of the company’s board, aided and abetted that breach of fiduciary duty. The Market was acquired by an entity controlled by a private equity firm, and the founder of the Market rolled his equity ownership in the Market into the acquirer as part of the deal. The court held that because there was no coercion applied to the fully informed vote of the common stockholders ratifying the decision of the directors that the merger was in the stockholders’ best interest and the vote was adequately informed so as to serve as a ratification of the board’s decision, the matter must be dismissed. View "Morrison v. Berry" on Justia Law

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Plaintiffs alleged insider-trading side deals in connection with the sale of a small aerospace manufacturing company, Kreisler, and insufficient disclosure to stockholders regarding the sales process. Before the sale, Kreisler was offered to dozens of potential acquirers. Several bidders emerged. A fairness opinion was rendered and a special committee ultimately recommended the sale. The transaction was approved by written consent of a majority of the shares outstanding. A block of shares of just over 50 percent executed a stockholder support agreement providing for approval of the transaction, so there was no stockholder vote. An Information Statement was provided to stockholders to permit them to decide whether to seek appraisal. A majority of Kreisler’s board of directors are independent and disinterested, and its charter contains an exculpation provision. The Delaware Court of Chancery dismissed the complaint, finding that even accepting the well-pled allegations as true and drawing all reasonable inferences in the Plaintiff’s favor, the Complaint fails to state a claim on which relief may be granted. View "Kahn v. Stern" on Justia Law

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In this consolidated class action, former stockholders of Martha Stewart Living Omnimedia, Inc. (MSLO) brought claims against Martha Stewart, MSLO’s former controlling stockholder and namesake, for breach of fiduciary duty and against Sequential Brands Group, Inc., (Sequential), a third-party buyer, for aiding and abetting that breach. The claims arose from a transaction whereby MSLO was acquired by Sequential in a merger. At issue was whether Stewart leveraged her position as controlling stockholder to secure greater consideration for herself than was paid to the other stockholders as a result of the merger. Stewart and the Sequential defendants brought motions to dismiss. The Court of Chancery granted the motions, holding that the complaint failed to state a claim for breach of fiduciary duty against Stewart, and therefore, the court need not reach the question of whether the complaint adequately pleaded the other elements of aiding and abetting a breach of fiduciary duty. View "In re Martha Stewart Living Omnimedia, Inc. Stockholder Litigation" on Justia Law

Posted in: Business Law

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The Delaware Court of Chancery granted in part a motion for summary judgment in a breach of contract dispute regarding Duffield's involvement in the design of a wastewater treatment system. The court granted the motion as to Count I against defendants Don Lockwood and John Stanton, holding them jointly and severally liable for the total amount of $82,153.17 plus pre- and post-judgment interest; imposed a constructive trust over the assets transferred to defendants, ordered a full accounting of the proceeds of the distributions, and ordered disgorgement of any profits or proceeds from the transfers; denied the motion as it related to Count I claims against Pamala Stanton; and held that the motion for rule to show cause was moot. View "Duffield Associates, Inc. v. Lockwood Brothers, LLC" on Justia Law

Posted in: Business Law, Contracts

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The Delaware Court of Chancery held that, under 8 Del. C. 202, in order for a stockholder to be bound by stock transfer restrictions that are not "noted conspicuously on the certificate or certificates representing the security," he must have actual knowledge of the restrictions before he acquires the stock. If the stockholder does not have actual knowledge of the stock transfer restrictions at the time he acquires the stock, he can become bound by the stock transfer restrictions after the acquisition of the stock only if he affirmatively assents to the restrictions, either by voting to approve the restrictions or by agreeing to the restrictions. In this case, plaintiff did not have actual knowledge of the restrictions prior to acquiring his stock and the company must produce the requested documents as they are necessary to effectuate the stockholder's stated purpose. View "Henry v. Phixios Holdings, Inc." on Justia Law

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This dispute arose from the winding-down of a limited liability company formed as a real estate sales venture between two realtors. The Delaware Court of Chancery granted in part and denied in part defendants' partial motion to dismiss. The court dismissed with respect to the breach of fiduciary duty count because non-conclusory allegations in support of a relationship creating such a duty were lacking on the face of the complaint; denied the motion to dismiss with respect to the breach of an implied contract/estoppel claim because promissory estoppel was adequately alleged; and dismissed with respect to the constructive trust claim because it was waived. View "Beach to Bay Real Estate Center LLC v. Beach to Bay Realtors Inc." on Justia Law

Posted in: Business Law

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Plaintiffs filed an amended stockholder derivative complaint alleging that the Qualcomm Inc. board’s knowing disregard for “red flags” resulted in violations of the Foreign Corrupt Practices Act and a U.S. Securities and Exchange Commission cease-and-desist order. Defendants filed a motion to dismiss under County of Chancery Rule 23.1 for failure to make a demand or allege that demand would be futile. The Court of Chancery granted Defendants’ motion to dismiss under Rule 23.1, holding that the complaint failed to allege demand futility as to count one for breach of fiduciary duty claim for improper oversight, count two for waste against the individual defendants, and count three for unjust enrichment against the individual defendants. View "In re Qualcomm Inc. FCPA Stockholder Derivative Litigation" on Justia Law

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At dispute in this case was whether Plaintiff, a preferred stockholder of Federal National Mortgage Association (Fannie Mae), had a right to inspect Fannie Mae’s books and records. The Court of Chancery granted Fannie Mae’s motion to dismiss under Court of Chancery Rule 12(b)(6) for failure to state a claim because a previous judgment from the Eastern District of Virginia was preclusive on the issue of whether section 4617(b)(2)(A)(i) of the Housing and Economic Recovery Act of 2008 (HERA) transferred the stockholder right to seek books and records to the Federal Housing Finance Agency (FHFA). View "Pagliara v. Federal National Mortgage Association" on Justia Law

Posted in: Business Law