Justia Delaware Court of Chancery Opinion Summaries

A 16-count complaint alleged conspiracy to funnel valuable pharmaceutical interests away from an entity in which the Plaintiff, CelestialRX, LLC, is a member. The claims include allegedly improper self-dealing by two members of a three-member LLC. On motions to dismiss and for summary judgment, the Delaware Chancery Court rejected a claim that plaintiffs had contractually released certain claims and analyzed the LLC agreement to conclude that good faith—a subjective standard, applies separately to both the transaction and to the conflicted party’s analysis of whether it is “fair and reasonable,” but must be read consistently with the purpose of specific standards, which is to permit conflicted transactions in certain circumstances. The court urged the parties to mediate the dispute. View "CelestialRX Investments, LLC.v. Krivulka" on Justia Law

IBM's proposed purchase of Merge Healthcare was supported by a vote of close to 80% of Merge stockholders. Former Merge stockholders sought post-closing damages against the company’s directors for what they alleged was an improper sale process. Merge did not have an exculpation clause in its corporate charter, so its directors have potential liability for acts violating their duty of care, in the context of an allegedly less-than-rigorous sales process. The Delaware Court of Chancery dismissed. Demonstrating such a violation of the duty of care is not trivial: it requires a demonstration of gross negligence, but it is less formidable than showing disloyalty. Regardless of that standard, the uncoerced vote of a majority of disinterested shares in favor of the merger cleansed any such violations, raising the presumption that the directors acted within their proper business judgment. View "In Re Merge Healthcare Inc. Stockholder Litigation" on Justia Law

This appeal concerned the 2015 annual meeting of stockholders held by Preferred Communications Systems, Inc. (PCSI). In advance of the meeting, five members of the Preferred Investors Association (the Association) signed a letter distributed to PCSI’s investors that stated their opposing to the reelection of the incumbent members of PCSI’s the board of directors. Three of the incumbent directors lost their seats. These former directors brought suit against the Association and the members who signed the letter, alleging defamation. Defendants moved to dismiss the claim for failure to state a claim. The Court of Chancery granted the motion as to a subset of statements made in the letter, holding (1) Delaware’s anti-SLAPP statute does not apply; (2) Plaintiffs are limited-purpose public figures; and (3) it is reasonably conceivable that a subset of the letter’s statements were defamatory and made with actual malice. View "Agar v. Judy" on Justia Law

At issue in this case was a bylaw adopted by Paylocity Holding Corporation purporting to shift to a stockholder who files an internal corporate claim outside of Delaware without the company’s consent attorneys’ fees and expenses incurred by the company in connection with the claim if the stockholder does not achieve the full remedy sought. Here, a Paylocity stockholder sought a declaration that the bylaw was invalid under Sections 109(b) and 102(b)(6) of the Delaware General Corporation Law. Defendants moved to dismiss the complaint as unripe and for failure to state a claim for relief. The Court of Chancery held (1) Plaintiff’s claims are ripe for review; (2) Plaintiff’s challenge under Section 109(b) states a claim for relief; and (3) Plaintiff’s remaining two claims are dismissed because Plaintiff did not demonstrate that the bylaw violates Section 102(b)(6) and because Plaintiff failed to state a claim for relief with regard to these claims. View "Solak v. Paylocity Holding Corp." on Justia Law

The beneficial owner of a Delaware statutory trust sought to inspect certain of the trust’s books and records. The trust denied the beneficial owner’s request, asserting that the form of the request and the motivations underlying the request were improper. The beneficial owner filed a complaint asserting both a contractual demand and a statutory demand. The Court of Chancery granted the beneficial owner’s motion for summary judgment, holding that the beneficial owner was entitled to inspect, examine, and copy the requested information under its contractual demand. View "Grand Acquisition, LLC v. Passco Indian Springs DST" on Justia Law

Plaintiffs, former stockholders of Auspex, filed a putative class action to challenge the propriety of the merger with Teva Pharmaceuticals and seek post-closing damages, alleging that the members of Auspex's board of directors breached their fiduciary duties by permitting senior management to conduct a flawed sales process that ultimately netted stockholders inadequate consideration for their shares. The directors have moved to dismiss plaintiffs’ Complaint under Rule 12(b)(6). The court granted the motion, concluding that, even accepting plaintiffs' well-pled facts as true, defendants are entitled to invoke the irrebuttable business judgment rule. In this case, plaintiffs have not pled facts that would allow a reasonable inference that the merger involved a controlling stockholder, much less that a controlling stockholder pushed Auspex into a conflicted transaction in which the controller received nonratable benefits. They are left, then, to overcome the cleansing effect of stockholder approval, which in this case was disinterested, uncoerced and fully informed. View "Larkin v. Shah" on Justia Law

This letter opinion addressed Third-Party Defendants’ motions to dismiss Third-Party Plaintiffs’ amended third-party complaint. The Third-Party Defendants advanced four bases on which the amended complaint should be dismissed, including lack of personal jurisdiction, failure to state a claim, failure to comply with Court of Chancery Rule 23.1, and an unreasonable delay in bringing the amended complaint. The Court of Chancery granted the Third-Party Defendants’ motions to dismiss, holding that the Third-Party Plaintiffs’ claims were time-barred because the Third-Party Plaintiffs failed to identify a tolling doctrine or extraordinary circumstances sufficient to avoid application of laches. View "CMS Inv. Holdings, LLC v. Castle" on Justia Law

At issue in this case was the fair value of stock of ISN Software Corp. (Respondent) held by two minority stockholders, Polaris and Ad-Venture, (collectively, Petitioners) at the time of a merger by which the controller cashed out some, but not all, of the stock held by the minority. The Court of Chancery held (1) the method used by the controller to determine the fair value of the stock is unreliable; (2) a discounted cash flow analysis is the most reliable indicator of fair value; and (3) upon consideration of the expert opinions provided by Petitioners and Respondent, the statutory fair value is $98,783 per share. View "In re ISN Software Corp. Appraisal Litig." on Justia Law

In 2015, Plaintiff, a stockholder of Tradeworx, Inc., requested a declaratory judgment that shares issued in 2000 to WisdomTree Investments, Inc. were void because they were issued in exchange for future services, a practice that, at the time, was prohibited under certain provisions of the Delaware General Corporation Law and the Delaware Constitution. WisdomTree moved to dismiss the complaint for failure to state a claim. The Court of Chancery granted WisdomTree’s motion, holding that Plaintiff’s claim was barred under the doctrine of laches because the claim exceeded the analogous statutory limitations period by almost twelve years. View "Kraft v. Wisdomtree Invs., Inc." on Justia Law

Freestone Insurance Company was a Delaware-domiciled insurer that was placed in liquidation. The liquidation proceeding was governed by the Uniform Insurers Liquidation Act (the Uniform Act). The order that placed Freestone into liquidation contained an injunction (the Anti-Suit Injunction) barring third parties from pursuing claims against Freestone other than through the statutory process for receiving evaluating, and paying claims (the Claims Process). U.S. Bank National Association (the Bank) moved to lift the Anti-Suit Injunction, claiming that it wished to litigate against Freestone outside of the Claims Process and establish the amount of its claims and its status as a general creditor of Freestone. The Court of Chancery denied the Bank’s motion, holding that granting relief on the facts of this case would contravene the policies of the Uniform Act, interfere with the Claims Process, and impose unnecessary costs on Freestone and the Insurance Commissioner of the State of Delaware, who was serving as the receiver for Freestone. View "In re Liquidation of Freestone Ins. Co." on Justia Law