Justia Delaware Court of Chancery Opinion Summaries

Plaintiffs were four Delaware-domiciled captive insurance companies. The State Insurance Commissioner prosecuted their claims as their receiver in liquidation, alleging fraudulent conduct on the part of the companies’ president, breach of fiduciary duty on the part of the other directors of the corporation, and, as to the companies’ auditors and their administrative management company, aiding and abetting breaches of fiduciary duty, breach of contract, and negligence. The Court of Chancery dismissed in part the claims against the auditors and their company, holding (1) the doctrine of in pari delicto applies in this case and effectively bars the relevant claims against those defendants; (2) Plaintiffs’ claims for breach of contract and negligence are dismissed on grounds of in pari delicto, but the fiduciary duty exception to in pari delicto covers Plaintiffs’ claims for aiding and abetting a breach of fiduciary duty; and (3) Plaintiffs’ motion to dismiss their claims for aiding and abetting against each of the auditors and the administrative management company is denied, except as they relate to the auditor that was retained second. View "Hon. Karen Stewart v. Wilmington Trust SP Servs., Inc." on Justia Law

In 2014, Defendant First Aviation Services, Inc., a Delaware corporation, completed a 10,000-to-1 reverse stock split, which eliminated the interests of Plaintiff, a former stockholder of First Aviation. Four days later, the First Aviation directors adopted a non-reciprocal fee-shifting bylaw purporting to create fee exposure for former stockholders of the company and their attorneys in any challenge to the reverse stock split. Ten days later, Plaintiff brought this action against First Aviation and its directors (collectively, Defendants) on behalf of himself and a class of former First Aviation stockholders who had been similarly cashed out, alleging that the reverse stock split was unfair. Plaintiff subsequently amended his complaint to challenge the bylaw. Defendants argued that the bylaw was enforceable in this case. Plaintiff moved for partial judgment on the pleadings that the bylaw did not apply here. The Court of Chancery granted Plaintiff’s motion, holding that because the bylaw was adopted after Plaintiff was cashed out of First Aviation by operation of the reverse stock split, the bylaw did not apply to this case. View "Strougo v. Hollander" on Justia Law

In 2004, Plaintiff retained Law Firm in connection with an action to inspect the books and records of certain defendants. Law Firm served as counsel in this litigation through the filing of claims against other defendants. In 2011, Law Firm withdrew as counsel. When some defendants prevailed at trial, the Court concluded that Law Firm should be awarded attorneys’ fees and expenses. Law Firm then moved to intervene, attaching a petition for a charging lien based on $766,166 in unpaid fees and expenses incurred in representing Plaintiff during the earlier stages of this litigation. The Court of Chancery granted the motion for leave to intervene, holding that Law Firm had an interest relating to the subject of the action, and Law Firm’s application was timely. View "Sutherland v. Sutherland" on Justia Law

This dispute concerned an underlying breach of fiduciary duty case that was coordinated with an appraisal proceeding, both arising out of a take-private transaction involving Dole Food Company, Inc. (Dole). During the proceedings, Defendants identified a corporation as their expert witness on the subject of Dole’s value at the time of the transaction. Plaintiffs objected, arguing that an expert witness must be a biological person. The Court of Chancery agreed with Plaintiffs, holding that an expert witness must be a biological person, and therefore, Defendants could not rely on the corporation that they designated to serve as their expert witness. View "In re Dole Food Co., Inc. Stockholder Litig." on Justia Law

Plaintiff served as the Chairman and CEO of Smashburger Master LLC until his termination in early 2014. Smashburger subsequently informed Plaintiff that it was redeeming Plaintiff’s units in the company. Plaintiff disagreed with Smashburger’s valuation of the units and demanded that Smashburger provide him with documents from specific categories of business and financial records. Smashburger refused Plaintiff’s request on the grounds that it had already redeemed all of Plaintiff’s units, thus terminating Plaintiff's status as a member of Smashburger and precluding him from properly demanding inspection. Plaintiff then filed a complaint against Smashburger. The Court of Chancery granted Smashburger’s motion to dismiss, concluding that Plaintiff was no longer a member of Smashburger when he demanded inspection, and Delaware law does not provide pertinent inspection rights to former LLC members. View "Prokupek v. Consumer Capital Partners LLC" on Justia Law

After David H. Murdock, the CEO and controlling stockholder of Dole Food Company, Inc., acquired all the shares of Dole common stock that he did not already own, Petitioners pursued their statutory right to an appraisal of their shares of Dole common stock. During discovery, Dole sought information about any valuations of Dole common stock that Petitioners prepared, reviewed, or considered when buying to selling Dole common stock or when seeking appraisal. Petitioners objected to the document requests. Dole subsequently served notices of deposition for each Petitioner pursuant to Court of Chancery Rule 30(b)(6) and identified the valuations as a topic of questioning. During the depositions, Petitioners’ counsel instructed the Rule 30(b)(6) witnesses not to testify about the valuations on the basis of relevance. Dole moved to compel production of the valuation-related information and for supplemental Rule 30(b)(6) depositions. The Court of Chancery granted the motion, holding that, under the circumstances, Petitioners’ failure to provide the discovery was not substantially justified. View "In re Appraisal of Dole Food Co., Inc." on Justia Law

The underlying case involved a deadlock relating to the management of the business of TransPerfect Global, Inc. and its wholly owned subsidiaries. Here, Plaintiff filed a motion for the appointment of a interim custodian until a trial could be held to resolve, among other things, Plaintiff’s petition for the appointment of a custodian. The Court of Chancery denied the motion, as Plaintiff failed to establish that the appointment of a temporary custodian was urgently needed to serve during the interim between now and trial for the immediate protection of the corporation. View "In re TransPerfect Global, Inc." on Justia Law

In 2004, KKR & Co. LP (KKR) acquired KKR Financial Holdings LLC (KFN) in a stock-for-stock merger. Plaintiffs, stockholders of KFN, challenged the merger by filing a class action complaint, asserting breach of fiduciary duty claims against the members of the KFN board and KKR. The Court of Chancery dismissed the action for failure to state a claim for relief, holding (1) Plaintiffs’ fiduciary duty claim against KKR premised on the theory that KKR was a controlling stockholder of KFN failed, as KKR did not control the board of KFN when it approved the merger; and (2) Plaintiffs’ fiduciary duty claim against the directors of KFN failed because the board’s approval of the merger was subject to business judgment review. View "In re KKR Fin. Holdings LLC Shareholder Litig." on Justia Law

A class of stockholders of Rural/Metro Corporation (Rural) filed a class action against RBC Capital Markets, LLC (RBC) for aiding and abetting breaches of fiduciary duty by the board of directors of Rural in relation to a merger between Rural and Warburg Pincus, LLC. The post-trial decision held RBC liable to Plaintiffs but did not fix an amount of damages suffered by the class. This opinion quantified the amount of damages for which RBC was liable, setting the amount of RBC’s liability to the class at $75,798,550, which represented eighty-three percent of the total damages. The court also awarded pre- and post-judgment interest at the legal rate from June 30, 2011, until the date of payment. View "In re Rural/Metro Corp. Stockholders Litig." on Justia Law

Plaintiff-individual, who owned common stock of Defendant-corporation, sent a letter to Defendant seeking to inspect certain of Defendant’s books and records pursuant to 8 Del. C. 220. Plaintiff’s ultimate goal in pursuing her books and records request was to determine whether there was a basis to bring a derivative suit based on wrongs alleged in a previous derivative action. In defense to the request Defendant alleged that Plaintiff’s contemplated derivative action would be time-barred. The Court of Chancery entered judgment in favor of Defendant, holding that because Plaintiff’s contemplated derivative action would be time-barred and because no other purpose had been identified, Plaintiff failed to prove a proper purpose for the books and records inspection, which was an essential element of her case under section 220. View "Wolst v. Monster Beverage Corp." on Justia Law