Justia Delaware Court of Chancery Opinion Summaries

When Rural/Metro Corporation (“Rural”) merged with an affiliate of Warburg Pincus LLC, each publicly held share of Rural common stock was converted into the right to receive $17.25. Plaintiff-stockholders initiated this action, contending (1) the members of the Rural board of directors breached their fiduciary duties by approving the merger and by failing to disclose material information in Rural’s definitive proxy statement; and (2) RBC Capital Markets, LLC aided and abetted the directors’ breaches of fiduciary duty. The directors settled with Plaintiffs, and the case proceeded to trial against RBC. The Court of Chancery ruled in favor of Plaintiffs, holding that RBC was liable for aiding and abetting the directors’ breaches of the duty of care and the duty of disclosure. View "In re Rural Metro Corp. Stockholders Litig." on Justia Law

Since 2007, Dimensional Associates, LLC, a private equity fund, had controlled Orchard Enterprises, Inc., a Delaware corporation. In 2010, Dimensional squeezed out the minority stockholders of Orchard. The merger consideration was $2.05 per share, but in 2012, the then-Chancellor determined that the fair value of the common stock at the time of the merger was $4.76 per share. Plaintiffs subsequently filed this breach of fiduciary action, contending that Dimensional and the directors who approved the merger should be held liable for damages. Plaintiffs also named Orchard as a defendant. Plaintiffs and Defendants filed cross motions for summary judgment. The Court of Chancery (1) denied Plaintiffs’ motion except in two respects: one of Plaintiffs’ claimed violations of Defendants' duty of disclosure was a material misrepresentation, and entire fairness was the operative standard of review with the burden of persuasion on Defendants; and (2) denied Defendants’ motions except in two respects: one of the alleged disclosure violations was factually accurate, and Orchard could not be held liable for breach of fiduciary duty or for aiding and abetting. View "In Re Orchard Enters., Inc. Stockholder Litig." on Justia Law

Anthony Pacchia brought an action challenging a transaction through which Activision Blizzard, Inc. and an entity controlled by Activision’s two senior officers acquired more than fifty percent of Activision’s outstanding shares from Vivendi S.A., its controlling stockholder. Several of the individual defendants who served on the Activision board of directors and approved the transaction were senior officers of Vivendi (“Vivendi Directors”). Vivendi objected to the document requests that Plaintiff served on the grounds that French law generally barred the production of discovery, noting that all of its electronic documents were housed on servers in Paris, France, and could not be produced. Plaintiff filed a motion to compel seeking an order requiring Vivendi and the Vivendi Directors to produce documents in their custody and control, wherever located, in accordance with the Court of Chancery Rules and without regard to any contrary provisions of French law. The Court of Chancery largely granted the motion and directed that discovery proceed in the manner described in this decision. View "In re Activision Blizzard, Inc. Stockholder Litig." on Justia Law

The parties in this dispute were Koninklijke Philips N.V. (“Philips N.V.”), a Netherlands holding company, and Carlo Vichi, an Italian businessman who had a longstanding business relationship with Philips N.V. Philips N.V. was a participant in a joint venture, LG.Philips Displays Holdings B.V. (LPD), that did business with Vichi and other entities. LPD approached Vichi for a substantial loan, which Vichi agreed to make. The joint venture eventually defaulted on the loan. Vichi filed a complaint against Philips N.V., claiming that Philips N.V. committed fraud by misrepresenting the joint venture’s financial condition and prospects and by falsely promising that it would stand behind LPD to ensure it could meet its financial obligations. The Court of Chancery held that Philips N.V. was not liable to Vichi on any of the claims he presented at trial and that Philips N.V. should not be held responsible for the loss Vichi suffered on the loan he made to LPD. View "Vichi v. Koninklijke Philips Elecs., N.V." on Justia Law

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

In 2009, Sirius SM Radio Inc. negotiated a capital infusion (the investment agreement) from Liberty Media Corporation in return for Liberty Media receiving preferred stock in Sirius. Under the investment agreement, Liberty Media secured the ability to take control of Sirius in 2012 without paying a premium to Sirius stockholders by purchasing additional shares needed to obtain control in the market. When Liberty Media announced in 2012 that it intended to acquire majority control, Plaintiffs sued, contending that the Sirius board had breached its fiduciary duties by adhering to the provisions of the investment agreement and that Liberty Media breached its fiduciary duties by purchasing shares on the open market to acquire majority control of Sirius without paying a premium. The Court of Chancery granted Defendants' motion to dismiss, holding (1) Plaintiffs' challenge to the investment agreement was time-barred, as it was filed after the three-year limitations period expired; and (2) Liberty Media's decision to give valuable consideration in exchange for the right to make open market purchases after the standstill period expired provided no basis for a cause of action against it. View "In Re Sirius XM S'holder Litig." on Justia Law

Twenty-three plaintiffs (Plaintiffs) representing the interests of a stockholder faction challenged the validity of incumbent directorships elected at the corporation's annual meeting. The parties stipulated to holding a second stockholders' meeting, at which five directors were elected to the corporation's board. After three of the directors resigned their directorships, the two remaining directors executed written consents appointing a third director to the board. The three directors then appointed two more directors to fill the remaining vacancies. Plaintiffs petitioned the Chancery Court pursuant to Del. Code 8, 223(c) to order a new election through exercise of the stockholders' franchise rather than through appointment by the remaining directors. After noting that Plaintiffs bore the burden of persuasion under section 223(c), the Court held that the equities did not support a special meeting of the stockholders and that the directors appointed by the remaining elected directors continue in office until the election at the next annual meeting. View "Canmore Consultants Ltd. v. L.O.M. Med. Int'l, Inc. " on Justia Law

Plaintiffs Costantini, Jr. and Kahn sought indemnification for their fees and costs in underlying litigation involving Swiss Farm. The court concluded that Costantini was entitled to indemnification under Article 14 of the Operating Agreement because he was a manager of Swiss Farm and was sued by Swiss Farm in that capacity and prevailed. However, the court concluded that, although Kahn was sued for breach of fiduciary duty and prevailed, he was not a member of the Board of Managers, an officer, an employee or an agent of the company and, therefore, was not entitled to indemnification under the Operating Agreement. Accordingly, the court granted in part and denied in part plaintiffs' motion for judgment on the pleadings. View "Costantini, et al. v. Swiss Farm Stores Acquisition LLC" on Justia Law

Trusts that owned fifty percent of the common stock of nominal defendant IMS alleged that two of the company's three most senior officers mismanaged the company in breach of their fiduciary duties. Trusts moved to compel IMS to produce the senior officers' work email accounts. The senior officers asserted the attorney-client privilege but did not invoke the work product doctrine. The court concluded that the In re Asia Global Crossing, Ltd. factors weighed in favor of production, absent a statutory override that could alter the common law result. Because IMS conducted its business in Maryland, the federal government and the State of Maryland were the sovereigns whose laws IMS must follow when dealing with its employees' email. The Federal Wiretap Act, 18 U.S.C. 2510 et seq.; the Federal Store Communications Act, 18 U.S.C. 2701; the Maryland Wiretap Act, Md. Code, Cts. & Jud. Proc. 10-401 to 10-414; and the Maryland Stored Communications Act, Md. Code, Cts. & Jud. Proc. 10-4A-01 to 10-4A-08, did not change the common law privilege analysis. Accordingly, the court granted the motion to compel. View "In re Info. Mgmt. Servs., Inc. Derivative Litigation" on Justia Law

Plaintiffs brought a derivative action on behalf of China Automotive alleging breaches of fiduciary duty, insider trading, and unjust enrichment against five members of China Automotive's Board. The court concluded that because plaintiffs have not alleged particularized facts showing that any of Defendants Richardson, Tung, or Xu were interested, not independent, or facing a substantial threat of personal liability at the time the derivative Complaint was filed, these three directors were entitled to consider demand. Therefore, under Court of Chancery Rule 23.1, demand was not excused. The court rejected plaintiffs' remaining claims under Rule 23.1 and dismissed as to plaintiffs with prejudice. View "In re: China Automotive Systems Inc. Derivative Litigation" on Justia Law