Justia Delaware Court of Chancery Opinion Summaries

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

R&D, a member of the Joint Venture, brought a books and records action under 6 Del. C. 18-305 and the Joint Venture's limited liability company agreement, seeking two categories of books and records that were in the possession and control of Investment Services. At issue was whether the court had jurisdiction over Investment Services, an Indiana corporation, under either Delaware's long-arm statute or its Limited Liability Company Act, 6 Del. C. ch. 18. The court concluded that R&D had not met its burden of making a prima facie showing of a statutory basis for personal jurisdiction over Investment Services under either Delaware's long-arm statute or Section 18-109 of the LLC Act. Therefore, R&D's claim against Investment Services must be dismissed under Rule 12(b)(2) for lack of personal jurisdiction. The court also concluded that the court did have jurisdiction over HDG Properties because of its contractual consent; R&D failed to allege any "reasonably conceivable" collection of facts upon which it could prevail against other HDG Defendants; and R&D's inspection claims against these HDG Defendants must be dismissed under Rule 12(b)(6). Accordingly, the motion to dismiss was granted as to all of the HDG Defendants. View "Florida R&D Fund Investors, LLC v. Florida BOCA/Deerfield R&D Investors, LLC, et al." on Justia Law

In 2000, Trados Inc. obtained venture capital (VC) to support a growth strategy that could lead to an initial public offering. The VC firms received preferred stock and placed representatives on the Trados board of directors (the Board). Trados, however, failed to satisfy its VC backers. The Board subsequently adopted a management incentive plan (MIP) that compensated management for achieving a sale even if the sale yielded nothing for the common stock. In 2005, SDL plc acquired Trados for $60 million. The merger constituted a liquidation that entitled the preferred stockholders to a liquidation preference of $57.9 million. Without the MIP, the common stockholders would have received $2.1 million. With the MIP, the common stockholders received nothing. Plaintiff contended that instead of selling to SDL, the board had a fiduciary duty to continue operating Trados independently to generate value for the common stock. The Court of Chancery held that Defendants proved the decision to approve the merger was fair, as the common stock had no economic value before the merger, making it fair for its holders to receive in the merger the substantial equivalent of what they had before. Likewise, the fair value of the common stock for purposes of appraisal was zero. View "In re Trados Inc. S'holders Litig." on Justia Law

Longview Energy Company filed a complaint against William Huff, Richard D'Angelo, and Riley-Huff Energy Group as a result of a breach of fiduciary duty committed by Huff and D'Angelo in connection with their usurpation of a corporate opportunity. The corporate opportunity belonging to Longview related to property interests in a large area of land in south Texas called Eagle Ford. A Texas court entered a judgment against Defendants and imposed a constructive trust in favor of Longview on the profits and ownership of Riley-Huff's interests in Eagle Ford and a damage award against Huff and D'Angelo. Huff and D'Angelo appealed and sought indemnification from Longview, a Delaware corporation they served on as directors. The Court of Chancery granted Longview's motion to dismiss the complaint because it did not state a ripe claim. View "Huff v. Longview Energy Co." on Justia Law

Defendant was a Delaware corporation. Plaintiff was a purported minority stockholder of the corporation. Plaintiff served Defendant with a letter requesting inspection of its books and records pursuant to Del. Code Ann. 8, 220 and attached a sworn affidavit affirming he was a beneficial owner of Defendant's stock. When Defendant failed to respond to Plaintiff's request, Plaintiff filed this action demanding the books and records. Defendant filed a motion to dismiss, contending that Plaintiff failed to comply with the procedural requirements of section 220 because Plaintiff failed to provide adequate evidence of his beneficial ownership of company stock at the time he sent his inspection demand. The Court of Chancery granted the motion, holding that Plaintiff's sworn affidavit attesting he was an owner of company stock was insufficient evidence of beneficial ownership. View "Barnes v. Telestone Techs. Corp." on Justia Law

This derivative suit was brought by the named plaintiff, a stockholder in United Technologies Corporation (UTC), on behalf of UTC. The plaintiff alleged that the UTC board of directors caused UTC to misrepresent violations of export controls by two of its subsidiaries to the federal government. Defendants were the members of the UTC board at the time of the complaint and the former chairman and CEO of UTC. The plaintiffs, however, failed to allege that any of the individuals other than the CEO and the first-named defendant were not independent. The Court of Chancery dismissed the complaint with prejudice as to the named plaintiff on the ground that the plaintiff failed to plead facts supporting an inference that a majority of the board faced a substantial likelihood of personal liability. View "Harold Grill 2 IRA v. Chenevert" on Justia Law

Plaintiffs, stockholders in Chevron and FedEx, sued the boards of Chevron and FedEx for adopting forum selection bylaws providing that the forum of litigation relating to the companies' internal affairs should be conducted in Delaware. The cases were consolidated. Defendants filed a motion for judgment on the pleadings on Plaintiffs' claims that (1) the bylaws were statutorily invalid because they were beyond the boards' authority under the Delaware General Corporation Law, and (2) the bylaws were contractually invalid and therefore could not be enforced like other contractual forum selection clauses. The Court of Chancery granted Defendants' motion, holding (1) the bylaws were facially valid as a matter of statutory law; and (2) the bylaws were valid and enforceable contractual forum selection clauses. View "Boilermakers Local 154 Ret. Fund v. Chevron Corp." on Justia Law

A holding company (Company) whose equity was solely owned by Defendant owned forty-three percent of M&F Worldwide (MFW). Company offered to purchase the rest of the corporation's equity in a going private merger. The merger was conditioned on both independent committee approval and a majority-of-the-minority vote. A special committee was formed, which picked its own legal and financial advisors. After the committee successfully negotiated with Company to raise its bid by $1 per share, the merger was approved by the majority of the stockholders unaffiliated with the controlling stockholder (the minority stockholders). Company, Defendant, and other directors of MFW were sued by stockholders, who alleged that the merger was unfair. The Court of Chancery granted Defendants' motion for summary judgment, holding that when a controlling stockholder merger has, from the time of the controller's first overture, been subject to (i) negotiation and approval by a special committee of independent directors empowered to say no, and (ii) approval by an uncoerced, fully informed vote of majority of the minority investors, the business judgment rule standard of review applies, under which the Court was required to dismiss the challenge to the merger in this case. View "In re MFW S'holders Litig." on Justia Law

The board of directors of Primedia, Inc. adopted a resolution approving a merger agreement among Primedia, TPG Capital, and TPG's wholly owned acquisition subsidiaries. Primedia's majority stockholder, KKR, approved the merger agreement. At the time the transaction closed, Linda Kahn and a co-plaintiff were litigating a derivative action on Primedia's behalf, alleging that KKR traded on inside information when it purchased shares of Primedia's preferred stock and seeking disgorgement of KKR's profits under Brophy v. Cities Service Co. In this class action, Kahn and her co-plaintiff alleged that the terms of the merger were unfair because the Primedia directors failed to obtain any value for the Brophy claim. Specifically, they argued that the merger conferred a special benefit on KKR because KKR knew it was highly unlikely that any acquirer would pursue the Brophy claim. Plaintiffs also challenged a provision in the merger agreement limiting the Primedia board's ability to change its recommendation that stockholders vote in favor of the merger. The Court of Chancery (1) dismissed Defendants' motion to dismiss as to the fairness claim because Plaintiffs had standing to pursue the claim and pled a reasonably conceivable theory; and (2) otherwise granted the motion. View "In re Primedia, Inc. S'holders Litig." on Justia Law