Justia Delaware Court of Chancery Opinion Summaries

In a dispute between Jonathan H. Paul and Rockpoint Group, LLC, the Delaware Court of Chancery denied Rockpoint's motion to dismiss Count III and granted Paul's cross-motion for partial summary judgement. The case stemmed from a disagreement about how to divide the proceeds from a transaction involving the investment fund complex that Paul co-founded and later left. After Paul's departure, he and his former partners agreed to an amendment to the company’s limited liability agreement, which stipulated Paul would receive a share of the proceeds from certain future transactions. A dispute arose over the calculation of Paul’s share when a qualifying transaction occurred. The court determined that the dispute resolution mechanism in the agreement called for an expert determination, not a plenary arbitration. The court also affirmed that the third amended and restated LLC agreement, not the first, governed the dispute. The court ruled that the appraiser could not consider extrinsic evidence, such as legal arguments and affidavits, presented by Rockpoint in its valuation. The court further directed that Rockpoint's appraisal must be redacted to omit the offending material. View "Paul v. Rockpoint Group, LLC" on Justia Law

In this case before the Court of Chancery of the State of Delaware, Plaintiff Kevin Brown, a former employee of Court Square Capital Management, L.P., sued the company for withholding his carried interest payments, alleging breach of contract. Court Square Capital Management counterclaimed, alleging that Brown had violated non-compete and confidentiality provisions in the company's LLC agreements. The issues in question were whether Brown's conduct in relation to two investment opportunities, Zodiac and Hayward, violated the non-compete provisions, and whether his conduct concerning certain internal memos breached the confidentiality provisions.The court found that Brown did not violate the non-compete provisions. Although the companies in question could be considered as "investment opportunities" as per the LLC agreement, Brown did not acquire any interest in these companies during the prohibited period, and his salary from his new employer, MSD, did not constitute an acquired interest.The court also found that Brown did not breach the confidentiality provisions. Court Square argued that Brown breached these provisions by requesting and receiving internal memos (HUMs) from his former colleague at Court Square. The court, however, found that the information in the HUMs was not confidential as it was widely circulated among private-equity firms and would have been easily accessible to anyone in Brown's position. Furthermore, Brown used these memos solely for formatting purposes and did not use the information for competitive purposes.The court therefore entered judgment in favor of Brown. View "Brown v. Court Square Capital Management, L.P." on Justia Law

In the case brought before the Court of Chancery of the State of Delaware, Texas Pacific Land Corporation (the "Company") sued Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, SoftVest Advisors, LLC, and SoftVest, L.P. (collectively, the "Investor Group") over a dispute related to a stockholder vote. The Company alleged that the Investor Group breached a contractual obligation under a stockholders agreement to vote their shares in accordance with the board of directors' recommendation. The recommendation was for a charter amendment to increase the Company’s authorized shares. The Investor Group voted against the amendment, arguing they were not bound to follow the board’s recommendation due to exceptions in the agreement. They also claimed the doctrine of unclean hands barred the Company from enforcing the voting commitment, arguing the Company had disclosed inaccurate information when soliciting stockholder approval. The court found the Investor Group breached the voting commitment and their shares should be deemed to have voted in favor of the amendment. Consequently, the amendment was declared to have been approved. The court dismissed the Investor Group's unclean hands argument, citing their own misconduct in violating the agreement. View "Texas Pacific Land Corporation v. Horizon Kinetics LLC, et al." on Justia Law

The Court of Chancery denied Sunder Pros LLC's application for a preliminary injunction against Tyler Jackson because Sunder could not establish a reasonable likelihood of success on the merits and further denied Sunder's application for a preliminary injunction against the remaining defendants for lack of an underlying breach of contract.Jackson, the former head of Sunder's sales who lived in Texas, joined Solar Pros, LLC and resigned from Sunder. Sunder, whose headquarters were in Utah but was a Delaware LLC, brought this suit arguing that Jackson was bound by restrictive covenants (the covenants). The Court of Chancery denied relief, holding (1) the covenants, which were facially unreasonable in their own right, were part of an agreement that could not be enforced against Jackson because the agreement originated in an egregious breach of fiduciary duty; and (2) as to the remaining Defendants, there was no underlying breach of contract, and Defendants did not engage in conduct that could support a claim for tortiously interfering with the covenants as required by Utah law. View "Sunder Energy, LLC v. Jackson" on Justia Law

In this case surrounding the acquisition of Twitter Inc., the Court of Chancery denied Plaintiff's motion for mootness fees, holding that Plaintiff's claim was without merit.Defendants Elon R. Musk, X Holdings I, Inc., and X Holdings II, Inc. agreed to acquire Twitter Inc. pursuant to an agreement and plan of merger (merger agreement). After Defendants' counsel sent a letter to Twitter claiming to terminate the merger agreement Twitter filed a complaint seeking specific enforcement. Thereafter, the deal closed on the original terms of the merger agreement. Plaintiff, who held 5,500 shares of Twitter common stock, brought suit seeking specific performance and damages, claiming that Elon Musk breached his fiduciary duties as a controller of Twitter and that Defendants breached the merger agreement. This Court issued a memorandum opinion dismissing most of Plaintiff's complaint, leaving open the possibility that the damages provision in the merger agreement conveyed third-party beneficiary status to stockholders claiming damages for breach of the agreement. Months later, Plaintiff claimed partial credit for the consummation of the deal and petitioned for mootness fees in the amount of $3 million. The Court of Chancery denied Plaintiff's motion for mootness fees, holding that Plaintiff's claim was not meritorious when filed. View "Crispo v. Musk" on Justia Law

The Court of Chancery affirmed the judgment of the trial court awarding $75,000 in fees and expenses to Plaintiff's counsel in the underlying stockholder class action instead of the requested award of $1,100,000, holding that the amount requested in this case was unreasonable because the benefits achieved by mooting the lawsuit were insignificant.Plaintiff brought the underlying action challenging a merger agreement under which Centene Corporation agreed to acquire Magellan Health, Inc. Specifically, Plaintiff claimed that, as part of a sale process conducted by Magellan, prospective bidders entered confidentiality agreements that contained provisions that rendered stockholder disclosures materially deficient. Shortly thereafter, Magellan issued supplemental disclosures and waived its rights under three of the four confidentiality agreements. These actions mooted Plaintiff's claims and stipulated to dismissal. Plaintiff's counsel then petitioned the court for the $1,100,000 attorneys' fees and expenses award. The court awarded $75,000 in fees and expenses. The Court of Chancery affirmed and then issued this decision to warn other courts applying Delaware law of policy dangers in regard to mootness fee petitions, holding that there was no error in the award of fees and expenses in this case. View "Anderson v. Magellan Health, Inc." on Justia Law

The Court of Chancery granted Plaintiff's motion seeking confirmation of an arbitration award and denied Defendants' cross-motion requesting that the award be vacated, holding that Defendants were not entitled to relief on their claims of error.Plaintiff and Defendants entered into an amended and restated limited liability company agreement (LLC agreement) setting out the parties' rights and obligations. The LLC agreement contained an arbitration provision stating that disputes arising out of the contract would be determined by arbitration. Plaintiff later filed a demand for arbitration, and the arbitral panel issued an award in favor of Plaintiff. The Court of Chancery confirmed the arbitration award, holding that the tribunal did not manifestly disregard the law and that Defendants' arguments regarding mootness were unavailing. View "Huntington Way Associates LLC v. RRI Associates LLC" on Justia Law

In 2014, Merck and Bayer entered a Stock and Asset Purchase Agreement (SAPA) whereby Merck sold, and Bayer purchased, Merck’s consumer care business and consumer care product lines, including the Claritin, Coppertone, Dr. Scholl’s, and Lotrimin foot powder product lines. The transaction closed in October 2014. Bayer paid Merck more than $14 billion. After the transaction closed, both companies were the subject of lawsuits alleging injuries arising from consumers’ use of talc-based products that Merck used in foot powder product lines sold to Bayer; asbestos allegedly contained in talcum powder has caused fatal cancers.The Delaware Court of Chancery dismissed Merck’s suit in which it argued that Bayer breached the SAPA by refusing to assume liability for the claims. Both companies, as sophisticated participants in the pharmaceutical industry, understood that consumer products businesses face potential liability for torts associated with the sale of such consumer products. The SAPA clearly and unambiguously provides that Merck indefinitely retained substantive liability for the product liability claims related to products sold before the transaction closed. Merck attempted to argue that its liability for the product liability claims ceased in 2021; the court found that interpretation contrary to the SAPA's clear and unambiguous terms. Bayer’s interpretation of the SAPA is the only reasonable one. View "Merck & Co., Inc. v. Bayer AG" on Justia Law

In this case involving a Pennsylvania-domiciled insurance company in rehabilitation under the jurisdiction of a Pennsylvania court and a management company that was a wholly-owned subsidiary of the Pennsylvania-domiciled insurance company that was not a part of the rehabilitation proceeding the Court of Chancery granted in part and denied in part Plaintiffs' motion to stay, holding that a stay was warranted in part.In In re Liquidation of Freestone Insurance Co., 143 A.3d 1234 (Del. Ch. 2016), the Court of Chancery was presiding over an insurance delinquency proceeding, and at issue was whether to lift a broad anti-suit injunction to permit litigation to proceed in another state against the delinquent insurer. The Court of Chancery held that the factors set forth in Freestone to consider in deciding whether to depart from the presumption against permitting collateral proceedings to go forward against the delinquent insurer supported a stay in the instant case as to the delinquent insurer but did not support a stay as to the management company. View "Principal Growth Strategies, LLC v. AGH Parent LLC" on Justia Law

In this investment fund complex dispute brought by former partners causing two LLCs to file suit for breach of the LLC agreements after the fund principal commenced an arbitration the Court of Chancery held that, absent a further arbitration agreement, the parties must litigate the claims asserted in this action in the district court.The employment agreement of the fund principal contained a mandatory agreement to arbitrate all claims relating to his employment. The fund principal's partners eventually terminated him for cause for allegedly violating his employment agreement and, as a consequence, for canceling the fund principal's member interests in the LLC. Thereafter, the fund principal commenced an arbitration in which he sought to litigate whether he had breached his employment agreement. The former partners refused to arbitrate and then brought this suit seeking a permanent injunction barring the fund principal from arbitrating the breaches of the LLC agreements. The Court of Chancery held that the LLCs were bound by the arbitration agreement and that the court must decide which claims must be litigated and which claims were arbitrable. View "Fairstead Capital Management LLC v. Blodgett" on Justia Law