Justia Delaware Court of Chancery Opinion Summaries

The Court of Chancery dismissed Plaintiff's complaint for declaratory relief and injunctive relief against the City Library of Wilmington for failure to state a claim, holding that the complaint failed to state a claim for breach of contract.After Plaintiff was banned from various sections of the Library, he filed this complaint seeking to enjoin the Library from banning him and from suspending his privileges. Plaintiff further sought to induce the Library to enforce Library regulations and asked that the Court "rewrite the organizational chart of the Library." The Library filed a motion to dismiss the complaint. The Court of Chancery granted the motion, holding that Plaintiff's count for breach of contract did not state a claim on which relief could be granted. View "Brown v. City Library of Wilmington" on Justia Law

The Court of Chancery granted Plaintiff JUUL Labs, Inc.'s motion for judgment on the pleadings in this action regarding Defendant Daniel Grove's right to inspect Plaintiff's books and records, holding that Defendant did not waive his right to seek an inspection of books and records under California law but that, under the internal affairs doctrine, Defendant did not have the right to seek an inspection of books and records under California law.Plaintiff was a privately held Delaware corporation with its principal place of business in San Francisco, California. Defendant stated that he might sue Plaintiff in California state court to enforce his right to inspect Plaintiff's books and records under Cal. Corp. Code 1601. Plaintiff filed this action, arguing that Defendant waived his inspection rights and that, to the extent that Defendant did not waive all of his inspection rights, Defendant could not seek inspection under California law. The Court of Chancery held (1) Delaware law governed Plaintiff's internal affairs, and because the scope of Defendant's inspection rights was a matter of internal affairs, Delaware law applied and Defendant could not rely on section 1601 to obtain books and records; and (2) because Defendant did not make a demand for inspection under Delaware law, this decision did not address whether he validly waived his inspection rights. View "JUUL Labs, Inc. v. Grove" on Justia Law

The Court of Chancery granted in part and denied in part the motion for partial summary judgment filed by Applied Energetics, Inc. (the Company) on its claims against George Farley, the Company's former director and principal executive officer, and AnneMarieCo, LLC, holding that Farley lacked authority to issue himself twenty-five million shares and grant himself an annual salary of $150,000 per year but that the Company was not entitled to summary judgment on Farley's counterclaims.The Company asserted several claims based on Farley's actions. Farley filed counterclaims against the Company for breach of contract, for unjust enrichment, and to validate his actions under section 205 of the Delaware General Corporation Law. The Company moved for partial summary judgment. The Court of Chancery granted the motion in part and denied it in part, holding (1) because Farley was the Company's sole remaining director when he issued himself stock and granted himself compensation, Farley's actions were invalid; (2) because the Company had the corporate power to issue shares and compensate its officers and directors Farley's acts could be validated under section 205; (3) the Court had the power to validate Farley's decision to grant himself a salary; and (4) evidence could support Farley's claim for compensation under a theory of quantum merit. View "Applied Energetics, Inc. v. Farley" on Justia Law

The Court of Chancery quashed a subpoena the Department of Finance, acting on behalf of the State Escheator, used to AT&T Inc. in its current form, holding that the State Escheator had the authority to issue the subpoena but that AT&T met its burden to show that the scope of the subpoena was so expansive that enforcement would constitute an abuse.The Escheat Law authorizes the State Escheator to conduct examinations of companies' books and records to determine whether they had complied with statutory requirements of the Escheat Law, 12 Del. C. 1130-1190. When the Department began examining the books and records of AT&T and AT&T refused to produce two categories of information, the Department issued an administrative subpoena for the missing information. AT&T refused to comply and filed a federal action alleging that the State Escheator and two other state officials took actions that violated federal law and the Constitution. The Department responded by bringing this action to enforce the subpoena. AT&T responded with a motion to modify or quash the subpoena. The Court of Chancery quashed the subpoena in its current form, holding that enforcing the subpoena as written would be an abuse of the court's process. View "State, Department of Finance v. AT&T, Inc." on Justia Law

The Court of Chancery granted permanent mandatory injunctive relief sought by the Council for the Association of Unit Owners of Pelican Cove Condominium requiring Respondents, owners of Unit 7 in Pelican Cove, to comply with a six-person per unit maximum occupancy limitation located in the declaration of Pelican Cove recorded in the chain of title to the property, holding that the Council will continue to suffer some irreparable harm if a permanent injunction is not granted.Citing case law indicating that ongoing violation of a restrictive covenant may constitute irreparable harm, per se, the Court of Chancery held that other unit owners of Pelican Cove, represented by the Council, would suffer irreparable harm absent injunctive relief because Respondents' breach of the Declaration diminished other unit holders' own enjoyment of their property. Further, without injunctive relief, there was nothing to stop the occupancy of Unit 7 by more than six persons. The Court determined that the balance of the equities weighed in favor of issuing an injunction. View "Council of Association of Unit Owners of Pelican Cove Condominium v. Yeilding" on Justia Law

The Supreme Court held that Sussex County, Kent County, and New Castle County use assessment methodologies when preparing their assessment rolls used by school districts in levying local taxes that fail to comply with three legal requirements.Plaintiffs were the NAACP Delaware State Conference of Branches (the NAACP-DE), the Delawareans for Educational Opportunity (the DEO) and the City of Wilmington. The NAACP-DE and the DEO argued that Delaware's public schools failed to provide an adequate education for students from low-income households, students whose first language is not English, and students with disabilities. When school districts levy local taxes, they are required to use the assessment rolls prepared by Delaware's three counties. The NAACP-DE and the DEO argued that when preparing their assessment rolls, the counties failed to comply with 9 Del. C. 8306(a) (the True Value Statute) and Del. Const. art. VIII, 1 (the Uniformity Clause). The City of Wilmington argued that New Castle County also violated its obligations under 22 Del. C. 1101-1104 (the Assessment Roll Statutes). The Supreme Court held (1) Plaintiffs had standing to assert their claims; and (2) all three counties used assessment methodologies that violate the True Value Statute and the Uniformity Clause and that New Castle County violated its obligations under the Assessment Roll Statutes. View "In re Delaware Public Schools Litigation" on Justia Law

The Court of Chancery granted Defendants' motion to dismiss Plaintiff's complaint alleging that North Shores Board of Governors, Inc. (NSBG), a Delaware not-for-profit corporation that represented the homeowners at North Shores, a residential community, had no authority under the governing covenants to charge assessments or expend funds for maintenance of any of the community's recreational facilities and improvements to the community's beach dunes, holding (1) all claims contesting the annual assessments were barred by laches; and (2) all claims contesting the dune project were barred by the clear language of the covenants and the residential community's charter. View "Abbott v. North Shores Board of Governors, Inc." on Justia Law

In this class action complaint brought under the Delaware Uniform Fraudulent Transfer Act (DUFTA) alleging that Genworth Life Insurance Company (GLIC) engaged in both actual and constructive fraudulent transfers the Court of Chancery granted in part and denied in part GLIC's motion to dismiss, holding that Plaintiffs' attempts to reverse some of GLIC's dividends were time barred.Plaintiffs, a class of insureds who held long-term care insurance policies and insurance agents who alleged that they were entitled to commission payments for selling such payments, alleged that on the brink of its failure, GLIC's owners engaged in an intentional plan to syphon off GLIC's assets. In their class action complaint Plaintiffs asked the Court of Chancery to restore to GLIC the value of the assets that were syphoned away from 2012 to 2014. In response, Defendants filed a motion to dismiss. The Court of Chancery granted the motion in part and denied it in part, holding (1) any challenge to the $395 million in dividends GLIC paid from 2012 to 2014 was untimely under 6 Del. C. 1309; and (2) Plaintiffs had standing to bring this lawsuit. View "Burkhart v. Genworth Financial, Inc." on Justia Law

The Court of Chancery granted Defendants' motion to dismiss two counts arising from the dilution of Plaintiff's equity and voting interests under Court of Chancery Rule 12(b)(6), holding that the complaint failed to state a claim.Plaintiff owned common stock of NexBank Capital, Inc. Plaintiff filed this complaint alleging that NexBank's board of directors and their trusts comprised a control group with concomitant fiduciary obligations to the minority stockholders of NexBank. Plaintiff took issue with 2016 and 2017 stock offerings that were allegedly offered at a discounted price to participants and alleged that his equity and voting interests were diluted because of the stock offerings. Count I claimed that the defendants breached their fiduciary duties and controllers, and Count II claimed that NexBank board members named as defendants breached their fiduciary duties as directors. The Court of Chancery held that the complaint failed to state a claim under Gentile v. Rossette, 906 A.2d 91 (Del. 2006), as to either stock offering and thus dismissed the complaint. View "Daugherty v. Dondero" on Justia Law

The Court of Chancery denied Defendants' motion to dismiss breach of fiduciary duty claims brought by a Tesla, Inc. stockholder against Telsa's chief executive officer, Elon Musk, and members of Tesla's board of directors regarding a stockholder vote approving an incentive-based compensation plan for Musk, holding that, on the pled facts, it was reasonably conceivable that the award was unfair.After approving the award, the Board submitted the award to Tesla's stockholders for approval. The stockholders approved the award, after which Tesla implemented the award. Thereafter, Plaintiff brought direct and derivative claims against Musk and members of the Board alleging that the award was excessive and the product of breaches of fiduciary duty. Defendants moved to dismiss the complaint. The Court of Chancery denied the motion, holding (1) entire fairness is the standard by which the award must be reviewed; and (2) under the circumstances of this case, Defendants' motion to dismiss the breach of fiduciary duty claims must be denied. View "Tornetta v. Musk" on Justia Law