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A 16-count complaint alleged conspiracy to funnel valuable pharmaceutical interests away from an entity in which the Plaintiff, CelestialRX, LLC, is a member. The claims include allegedly improper self-dealing by two members of a three-member LLC. On motions to dismiss and for summary judgment, the Delaware Chancery Court rejected a claim that plaintiffs had contractually released certain claims and analyzed the LLC agreement to conclude that good faith—a subjective standard, applies separately to both the transaction and to the conflicted party’s analysis of whether it is “fair and reasonable,” but must be read consistently with the purpose of specific standards, which is to permit conflicted transactions in certain circumstances. The court urged the parties to mediate the dispute. View "CelestialRX Investments, LLC.v. Krivulka" on Justia Law

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IBM's proposed purchase of Merge Healthcare was supported by a vote of close to 80% of Merge stockholders. Former Merge stockholders sought post-closing damages against the company’s directors for what they alleged was an improper sale process. Merge did not have an exculpation clause in its corporate charter, so its directors have potential liability for acts violating their duty of care, in the context of an allegedly less-than-rigorous sales process. The Delaware Court of Chancery dismissed. Demonstrating such a violation of the duty of care is not trivial: it requires a demonstration of gross negligence, but it is less formidable than showing disloyalty. Regardless of that standard, the uncoerced vote of a majority of disinterested shares in favor of the merger cleansed any such violations, raising the presumption that the directors acted within their proper business judgment. View "In Re Merge Healthcare Inc. Stockholder Litigation" on Justia Law

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This appeal concerned the 2015 annual meeting of stockholders held by Preferred Communications Systems, Inc. (PCSI). In advance of the meeting, five members of the Preferred Investors Association (the Association) signed a letter distributed to PCSI’s investors that stated their opposing to the reelection of the incumbent members of PCSI’s the board of directors. Three of the incumbent directors lost their seats. These former directors brought suit against the Association and the members who signed the letter, alleging defamation. Defendants moved to dismiss the claim for failure to state a claim. The Court of Chancery granted the motion as to a subset of statements made in the letter, holding (1) Delaware’s anti-SLAPP statute does not apply; (2) Plaintiffs are limited-purpose public figures; and (3) it is reasonably conceivable that a subset of the letter’s statements were defamatory and made with actual malice. View "Agar v. Judy" on Justia Law

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Plaintiff brought this action opposing the use of portions of a former industrial park in the City of Lewes, now owned by the state. This action involved a lease of a portion of that property to the City and a sublease from Lewes to a non-profit that maintained a dog park on the property. At a regularly scheduled city council meeting, the Lewes City Council voted to approve an amendment to the sublease to the non-profit, which added an access road to the sublease. In his complaint, Plaintiff alleged numerous violations of the Delaware Freedom of Information Act (FOIA). The Court of Chancery granted the motion to dismiss of the Mayor, the City Council, and the City, holding that a violation of FOIA did not occur here. View "Lechliter v. Becker" on Justia Law

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At issue in this case was a bylaw adopted by Paylocity Holding Corporation purporting to shift to a stockholder who files an internal corporate claim outside of Delaware without the company’s consent attorneys’ fees and expenses incurred by the company in connection with the claim if the stockholder does not achieve the full remedy sought. Here, a Paylocity stockholder sought a declaration that the bylaw was invalid under Sections 109(b) and 102(b)(6) of the Delaware General Corporation Law. Defendants moved to dismiss the complaint as unripe and for failure to state a claim for relief. The Court of Chancery held (1) Plaintiff’s claims are ripe for review; (2) Plaintiff’s challenge under Section 109(b) states a claim for relief; and (3) Plaintiff’s remaining two claims are dismissed because Plaintiff did not demonstrate that the bylaw violates Section 102(b)(6) and because Plaintiff failed to state a claim for relief with regard to these claims. View "Solak v. Paylocity Holding Corp." on Justia Law

Posted in: Business Law

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Charles and Melissa Dalton obtained a loan from Household Finance Corporation II that was secured by a mortgage on their property. The Daltons received a trial period plan pursuant to a Trial Period Plan Agreement. The Daltons’ loan was later sold to LSF9 Master Participation Trust, and the servicing of the Daltons’ loan was transferred to Caliber Home Loans, Inc. The Daltons filed this action against LSF9 and Caliber alleging, inter alia, breach of the Trial Period Plan Agreement and seeking a preliminary and permanent injunction enjoining LSF9 and Caliber from terminating the Daltons’ loan modification. The Court of Chancery dismissed all claims against LSF9 and Caliber, holding (1) LSF9 and Caliber were not parties nor successors in interest to the Trial Period Plan Agreement; (2) LSF9 and Caliber were not parties to the consent orders between Household Finance and the United States Department of the Treasury; (3) the Daltons failed to state a claim for unjust enrichment; and (4) the Daltons failed to allege a reasonable probability of success on the merits or imminent threat of irreparable injury. View "Dalton v. Household Finance Corp., II" on Justia Law

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This lawsuit involved a loan agreement between Lender and Borrowers. The agreement gave Lender an option to purchase the collateral for the loan - the famous ex-Presidential Yacht Sequoia. A valuation of the Sequoia for purposes of securing the loan was established via fraud on the part of Borrowers. The claims and counterclaims arising out of the loan agreement were eventually resolved by a settlement entered as a court order. The only issue remaining for the Court of Chancery was to oversee the computation of the amount due Borrowers from Lender should Lender elect to acquire the Sequoia. Lender agreed to a minimum option price of zero dollars. The Court of Chancery found the option price to be zero dollars. View "The Sequoia Presidential Yacht Group LLC v. FE Partners LLC" on Justia Law

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The beneficial owner of a Delaware statutory trust sought to inspect certain of the trust’s books and records. The trust denied the beneficial owner’s request, asserting that the form of the request and the motivations underlying the request were improper. The beneficial owner filed a complaint asserting both a contractual demand and a statutory demand. The Court of Chancery granted the beneficial owner’s motion for summary judgment, holding that the beneficial owner was entitled to inspect, examine, and copy the requested information under its contractual demand. View "Grand Acquisition, LLC v. Passco Indian Springs DST" on Justia Law

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After a beneficial owner (Grand Acquisition) of a Delaware statutory trust sought to inspect certain of the trust's books and records, the trust (Passco Trust) denied the request, arguing that the form of the request and the motivations underlying the request both were improper. The bulk of the parties’ dispute centers on whether the trust agreement incorporates the statutory requirements of 12 Del. C. 3819 and, if so, whether the beneficial owner has satisfied those requirements. In this case, the court concluded that Grand Acquisition is entitled to the requested information under its contractual demand where the owners' right to books and records under the Trust Agreement is not subject to the Delaware Statutory Trust Act's, 12 Del. C. 3801-3826, preconditions and defenses, the owners' right to books and records under the Trust Agreement includes the requested information, and Passco Trust has failed to prove its implied improper purpose defense. Accordingly, The court granted Grand Acquisition's motion for summary judgment and denied Passco Trust's motion for summary judgment. View "Grand Aquisition, LLC v. Passco Indian Springs DST" on Justia Law

Posted in: Trusts & Estates

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Plaintiffs, former stockholders of Auspex, filed a putative class action to challenge the propriety of the merger with Teva Pharmaceuticals and seek post-closing damages, alleging that the members of Auspex's board of directors breached their fiduciary duties by permitting senior management to conduct a flawed sales process that ultimately netted stockholders inadequate consideration for their shares. The directors have moved to dismiss plaintiffs’ Complaint under Rule 12(b)(6). The court granted the motion, concluding that, even accepting plaintiffs' well-pled facts as true, defendants are entitled to invoke the irrebuttable business judgment rule. In this case, plaintiffs have not pled facts that would allow a reasonable inference that the merger involved a controlling stockholder, much less that a controlling stockholder pushed Auspex into a conflicted transaction in which the controller received nonratable benefits. They are left, then, to overcome the cleansing effect of stockholder approval, which in this case was disinterested, uncoerced and fully informed. View "Larkin v. Shah" on Justia Law