Justia Delaware Court of Chancery Opinion Summaries

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

The Court of Chancery denied CDC Upshot Ventures I, L.P.'s motion to dismiss this summary advancement proceeding under Rule 12(b)(1) for lack of subject matter jurisdiction after invoking an arbitration provision in its operating agreement, holding that because an arbitration provision does not deprive a court of subject matter jurisdiction, a party can waive a right to arbitrate by participating sufficiently in a court proceeding.The court granted summary judgment establishing Petitioner's right to receive advancements from CSC Upshot Ventures I, L.P. and determining that Upshot owed Petitioner specific amounts. After sanctions were imposed and Upshot still failed to pay, the court issued an order requiring Upshot to show cause why further sanctions should not be imposed. Upshot filed a motion to dismiss, arguing that the court lacked subject matter jurisdiction in light of the arbitration provision. The Court of Chancery denied the motion for lack of subject matter jurisdiction, holding (1) the arbitration provision can be waived and whether a judicial conduct waiver has occurred is an issue of substantive arbitrability for the court to decide; (2) the arbitration provision in this case was insufficient to empower the arbitrator to decide whether a judicial conduct waiver has occurred; and (3) Upshot waived its right to arbitrate in this case. View "Gandi-Kapoor v. Hone Capital LLC" 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 granted summary judgment in favor of Defendants in this action challenging two provisions in a certificate of incorporation of Bumble, Inc., holding that the challenged provisions were valid.The provisions at issue stated that each share will carry one vote, unless the share is owned by a "Principal Stockholder," defined as the parties to a publicly-disclosed stockholders agreement, in which case it will carry ten votes. At the time of this action there were two principal stockholders, including Bumble's founder and its financial sponsor. Plaintiff brought this action seeking a declaration that the provisions were invalid as violating sections 212(a) and 151(a) of the Delaware General Corporation Law (DGCL). The Court of Chancery granted summary judgment for Defendants, holding that the challenged provisions complied with Delaware law. View "Colon v. Bumble, Inc." on Justia Law

The Court of Chancery declined to approve a settlement agreement negotiated between Plaintiffs and Defendants on behalf of a class of common stockholders Plaintiffs purported to represent, holding that the proposed settlement was not fair and did not fulfill the principles of due process.Plaintiffs, common stockholders of AMC Entertainment Holdings, Inc., brought direct claims on behalf of a putative class of common stockholders seeking injunctive relief to stop AMC from holding a special meeting at which Plaintiffs, along with holders of fractional units of blank check preferred stock, were scheduled to vote upon two charter amendments that would authorize more common stock triggering the conversion of the fractional units into shares of common stock and reverse a stock split. Before a preliminary injunctive hearing, Plaintiffs negotiated a settlement with Defendants. The Court of Chancery held that the settlement could not be approved as submitted because, among other things, the settlement purported to release claims that did not arise out of the same factual predicate as the claims asserted in this action and because the release of claims arising out of preferred interests was not supported by consideration. View "In re AMC Entertainment Holdings, Inc. Stockholder Litigation" on Justia Law

The Court of Chancery granted Petitioner's petition to hold Respondents - Hone Capital LLC and CSC Upshot Ventures I, L.P. - in contempt for failing to comply with an order to advance expenses (the advancement order), holding that coercive contempt sanctions can be used to enforce an advancement right.At issue before the Court of Chancery was whether contempt sanctions could be used to enforce the advancement order in this case where contempt is not generally available to enforce a money judgment. The Court of Chancery held (1) due to the harm that a covered person faces, the holder of an advancement right is not relegated to collection mechanisms; and (2) Petitioner was entitled to relief on her request of a daily fine to coerce compliance until Respondents comply with the advancement order. View "Gandhi-Kapoor v. Hone Capital LLC" on Justia Law

The Court of Chancery determined the distribution of proceeds from the sale of real property in New Castle that was first partitioned then sold and determined the parties' respective shares of the sale proceeds.Lydell Davis and Shanna Veasley purchased a home together as joint tenants with the right of survivorship. Davis later moved out and filed a pro se petition for a partition of the property. The Court ordered a partition sale of the property and appointed a trustee to complete the sale. After the sale, each party sought offsets for various payments or improvements. The Court of Chancery held (1) Davis's share of the sale proceeds is decreased by $6,477, and Veasley's share is correspondingly increased by that amount; and (2) assuming that $85,456 remain in escrow and no further trustee's fees or costs are deducted, Davis was entitled to $36,251 from the escrowed sale proceeds, and Veasley was entitled to the remaining $49,205. View "In re Partition of Real Estate of Davis" 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