Justia Delaware Court of Chancery Opinion Summaries

In 2010, El Paso Corporation (“El Paso Parent”) sold member interests in three limited liability companies to El Paso Pipeline Partners, LP (“El Paso MLP”). At the time of the sale, El Paso Parent controlled El Paso MLP through its ownership of El Paso Pipeline GP Company, LLC, the sole general partner of El Paso MLP (“El Paso GP”). In 2015, the Court of Chancery issued a post-trial decision concluding that El Paso GP breached the limited partnership agreement governing El Paso MLP by causing El Paso MLP to buy the member interests (the “Fall Dropdown”). In 2012, Plaintiff brought this action challenging the Fall Droptown. While the litigation was pending, Kinder Morgan, Inc., acquired El Paso Parent and therefore indirectly owned and controlled El Paso GP. After trial, Kinder Morgan, El Paso Parent, El Paso MLP, and El Paso GP consummated a merger that ended El Paso MLP’s separate existence as a publicly traded entity. El Paso GP moved to dismiss this litigation, arguing that because Plaintiff styled his claim as derivative the closing of the merger meant that this case must be dismissed. The Court of Chancery denied El Paso GP’s motion to dismiss, holding that the merger did not extinguish Plaintiff’s standing to pursue the claim, and therefore, this Court can implement the liability award. View "In re El Paso Pipeline Partners, L.P. Derivative Litig." on Justia Law

In this case, the parties contested control of certain assets. Plaintiffs brought this action against Defendants for breach of a partnership agreement, breach of the covenant of good faith and fair dealing, equitable rescission, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, fraud, and civil conspiracy to commit fraud. Defendants sought implementation of a status quo order permitting a defendant-corporation to disburse funds for two distinct purposes: for payment of “administration fees” and for payment of legal fees to defend itself in this case. Plaintiffs sought implementation of a status quo order preventing these additional disbursements. The Court of Chancery (1) approved Defendants’ request to pay administration fees, holding that the administration fees were necessary to maintain the assets in the defendant-corporation’s control; and (2) rejected Defendants’ request to pay their legal fees with the disputed assets. View "Capital Link Fund I, LLC v. Capital Point Mmgt., LP" on Justia Law

Plaintiffs - George Polk, Tulum Management USA LLC, and RED Capital Investments LP - brought this action on behalf of nominal defendant RED Parent LLC against Defendants - certain members of the RED Parent Board of Managers, Recycled Energy Development LLC and RED Investment LLC - alleging breach of fiduciary duty and breach of contract. Earlier, RED Parent filed an action in Illinois in regard to essentially the same facts upon which the Delaware action claims were brought. In the Delaware action, Plaintiffs sought advancement, indemnification, and fees on fees incurred in both the Illinois action and the case at bar. The Court of Chancery denied Defendants’ motion to dismiss in favor of the Illinois action but granted Defendants’ motion to stay in favor of the Illinois action as to the valuation and fiduciary duty claims and retained jurisdiction over the Delaware action, holding (1) the parties and issues in the Delaware and Illinois actions are functionally identical; and (2) the Illinois court is capable of rendering prompt and complete justice. View "Tulum Mgmt. USA LLC v. Casten" on Justia Law

At issue in this case was the sale of a portfolio company, Double E Parent LLC, by Prairie Capital III, LP and Prairie Capital III, private equity funds. The buyer was Double E Holding Corp. (“Buyer”), an acquisition vehicle formed by Incline Equity Partners, III, LP (“the Incline Fund”). A Stock Purchase Agreement (“SPA”) governed the transaction. Prairie Capital III, which served as the Sellers’ Representative under the SPA, later sued Buyer to compel the release of funds from escrow. The Incline Fund intervened. Thereafter, Incline Fund and Buyer asserted counterclaims and cross-claims for, inter alia, fraud and aiding and abetting fraud against the Prairie Funds and related individuals and two claims for indemnification under the SPA against the Sellers’ Representative. The counterclaim defendants filed a motion to dismiss the fraud-related claims and one of the two counts seeking indemnification. The Court of Chancery (1) granted the motion to dismiss to the extent that the Buyer and the Incline Fund grounded their fraud-related claims on omissions outside of the SPA and certain representations within the SPA; (2) granted the motion as to one aspect of the challenged indemnification claim; and (3) otherwise denied the motion to dismiss. View "Prairie Capital III, LP v. Double E Holding Corp." on Justia Law

Plaintiffs filed a complaint alleging that Merrill Lynch aided and abetted Director Defendants in the breach of their fiduciary duty of care. The Court of Chancery issued a memorandum opinion denying Merrill Lynch’s motion to dismiss the complaint. Merrill Lynch subsequently moved for reargument, contending that its motion to dismiss should be granted based on a Delaware Supreme Court decision issued one day after the memorandum opinion in this case was issued. The Court of Chancery granted Merrill Lynch’s motion for reargument, and dismissed the complaint with prejudice as to the aiding and abetting claim against Merrill Lynch, holding (1) the Court incorrectly applied the Revlon enhanced scrutiny standard of review rather than the business judgment rule standard of review when it reviewed the complaint to determine whether it adequately alleged that the Director Defendants breached their fiduciary duties; and (2) upon reconsideration, Plaintiffs had not alleged sufficient facts to make it reasonably conceivable that the Director Defendants breached their duty of care. View "In re Zale Corp. Stockholders Litig." on Justia Law

In this derivative action, Plaintiff, a Facebook, Inc. stockholder, challenged the 2013 decision of Facebook’s board of directors to approve compensation for its outside, non-management directors, who comprised six of the eight directors on Facebook’s board. Plaintiff brought claims against the directors ("Defendants”) for breach of fiduciary duty, unjust enrichment, and waste of corporate assets. After the lawsuit was filed, Mark Zuckerberg, who controlled over sixty-one percent of the voting power of Facebook’s common stock and did not receive the 2013 compensation, expressed his approval in a deposition and an affidavit of the disputed compensation for the non-management directors. Defendants sought summary judgment against the fiduciary duty and unjust enrichments claims, arguing that because Zuckerberg ratified the compensation, the standard of review governing that transaction shifted from the entire fairness standard of review to the business judgment presumption. The Court of Chancery denied Defendant’s motion for summary judgment with regard to the fiduciary duty and unjust enrichment claims, holding (1) the entire fairness standard applies to the directors’ approval of the 2013 compensation; and (2) Defendants failed to demonstrate that the board’s compensation decisions were entirely fair. However, because Plaintiff failed to state a reasonably conceivable claim for waste, that claim was dismissed. View "Espinoza v. Zuckerberg" on Justia Law

This was an advancement proceeding based on related litigation before the Court of Chancery under 8 Del. C. 205 and 225 and an action in California. At issue in this matter was whether a former director and officer of a corporation was entitled to summary judgment on his request for advancement of fees and expenses from the corporation incurred in the 205/225 action and the California litigation. The Court granted the motion for summary judgment, holding that the former director and officer was entitled to advancement from the corporation as to the 205/225 action and the California action. View "In re Genelux Corp." on Justia Law

In this action under 8 Del. C. 205 and 225, the Court of Chancery was asked to determine the outcome of an annual election of directors based on its resolution of disputes over whether certain shares of stock were validly issued or lacked consideration. Plaintiffs were the company, which issued the stock, and a director-stockholder, who invested in the company and participated in executing a plot to remove the intervenor as CEO. Plaintiffs asked the Court to set aside the Intervenor’s election of Defendants, two directors, at the company’s most recent annual meeting. The Court of Chancery concluded that Defendants were validly elected and entitled to the declaratory relief they sought, holding (1) section 205 does not permit an enumerated party to petition the Court to declare invalid and defective any corporate act or stock; (2) some of Plaintiffs’ arguments were waived or time-barred; and (3) none of the grounds advanced by Plaintiffs provided a sufficient basis to grant them the requested relief. View "In re Genelux Corp." on Justia Law

This action arose from Selling Source, LLC’s acquisition of assets from Interpid Investments, LLC. Intrepid sought an order requiring Selling Source to pay it thirty percent of the aggregate distributions disbursed in several fiscal quarters preceding an “earn-out adjustment.” The Court of Chancery entered summary judgment in favor of Selling Source and against Intrepid, except that Selling Source’s motion was denied to the limited extent that Interpret sought recovery based on cash distributions, holding that that there was no dispute of material fact and that controlling contractual provisions were not ambiguous and must be read as Selling Source argued. View "Intrepid Invs., LLC v. Selling Source, LLC" on Justia Law

In 2015, Red Clay Consolidated School District (Red Clay) sought approval from voters to increase certain school-related property taxes. The referendum passed. Plaintiffs were residents of Red Clay who opposed the tax increase but did not vote because they were unable to access the polls. Plaintiffs brought this complaint asserting that Red Clay deprived them of their right to vote without due process of law and denied them equal protection, in violation of the Fourteenth Amendment, and that Red Clay violated Del. Const. art. I, 3, which states that all elections shall be free and equal. Specifically, Plaintiffs asserted that Red Clay raised impediments to voting by elderly and disabled residents, who Red Clay believed would oppose the tax increase. Red Clay filed a motion to dismiss the complaint for failure to state a claim. The Court of Chancery denied Red Clay’s motion, concluding that Plaintiffs pled sufficient facts to move beyond the pleading stage. View "Young v. Red Clay Consolidated Sch. Dist." on Justia Law