Justia Delaware Court of Chancery Opinion Summaries

This action arose out of the stock-for-stock merger of Jefferies Group, Inc. and Leucadia National Corporation. After the transaction was announced, the first of seven actions challenging the proposed transactions as filed in New York state court. The case subsequently proceeded in Delaware. Before trial began, the parties reached an agreement-in-principle to settle the case. The settlement, which was formally approved by the Court of Chancery, resulted in a payment of $70 million to the Class. Delaware Counsel sought an award of attorneys’ fees and expenses, and New York Plaintiffs filed a motion for a share of the fee award. The Court of Chancery (1) held that Delaware Counsel was entitled to a fee award of $21.5 million, which equated to 23.5 percent of the gross value of the settlement; and (2) denied the New York Plaintiffs’ motion for a share of the fee award in this action, holding that the New York Plaintiffs failed to substantiate their contribution to the results achieved in the Delaware action. View "In re Jefferies Group, Inc. Shareholders Litig." on Justia Law

In 2012, the Court of Chancery concluded in a Memorandum Opinion that Defendant Simon Michael had breached his fiduciary duties as a director of Plaintiff Shocking Technologies, Inc. In the Memorandum Opinion, the Court asked counsel to submit a form of implementing order. That did not occur, and judgment was not entered. Therefore, Michael lost the opportunity to appeal. The Court of Chancery vacated the Memorandum Opinion on the grounds that Michael’s expectation of appellate review was frustrated because of events not within his control. View "Shocking Technologies, Inc. v. Michael" on Justia Law

This dispute concerned the question of whether a secondary stock offering at an unusually high price, demanded by private equity investors that owned 44 percent of a corporation’s stock and facilitated by the directors that they appointed, impermissibly allowed select shareholders to benefit to the detriment of the corporation. From as early as 2012 complaints were filed related to the sale of stock in June 2011. Plaintiffs in the instant derivative action demanded futility based on the composition of the board at the time of the earlier-filed complaints. Plaintiffs asserted claims for breach of fiduciary duties, aiding and abetting, and unjust enrichment. In light of the investors’ contractual right to sell and the absence of a demonstrable basis for recovery, the Court of Chancery dismissed Plaintiffs’ claims for failure to state a claim. View "In re Molycorp, Inc. Shareholder Derivative Litig." on Justia Law

This action concerned a transaction in which Vivendi S.A. divested its controlling equity position in Activision Blizzard, Inc.. The transaction (“the Restructuring”) restructured Activision’s governance profile and stockholder base. The Lead Plaintiff and his attorneys (Lead Counsel) challenged the Restructuring. Before trial, the parties entered into a Settlement, and Lead Counsel sought court approval for the settlement. Thereafter, three objectors appeared. The first objector objected to the Settlement itself and the other two sought a fee award for their counsel. The Court of Chancery approved the Settlement, awarded $72.5 million to Lead Counsel, authorized Lead Counsel to make a $50,000 payment to the Lead Plaintiff from their award, and denied any fee award to the objectors’ counsel. View "In re Activision Blizzard, Inc. Stockholder Litig." on Justia Law

Plaintiffs - shareholders in their individual capacities - filed a complaint alleging that Defendants breached the duty of loyalty by conducting a self-interested recapitalization. Monetary damages were not available to Plaintiffs, but the Court of Chancery granted Plaintiffs leave to petition the Court for an award of attorneys’ fees and expenses, noting its inherent equitable power to shift attorneys’ fees and its statutory authority to shift costs. The Court concluded that Plaintiffs were entitled to an award of $2 million in attorneys’ fees and expenses, as such an award promotes meritorious litigation to address harm from disloyal acts and comports with equitable principles. View "In re Nine Systems Corp. S’holders Litig." on Justia Law

Plaintiff filed this action against Defendant seeking a declaration that it had a superior lien on funds to which Defendant also claimed an entitlement. Plaintiff brought two counts against Defendant, one requesting a declaration that Plaintiff was entitled to the immediate release and receipt of all funds at issue and the other alleging conversion. Defendant moved to dismiss for failure to state a claim, for lack of subject matter jurisdiction, and for failure to join an indispensable party. The Court of Chancery dismissed the case for lack of subject matter jurisdiction, holding (1) Plaintiff’s application for declaratory relief should be heard in superior court because that court has the power and ability to resolve a lien dispute and because Plaintiff has an adequate and complete remedy at law; and (2) Plaintiff’s second count for conversion asserts a legal right and implicates a legal remedy, and therefore, the Court of Chancery lacks subject matter jurisdiction to address it. View "The Bancorp Bank v. Cross & Simon, LLC" on Justia Law

Quandrant Structured Products Company, Ltd. owned debt securities issued by Athilon Capital Corp. a Delaware corporation. Quadrant asserted derivative claims for breach of fiduciary duty against the members of Athilon’s board of directors, contending that Athilon was insolvent. Defendants moved for summary judgment, arguing (1) for a creditor to have standing to maintain a derivative action, the corporation on whose behalf the creditor sues must be insolvent at the time of suit and continuously thereafter; and (2) when defining solvency, a plaintiff must prove that the corporation has no reasonable prospect of returning to solvency. The Court of Chancery denied Defendants’ motion for summary judgment on the breach of fiduciary duty claims, holding (1) to bring a derivative action, a creditor (i) must plead and later prove that the corporation was insolvent at the time the suit was filed, and (ii) must plead and later prove insolvency under the traditional balance sheet or cash flow tests; and (2) there was evidence which supported a reasonable inference that Athilon was insolvent at the time Quadrant filed suit. View "Quadrant Structured Prods. Co., Ltd. v. Vertin" on Justia Law

At issue in this derivative action were awards of restricted stock units (RSUs) that were granted to non-employee directors of Citrix Systems, Inc. (Citrix) (the RSU Awards). The majority of the directors’ compensation consisted of these RSU Awards, which the board’s compensation committee granted under Citrix’s Equity Incentive Plan (Plan). Citrix stockholders approved the Plan. Plaintiff-stockholder brought this action contending that the RSU Awards were, when combined with the cash payments that Citrix’s non-employee directors receive, “excessive” in comparison with the compensation received by directors at certain of Citrix’s peers. Plaintiff asserted claims for breach of fiduciary duty (Count I), waste of corporate assets (Count II), and unjust enrichment (Count III). Defendants moved to dismiss the complaint for failure to state a claim and for failure to make a pre-suit demand upon Citrix’s board. The Court of Chancery (1) denied Defendants’ Court of Chancery Rule 23.1 motion, as demand was futile; and (2) granted Defendants’ Court of Chancery Rule 12(b)(6) motion as to Count II but denied it as to Counts I and III, concluding that it was reasonably conceivable that the non-employee directors’ total compensation was not entirely fair to Citrix and that Defendants were unjustly enriched by the RSU Awards. View "Calma v. Templeton" on Justia Law

In 2012, Well Union Capital Limited (WU Parent) and Tom James Company (James) formed Carlisle Etcetera LLC (Carlisle). A James executive was appointed as Carlisle’s CEO, and through the CEO, James controlled Carlisle’s day-to-day operations. After Carlisle was formed, WU Parent transferred its member interest to a wholly owned subsidiary called Well Union U.S. Holdings, Inc. (WU Sub). Under the Delaware Limited Liability Company Act (the LLC Act), the transfer rendered WU Sub an assignee, rather than a member. When the relationship between US Parent and James deteriorated, both sides agreed that one needed to buy out the other, but they could not agree on a buyout procedure or price. During negotiations over the buyout, James sought to use its privileged position to extract concessions from WU Sub. WU Sub petitioned the Court of Chancery to dissolve Carlisle. James filed a motion to dismiss, arguing that because WU Sub was an assignee rather than a member, it lacked standing to petition for statutory dissolution under the LLC Act. The Supreme Court denied the motion, holding (1) WU Parent and WU Sub lacked standing to petition for statutory dissolution under the LLC Act; but (2) WU Sub had standing to seek dissolution in equity. View "In re Carlisle Etcetera LLC" on Justia Law

3850 & 3860 Colonial Blvd. LLC acquired an interest in Rubicon Media, LLC, a limited liability company controlled by Christopher Griffin. Griffin carried out a recapitalization of Rubicon LLC, which gave rise to Colonial’s principal claims. Rubicon LLC’s operating agreement required arbitration. Griffin later converted Rubicon LLC into Rubicon Media, Inc. At issue in this case was whether Colonial was obligated to arbitrate or whether creation of Rubicon Media as the LLC’s successor - with a charter providing exclusively for litigation - eliminated any right or duty to arbitrate. In a letter opinion, the Court of Chancery stayed proceedings pending arbitration, specifically awaiting resolution of the question of substantive arbitrability. Colonial sought certification of an interlocutory appeal of that order. The Court rejected Colonial’s application for certification of an interlocutory appeal, holding that there was an arguable basis for arbitration that raised a question for resolution in the arbitration forum. View "3850 & 3860 Colonial Blvd., LLC v. Griffin" on Justia Law