Justia Delaware Court of Chancery Opinion Summaries

Plaintiffs Costantini, Jr. and Kahn sought indemnification for their fees and costs in underlying litigation involving Swiss Farm. The court concluded that Costantini was entitled to indemnification under Article 14 of the Operating Agreement because he was a manager of Swiss Farm and was sued by Swiss Farm in that capacity and prevailed. However, the court concluded that, although Kahn was sued for breach of fiduciary duty and prevailed, he was not a member of the Board of Managers, an officer, an employee or an agent of the company and, therefore, was not entitled to indemnification under the Operating Agreement. Accordingly, the court granted in part and denied in part plaintiffs' motion for judgment on the pleadings. View "Costantini, et al. v. Swiss Farm Stores Acquisition LLC" on Justia Law

Trusts that owned fifty percent of the common stock of nominal defendant IMS alleged that two of the company's three most senior officers mismanaged the company in breach of their fiduciary duties. Trusts moved to compel IMS to produce the senior officers' work email accounts. The senior officers asserted the attorney-client privilege but did not invoke the work product doctrine. The court concluded that the In re Asia Global Crossing, Ltd. factors weighed in favor of production, absent a statutory override that could alter the common law result. Because IMS conducted its business in Maryland, the federal government and the State of Maryland were the sovereigns whose laws IMS must follow when dealing with its employees' email. The Federal Wiretap Act, 18 U.S.C. 2510 et seq.; the Federal Store Communications Act, 18 U.S.C. 2701; the Maryland Wiretap Act, Md. Code, Cts. & Jud. Proc. 10-401 to 10-414; and the Maryland Stored Communications Act, Md. Code, Cts. & Jud. Proc. 10-4A-01 to 10-4A-08, did not change the common law privilege analysis. Accordingly, the court granted the motion to compel. View "In re Info. Mgmt. Servs., Inc. Derivative Litigation" on Justia Law

Plaintiffs brought a derivative action on behalf of China Automotive alleging breaches of fiduciary duty, insider trading, and unjust enrichment against five members of China Automotive's Board. The court concluded that because plaintiffs have not alleged particularized facts showing that any of Defendants Richardson, Tung, or Xu were interested, not independent, or facing a substantial threat of personal liability at the time the derivative Complaint was filed, these three directors were entitled to consider demand. Therefore, under Court of Chancery Rule 23.1, demand was not excused. The court rejected plaintiffs' remaining claims under Rule 23.1 and dismissed as to plaintiffs with prejudice. View "In re: China Automotive Systems Inc. Derivative Litigation" on Justia Law

R&D, a member of the Joint Venture, brought a books and records action under 6 Del. C. 18-305 and the Joint Venture's limited liability company agreement, seeking two categories of books and records that were in the possession and control of Investment Services. At issue was whether the court had jurisdiction over Investment Services, an Indiana corporation, under either Delaware's long-arm statute or its Limited Liability Company Act, 6 Del. C. ch. 18. The court concluded that R&D had not met its burden of making a prima facie showing of a statutory basis for personal jurisdiction over Investment Services under either Delaware's long-arm statute or Section 18-109 of the LLC Act. Therefore, R&D's claim against Investment Services must be dismissed under Rule 12(b)(2) for lack of personal jurisdiction. The court also concluded that the court did have jurisdiction over HDG Properties because of its contractual consent; R&D failed to allege any "reasonably conceivable" collection of facts upon which it could prevail against other HDG Defendants; and R&D's inspection claims against these HDG Defendants must be dismissed under Rule 12(b)(6). Accordingly, the motion to dismiss was granted as to all of the HDG Defendants. View "Florida R&D Fund Investors, LLC v. Florida BOCA/Deerfield R&D Investors, LLC, et al." on Justia Law

Settlor established a trust (Trust) for the maintenance of two burial lots. The Wilmington and Brandywine Cemetery (the Cemetery) and PNC Bank, N.A. (the Trustee) petitioned to modify the Trust, to direct that three percent of the net asset value of the Trust be distributed annually to the Cemetery for the general maintenance of the Cemetery. Contending that the Trust had a charitable purpose, the Cemetery and Trustee relied on the common law doctrine of cy pres, Delaware's statutory codification of the cy pres doctrine, and the common law doctrine of deviation in seeking modification. The Court of Chancery denied the petition, holding that petition did not provide any basis for modifying the Trust. View "In re Latimer Trust" on Justia Law

In 2000, Trados Inc. obtained venture capital (VC) to support a growth strategy that could lead to an initial public offering. The VC firms received preferred stock and placed representatives on the Trados board of directors (the Board). Trados, however, failed to satisfy its VC backers. The Board subsequently adopted a management incentive plan (MIP) that compensated management for achieving a sale even if the sale yielded nothing for the common stock. In 2005, SDL plc acquired Trados for $60 million. The merger constituted a liquidation that entitled the preferred stockholders to a liquidation preference of $57.9 million. Without the MIP, the common stockholders would have received $2.1 million. With the MIP, the common stockholders received nothing. Plaintiff contended that instead of selling to SDL, the board had a fiduciary duty to continue operating Trados independently to generate value for the common stock. The Court of Chancery held that Defendants proved the decision to approve the merger was fair, as the common stock had no economic value before the merger, making it fair for its holders to receive in the merger the substantial equivalent of what they had before. Likewise, the fair value of the common stock for purposes of appraisal was zero. View "In re Trados Inc. S'holders Litig." on Justia Law

Plaintiff and Defendant entered into a license agreement for the development of boron-based small-molecule drug candidates for the treatment of acne. As part of the agreement, the parties agreed to arbitrate certain disputes. The parties also agreed that each had the right to initiate judicial proceedings to enforce their rights through equitable relief. A dispute arose under the agreement, and Defendant initiated arbitration regarding it. Approximately two weeks later, Plaintiff filed a complaint seeking to enjoin Defendant from proceeding with arbitration and seeking specific performance of the agreement. Defendant moved to dismiss the complaint for lack of subject matter jurisdiction on the grounds that the parties agreed to resolve the claims at issue in arbitration. The Court of Chancery denied Defendant's motion to dismiss, holding that Plaintiff's claims were not subject to mandatory arbitration under the parties' license agreement. View "Medicis Pharm. Corp. v. Anacor Pharms., Inc." on Justia Law

Longview Energy Company filed a complaint against William Huff, Richard D'Angelo, and Riley-Huff Energy Group as a result of a breach of fiduciary duty committed by Huff and D'Angelo in connection with their usurpation of a corporate opportunity. The corporate opportunity belonging to Longview related to property interests in a large area of land in south Texas called Eagle Ford. A Texas court entered a judgment against Defendants and imposed a constructive trust in favor of Longview on the profits and ownership of Riley-Huff's interests in Eagle Ford and a damage award against Huff and D'Angelo. Huff and D'Angelo appealed and sought indemnification from Longview, a Delaware corporation they served on as directors. The Court of Chancery granted Longview's motion to dismiss the complaint because it did not state a ripe claim. View "Huff v. Longview Energy Co." on Justia Law

Plaintiffs bought a townhouse condominium unit from Defendant. After the sale, repairs of leaks in the other condominium units caused by poor construction required the condominium board to collect special assessments in the amount of $65,000 from each unit holder, including Plaintiffs. Recoupment from the builder offset the sum, but Plaintiffs remained out-of-pocket over $40,000. Plaintiffs sued Defendant, alleging fraud and equitable fraud due to Defendant's allegedly insufficient disclosures made to Plaintiffs before the sale. The Court of Chancery entered judgment in favor of Defendant, holding (1) Plaintiffs failed to prove Defendant committed common-law fraud because they failed to show Defendant misrepresented or omitted some material fact before the sale of the condominium; and (2) rescission was not warranted under the facts of this case, and therefore, equitable fraud was inappropriate. View "Grzybowski v. Tracy" on Justia Law

Petitioners, residents of New Castle County, befriended a stray dog called Maggie. They later turned Maggie over to the Kent County Society for the Prevention of Cruelty to Animals (SPCA). Subsequently, Petitioners told the SCPA they would like to adopt Maggie. After concluding that the SPCA had euthanized Maggie, Petitioners filed this action, seeking to compel the SPCA to comply with the state's Shelter Standards Law, including strict compliance with its euthanasia requirements. The SPCA moved to dismiss the action, claiming, among other things, that Petitioners lacked standing to pursue their claims. The Court of Chancery dismissed the action, concluding that Petitioners failed to satisfy the "legally protected interest" element of standing because they did not own Maggie, and their statement of interest to adopt Maggie was not sufficient to create a reasonably conceivable legally protected interest in Maggie. View "Gittman-Crowther v. Kent County Society for the Prevention of Cruelty to Animals" on Justia Law