Justia Delaware Court of Chancery Opinion Summaries

This matter was before the court on defendant's Motion to Stay. After Perfumania announced an agreement to acquire defendant, Shirley Anderson, purportedly a stockholder of defendant, filed an action challenging the acquisition in a Florida state court (Florida Action). Arthur Weill filed a Motion to Intervene in the Florida Action; after that motion was denied, Weill filed a stockholder class action complaint similar to Anderson's and moved to consolidate his case with the Florida Action. Plaintiff filed the instant action. All three actions sought to enjoin the takeover of defendant, on behalf of a stockholder class, based upon similar allegations of inadequate disclosure and breach of fiduciary duty. Defendant sought a stay in favor of the Florida Action under the doctrine explained in McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co. Discounting, as the court found appropriate, the first-filed nature of the Florida Action, the court found nothing that indicated that this matter should be stayed in deference to the Florida Action. To the contrary, the interest of the the state in the behavior of fiduciaries for its corporate citizens convinced the court that the Motion to Stay must be denied. View "Dias v. Purches, et al." on Justia Law

Plaintiff sued the State to challenge a demand for payment made by the State under Delaware's escheat law, 12 Del. C. 1101, et seq. The State countersued, seeking a declaration that the sums demanded from plaintiff were proper and authorized under the Statute. Both parties moved for partial judgment on the pleadings. The court found that the rebates at issue fit comfortably within two of the "specifically enumerated" items of property listed in section 1198(11) and therefore granted the State's motion for partial judgment on the pleadings and denied plaintiff's cross-motion. Although the pleadings did not paint a clear picture of the form in which the rebates were issued by plaintiff to its customers, plaintiff's counsel conceded at oral argument that the rebates were issued as either negotiable "checks" or "credits." As such, the rebates consisted of specifically enumerated items of property under section 1198(11), and the State's claims could not be barred by any statute of limitations. View "Staples, Inc. v. Cook, et al." on Justia Law

A group of minority investors sued the manager of an LLC for damages, arguing that the manager breached his contractual and fiduciary duties. The court concluded that the manager's course of conduct beached both his contractual and fiduciary duties. Using his control over the LLC, the manager took steps to deliver the LLC to himself and his family on unfair terms. Therefore, the court entered a remedy, taking into account the distribution received by plaintiffs at the auction, and adding interest, compounding monthly at the legal rate, from that time period. Because the manager had made this litigation far more cumbersome and inefficient than it should have been by advancing certain frivolous arguments, the court awarded plaintiffs one-half of their reasonable attorneys' fees and costs under the bad faith exception to the American Rule. View "Auriga Capital Corp., et al. v. Gatz Properties, LLC, et al." on Justia Law

In a shareholder derivative action brought in the name of Sunpower, plaintiff claimed that the directors and certain officers of SunPower breached their fiduciary duties by failing to implement or to monitor an effective internal control system, which caused the company to misstate, and then to restate, its financial statements for 2008 and 2009. That restatement also led to related actions in federal court accusing the company and its directors and senior management of violating federal securities laws (Securities Class Action). Plaintiffs sought indemnification for whatever losses the company ultimately incurred from the Securities Class Action and recovery of other damages directly caused by the restatement itself. Defendants moved to stay the derivative action pending resolution of the Securities Class Action. The court found that practical considerations made simultaneous prosecution of both cases unduly complicated, inefficient, and unnecessary. Therefore, the court granted defendant's motion to stay the derivative action. View "Brenner v. Albrecht, et al." on Justia Law

This matter involved a request for books and records under Section 220 of the Delaware General Corporation Law. Plaintiff owned stocked in the defendant corporation and was also a plaintiff in a California state plenary state derivative action, in which it alleged that the defendant directors were liable to the corporation for a breach of their fiduciary duties. Because of the unusual procedural posture of this case, which included statements by the California Court appearing to endorse this action, the court ordered certain records produced. Defendants made production and plaintiffs subsequently filed a motion to compel, arguing that the production was insufficient. The court found that the issue was moot because plaintiff failed to file a third amended complaint before defendants filed and the parties briefed, a demurrer to the second amended complaint in the California action, and because, to the extent plaintiff needed expedited action on this motion to compel in order to file a third amended complaint, it failed to seek it. Defendant's demurrer had been submitted to the California court, which had stated that there would be no amendments to the now-completed briefing and that the second amended complaint would stand or fall with prejudice. Therefore, plaintiff no longer had a proper purpose. View "Amalgamated Bank v. NetApp, Inc." on Justia Law

Plaintiff, a former corporate officer, sued defendant, his former employer, for advancement and indemnification in connection with several proceedings that arose out of regulatory and criminal investigations at the defendant corporation following defendant's distribution of oversized morphine sulfate tablets into the market. The dispute centered around whether plaintiff succeeded on the merits of any of the proceedings at issue, thus entitling him to indemnification as a matter of law, or whether additional discovery was required to determine whether plaintiff acted in good faith, in which case he would be entitled to indemnification under the Indemnification Agreement. The court found that plaintiff was not entitled to advancement for the Jail Records Matter; was not entitled to mandatory indemnification for the Criminal Matter or the HHS Exclusion Matter; was entitled to mandatory indemnification for the FDA Consent Decree Matter; and that the evidence relevant to plaintiff's claims for permissive identification was limited to plaintiff's conduct, and the facts related to that conduct, underlying the proceedings for which indemnification was sought. View "Hermelin v. K-V Pharmaceutical Co." on Justia Law

This action involved claims by plaintiffs (Paron and, together with McConnon and Lyons) against defendant. McConnon, Lyons, and defendant co-founded Paron to manage client accounts using a software-based futures trading strategy defendant had developed. Plaintiffs accused defendant of fabricating records and making other false statements concerning the trade software, fraudulently inducing McConnon and Lyons to form Paron, and breaching fiduciary duties to Paron. This memorandum opinion addressed several outstanding procedural issues raised after trial concerning the post-trial briefing and the exhibits to be considered as part of the record. The court overruled in part and sustained in part Crombie's various objections to a number of plaintiffs' trial exhibits; denied Crombie's motion to reopen the record and admit additional evidence; denied Crombie's request that the court disregard plaintiffs' post-trial brief and award sanctions against them; denied Crombie's recent motion for involuntary dismissal; and considered the matter fully submitted and ripe for a final determination on the merits. View "Paron Capital Mgmt, LLC, et al. v. Crombie" on Justia Law

This action was before the court on a motion for a temporary restraining order (TRO) to enjoin the consummation of a proposed restructuring of a mortgage loan secured by certain resorts properties in Mexico and the Bahamas. Holders of more senior participations claim that the proposed transaction unfairly benefited the junior holder at the expense of the more senior holders in direct contravention of the terms of the agreements controlling the debt. The senior holders further claimed that if the proposed transaction was allowed to close, they would suffer irreparable harm through the loss of certain rights and guaranties under the new terms of the loan. The court concluded that the senior holders have stated colorable claims and made a sufficient showing that they would suffer imminent harm if the proposed transaction were allowed to close. Further, the court found that this potential irreparable harm outweighed the harm that would result to the junior holders by delaying the closing for a few weeks until a preliminary injunction could be heard. Accordingly, the court granted the TRO. View "Trilogy Portfolio Co., LLC, et al. v. Brookfield Real Estate Financial Partners, et al." on Justia Law

This case involved the dispute between Gila Dweck, the CEO, director, and 30% stockholder in Kids International Corporation (Kids) and Albert Nasser, the Chairman and controlling stockholder of Kids. Dweck and Nasser accused each other of breaching their fiduciary duties and Nasser asserted third-party claims for breach of fiduciary duty against Dweck's colleagues Kevin Taxin, Kids' President, and Bruce Fine, Kids' CFO and corporate secretary. The court found that Dweck and Taxin breached their fiduciary duties to Kids by establishing competing companies that usurped Kids' corporate opportunities and converted Kids' resources; Dweck further breached her fiduciary duties by causing Kids to reimburse her for personal expenses; Fine breached his fiduciary duties by abdicating his responsibility to review Dweck's expenses and signing off on them wholesale; Dweck, Taxin, and Fine breached their duties by, inter alia, transferring Kids' customer relationships and business expectancies to their competing companies; and Dweck, Taxin, and Fine were liable to Kids for the damages they caused by their breaches of duty. The court largely rejected Dweck's breach of fiduciary duty claims against Nasser. Nevertheless, Nasser failed to carry his burden of proving that it was entirely fair for Kids to pay him a consulting fee that compensated him equally with Dweck when he performed no work for kids. Nasser was liable to Kids for those fees. Dweck also established her entitlement to an accounting from Nasser for some of the amount in cash that Kids had on hand at the time of the split. View "Dweck, et al. v. Nasser, et al." on Justia Law

Plaintiffs, David and Barbara Smith, asserted various claims arising out of the construction of their home against Defendants, Donald L. Mattia, Inc. (DLM), Donald Mattia, and Barbara Joseph (Barbara). The Chancery Court (1) granted Defendants' motion for summary judgment on (i) Plaintiffs' breach of contract claim and (ii) Plaintiffs' civil conspiracy claim; (2) denied Defendant's motion for summary judgment on (i) Plaintiffs' claim for misappropriation of Plaintiffs' backfill and money paid to DLM that was not applied to their project and (ii) Plaintiffs' claim that Defendants fraudulently induced Plaintiffs to purchase excess lumber and misappropriated $8,836 in connection with the purchase of excess lumber; (2) granted Plaintiffs' motion for summary judgment, as Defendants did not articulate a viable cause of action in their counterclaim; and (3) denied Barbara's motion for Chan. Ct. R. 11 sanctions where there was no evidence that Plaintiffs' attorney did not have a good faith belief in the legitimacy of the claims asserted against Barbara. View "Smith v. Donald L. Mattia, Inc." on Justia Law