Justia Delaware Court of Chancery Opinion Summaries

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

In 2012, Ogus cofounded the SportTechie website. Bloom volunteered as a writer. Eventually, both quit their other jobs. They formed an LLC with Bloom a 55.5% member, and Ogus a 45.5% member and sole manager. They hired Kaufman. Vintage and Oak View made financial investments. In 2016-2017 Ogus converted SportTechie from an LLC to a Delaware corporation and appointed three directors: Bloom, a Vintage representative, and Bodie, Oak View’s designee. A stockholders agreement gave SportTechie the right to repurchase Ogus’s equity interest if he were terminated. Bloom—SportTechie’s CEO— recommended firing Ogus for poor performance. A quorum of the board authorized the termination of his employment. SportTechie exercised its option to repurchase Ogus’s stock.A chancellor dismissed Ogus's fiduciary duty and fraud claims challenging the stock repurchase and subsequently granted Bodie and Oak View summary judgment on a fraud claim, breach of fiduciary duty claims, an aiding and abetting claim, and a civil conspiracy claim. Those defendants had limited, innocuous roles in the relevant events. Bodie’s decision to sign the consent terminating Ogus is protected by the business judgment rule; there is no evidence of bad faith or self-interest. With no underlying breach of fiduciary duty claim, the aiding and abetting claim against Oak View and the civil conspiracy claim against Oak View and Bodie necessarily fail. As to Bloom and Kaufman, questions of material fact remain, precluding summary judgment on fraud, breach of fiduciary duty, and civil conspiracy claims. View "Ogus v. SportTechie, Inc." on Justia Law

The Court of Chancery granted the motion filed by Petitioner, Delaware Department of Labor, pursuant to Court of Chancery Rules 12 and 55(b) for default judgment against Respondent, Drew's Tree Service, LLC, holding that Petitioner was entitled to relief.In this case arising from Respondent's alleged failure to pay workers' compensation insurance, Petitioner alleged that Respondent had not complied with Petitioner's subpoena requiring Respondent to obtain worker's compensation insurance and provide Petitioner proof of such insurance. When Petitioner did not provide proof of insurance, the matter was referred to the Department of Justice. Petitioner then filed this action. The Court of Chancery granted Petitioner's motion for default judgment, holding that Respondent was out of compliance with 19 Del. C. 2374(a) and that Petitioner was entitled to an assessment of $52,250 and an injunction prohibiting Respondent from operating its business in Delaware while Respondent was out of compliance. View "Del. Dep't of Labor v. Drew's Tree Service, LLC" on Justia Law

The Chancery of Chancery granted a company's petition under 8 Del. C. 205 to validate and declare effective an amendment to the company's certificate of incorporation and stock issued in reliance on that amendment, holding that the amendment is hereby validated and declared effective pursuant to 8 Del. C. 205.Dozens of companies formed as special purpose acquisition companies (SPACs) proposed amendments to their certificates of incorporation to increase the number of authorized Class A common shares. The SPACs did not hold a separate Class A vote on the proposed amendments, believing them to be a series of common stock. Instead, a majority of the common shares entitled to vote, voting as a single class, approved the charter amendments. When the amendments were effectuated billions of shares were issued with the belief that they were authorized by the companies' certificates of incorporation. After the Court of Chancery issued a decision in Garfield v. Boxed, Inc., 2022 WL 17959766 (Del. Ch. Dec. 27, 2022), Petitioner brought this petition. The Court of Chancery granted relief, holding that the 115,120,243 class of Class A common stock issued in reliance on the effectiveness of the charter amendment are ordered validated and declared effective. View "In re Lordstown Motors Corp." on Justia Law

The Court of Chancery denied Defendant's motion to dismiss this action brought by stockholders of McDonald's Corporation (the Company) claiming breach of the duty of oversight and breach of the duty of loyalty, holding that Plaintiffs stated a claim sufficient to survive the motion to dismiss.From 2015 until his termination in 2019, Defendant served as the Company's executive vice president and global people officer. Defendant was disciplined in 2018 for sexual harassment then terminated after he committed another act of sexual harassment. Plaintiffs sued Defendant derivatively on the Company's behalf, alleging (1) as human resources officer, Defendant breached his fiduciary duties by ignoring red flags regarding sexual harassment and misconduct at the Company; and (2) Defendant's own acts of sexual harassment constituted a breach of duty in themselves. Defendant filed a motion to dismiss under Rule 12(b)(6), arguing that Delaware law does not impose on officers a duty of oversight. The Court of Chancery denied the motion to dismiss, holding (1) corporate officers owe the same fiduciary duties as corporate directors, which includes a duty of oversight; (2) Plaintiffs stated a claim against Defendant for breach of his oversight duties; and (3) Plaintiffs' claim against Defendant for his acts of sexual harassment stated a claim upon which relief could be granted. View "In re McDonald's Corporation Stockholder Derivative Litigation" on Justia Law

In this action brought by Plaintiffs, three out of the five children of Dr. Robert M. Harris and Mary Ellen Harris, who were gifted certain shares of the corporation formed by their father (Company), as tenants of by the entirety, the Court of Chancery deferred a decision on Michael Schwager's motion to dismiss the counts that named him as a defendant, holding that a determination must be made as to whether personal jurisdiction over Schwager existed.Plaintiffs alleged that as Dr. Harris's health was failing, Mary Ellen and her friends and advised scheme to seize control of the Company and engaged in a series of self-dealing transactions that tunneled millions of dollars out of the Company. Plaintiffs brought claims for breach of fiduciary duty and abetting breaches of fiduciary duty against Mary Ellen and her advisors, including Michael Schwager, challenged a merger that Mary Ellen effectuated to move the company to New Jersey, and argued that Mary Ellen violated the trust agreement. Schwager filed a motion to dismiss the claims against him for lack of personal jurisdiction. The Court of Chancery deferred considering Schwager's motion to dismiss under 12(b)(6) until after the trial court could determine whether jurisdiction over Schwager existed, holding that additional jurisdictional discovery was required. View "Harris v. Harris" on Justia Law

The Court of Chancery denied Paul Petigrow's motion to dismiss the claims against him for aiding and abetting breaches of fiduciary duty in connection with a share withdrawal (Count IV) and tortiously interfering with a trust instrument (Count V), holding that Petigrow was not entitled to relief.Plaintiffs were three of the children of Dr. Robert M Harris, Sr. and Mary Ellen Harris. Plaintiffs alleged that Mary Ellen and her advisors scheme to seize control of a family-owned corporation as Dr. Harris's health was failing. Petigrow, one of Mary Ellen's advisors, asserted that the Court of Chancery could not exercise personal jurisdiction over him for purposes of a claim for tortious interference with a trust instrument. The Court of Chancery denied his motion to dismiss, holding (1) the exercise of personal jurisdiction for purposes of Count V was consistent with traditional notions of due process, and the claim stated a claim against Pedigrow; and (2) Pedigrow's motion to dismiss Count IV was moot. View "Harris v. Harris" on Justia Law

In this case involving a Pennsylvania-domiciled insurance company in rehabilitation under the jurisdiction of a Pennsylvania court and a management company that was a wholly-owned subsidiary of the Pennsylvania-domiciled insurance company that was not a part of the rehabilitation proceeding the Court of Chancery granted in part and denied in part Plaintiffs' motion to stay, holding that a stay was warranted in part.In In re Liquidation of Freestone Insurance Co., 143 A.3d 1234 (Del. Ch. 2016), the Court of Chancery was presiding over an insurance delinquency proceeding, and at issue was whether to lift a broad anti-suit injunction to permit litigation to proceed in another state against the delinquent insurer. The Court of Chancery held that the factors set forth in Freestone to consider in deciding whether to depart from the presumption against permitting collateral proceedings to go forward against the delinquent insurer supported a stay in the instant case as to the delinquent insurer but did not support a stay as to the management company. View "Principal Growth Strategies, LLC v. AGH Parent LLC" on Justia Law

In this investment fund complex dispute brought by former partners causing two LLCs to file suit for breach of the LLC agreements after the fund principal commenced an arbitration the Court of Chancery held that, absent a further arbitration agreement, the parties must litigate the claims asserted in this action in the district court.The employment agreement of the fund principal contained a mandatory agreement to arbitrate all claims relating to his employment. The fund principal's partners eventually terminated him for cause for allegedly violating his employment agreement and, as a consequence, for canceling the fund principal's member interests in the LLC. Thereafter, the fund principal commenced an arbitration in which he sought to litigate whether he had breached his employment agreement. The former partners refused to arbitrate and then brought this suit seeking a permanent injunction barring the fund principal from arbitrating the breaches of the LLC agreements. The Court of Chancery held that the LLCs were bound by the arbitration agreement and that the court must decide which claims must be litigated and which claims were arbitrable. View "Fairstead Capital Management LLC v. Blodgett" on Justia Law

The Court of Chancery denied Defendants' motion to dismiss this action asserting that the management team (or sponsor) and directors of a special acquisition company (SPAC) breached their fiduciary obligations, holding that it was reasonably conceivable that Defendants breached their fiduciary duties.For a SPAC organized as a Delaware corporation, stockholders are assured that the SPAC's fiduciaries will abide by certain standards of conduct. Plaintiff, a stockholder, filed a putative class action alleging that Defendants undertook a value destructive deal that generated returns for the sponsor while impairing stockholders' ability to decide whether to redeem or to invest in the post-merger company. Defendants filed a motion to dismiss. The Court of Chancery denied the motion, holding that the complaint stated reasonably conceivable claims against Defendants in counts one, two, and three. View "Delman v. GigAquisitions3, LLC" on Justia Law