Justia Delaware Court of Chancery Opinion Summaries

The Court of Chancery granted Hightower Holdings, LLC's motion to dismiss this action under Rule 12(b)(3) based on the doctrine of forum non conveniens, holding that Hightower carried its burden to show that it would suffer overwhelming hardship from being forced to litigate this action in Delaware under the circumstances presented.This litigation arose when Scott Holsopple left his employment with Focus Operating, LLC (Focus Sub) and took a job with Hightower Holdings, LLC. Focus Financial Partners, LLC (Focus Parent), the publicly traded parent company of Focus Sub, filed this lawsuit against Holsopple and Hightower. Five days later, Holsopple and Hightower filed an action against Focus Parent in a California court, seeking declarations that restrictive covenants and Delaware-forum and Delaware-law provisions in a unit agreement Holsopple signed when joining Focus Sub were invalid and unenforceable under California law. Focus Parent then filed a second amended complaint asserting, among other things, claims for breach of the Delaware-forum provisions. Hightower moved to dismiss this action under the doctrine of forum non conveniens. Holsopple was subsequently dismissed from the lawsuit. The Court of Chancery granted the motion, holding that, under the circumstances, it would impose overwhelming hardship if Hightower were forced to litigate a less advanced case in this jurisdiction. View "Focus Financial Financial Partners, LLC v. Holsopple" on Justia Law

The Court of Chancery granted Defendants' motion to dismiss this derivative action under Rule 23.1 on the grounds that Plaintiff failed to demand that the Facebook board of directors (the Board) pursue the litigation and did not establish that demand was futile.At the request of Mark Zuckerberg, the Board pursued a reclassification of Facebook's shares, the result of which would be to shift two-thirds of Facebook's economic value to the non-voting stock and enable Zuckerberg to transfer the bulk of his economic ownership in Facebook without giving up voting control. After a lawsuit, the Board withdrew the reclassification. Plaintiff then filed a derivative action against Zuckerberg and Board members that approved the reclassification, claiming that the pursuit of the reclassification constituted a breach of duty and that Facebook was harmed as a result. Plaintiff chose not to make a pre-suit demand. Defendants moved to dismiss the action under Rule 23.1. The Court of Chancery granted the motion, holding that demand was not excused on the grounds that the directors were incapable of making an impartial decision regarding whether to institute such litigation. View "United Food & Commercial Workers Union v. Zuckerberg" on Justia Law

The Court of Chancery granted Scott Holsopple's motion for dismissal from this case, holding that this Court lacked any basis to assert personal jurisdiction over Holsopple.Holsopple previously worked for Focus Operating, LLC, a subsidiary of Focus Financial Partners, LLC (Focus Parent). During his employment with Focus Operating, Holsopple signed five Unit Agreements, two of which selected the courts of Delaware as the exclusive forum for disputes relating to the Unit Agreements. By signing the agreements, Holsopple because a member of Focus Parent. The two most recent iterations of Focus Parent's operating agreement selected the Courts of Delaware as the exclusive forum for disputes relating to the operating agreements. After Holsopple took a position with Hightower Holdings, LLC, a competitor of Focus Operating, Focus Parent filed this lawsuit alleging, among other things, that Holsopple violated the employment-related provisions in the Unit Agreements and violated the exclusive choice-of-forum provisions by filing a lawsuit in California state court. Holsopple filed a motion to dismiss for lack of personal jurisdiction. After a choice-of-law analysis, the Court of Chancery granted the motion, holding that the Delaware choice-of-forum provisions could not support jurisdiction. View "Focus Financial Financial Partners, LLC v. Holsopple" on Justia Law

In this litigation in which Altaba, Inc. (the Company) sought dissolution under the framework established by Sections 280 and 281(a) of the Delaware General Corporation Law the Court of Chancery held that the Company may make an interim distribution using its proposed amounts of security on the condition that it reserve funds for lawsuits pending in Canada resulting from data breaches that the Company disclosed in 2016 (the Canadian Actions Claim).As to all but two claims, in which the Company agreed to hold back the full amount of security requested by respective claimants, the Court of Chancery held that there was no obstacle to an interim distribution based on the amounts of security. For two claims, however, the Company sought to hold back less than the full amount of security requested by the claimants. The Court of Chancery held (1) as to the Canadian Actions Claim, if the Company wished to make an interim distribution to its stockholders it must reserve $1.05 billion Canadian; and (2) as to the second claim, the Company made a convincing showing that the amount it proposed to reserve was likely to be sufficient to provide compensation for claims that had not been made known to the Company or that had not yet arisen. View "In re Altaba, Inc." on Justia Law

In this case involving disputes over how several related Delaware statutory trusts should be governed and how they should operate the Court of Chancery held that the Trusts have no beneficial interest in the student loans that serve as collateral for the debt instruments (Notes) and that the holders of residual beneficial interests in the Trusts (the Owners) owe certain fiduciary duties to the indenture trustee, the note holders, and the reinsurer for certain of the notes (Indenture Parties).When several constituents brought separate operational controversies in separate lawsuits the actions were consolidated. At issue were offshoots of the National Collegiate Student Loan Master Trust I (the Trusts), each of which were Delaware statutory trusts formed for the purpose of acquiring and servicing a portfolio of student loans (the Student Loans). The Trusts acquired the Student Loans with the proceeds from the issuance of Notes and then entered into an Indenture granting interest in the Student Loans to the Indenture Trustee. The Indenture made Clea that the Trusts transferred the Student Loans for the benefit of the Noteholders. The Trusts then promised to service the Student Loans. The Owner Trustee, which possessed the right to act on behalf of the Trusts, found itself in the middle of a dispute between the Owners and the Indenture Parties, who had various economic interests in the Trusts. The Court of Chancery held as set forth above. View "In re National Collegiate Student Loan Trusts Litigation" on Justia Law

The Court of Chancery held that management of a Delaware corporation does not have the authority unilaterally to preclude a director of the corporation from obtaining the corporation's privileged information.This dispute concerned obtaining access to privileged communications among management of a company, its in-house counsel, and its outside counsel. The company, acting by and under the direction of a special committee of the company's board of directors, filed an action against a corporation and an L.P. alleging that the defendants breached contractual obligations they owed to the company. The special committee sought access to the privileged communications in order to oppose the company's motion for leave to voluntarily dismiss the complaint. The Court of Chancery held that the members of the special committee were entitled to discovery of the privileged communications. View "In re WeWork Litigation" on Justia Law

The Court of Chancery dismissed Plaintiff's complaint for declaratory relief and injunctive relief against the City Library of Wilmington for failure to state a claim, holding that the complaint failed to state a claim for breach of contract.After Plaintiff was banned from various sections of the Library, he filed this complaint seeking to enjoin the Library from banning him and from suspending his privileges. Plaintiff further sought to induce the Library to enforce Library regulations and asked that the Court "rewrite the organizational chart of the Library." The Library filed a motion to dismiss the complaint. The Court of Chancery granted the motion, holding that Plaintiff's count for breach of contract did not state a claim on which relief could be granted. View "Brown v. City Library of Wilmington" on Justia Law

The Court of Chancery granted Plaintiff JUUL Labs, Inc.'s motion for judgment on the pleadings in this action regarding Defendant Daniel Grove's right to inspect Plaintiff's books and records, holding that Defendant did not waive his right to seek an inspection of books and records under California law but that, under the internal affairs doctrine, Defendant did not have the right to seek an inspection of books and records under California law.Plaintiff was a privately held Delaware corporation with its principal place of business in San Francisco, California. Defendant stated that he might sue Plaintiff in California state court to enforce his right to inspect Plaintiff's books and records under Cal. Corp. Code 1601. Plaintiff filed this action, arguing that Defendant waived his inspection rights and that, to the extent that Defendant did not waive all of his inspection rights, Defendant could not seek inspection under California law. The Court of Chancery held (1) Delaware law governed Plaintiff's internal affairs, and because the scope of Defendant's inspection rights was a matter of internal affairs, Delaware law applied and Defendant could not rely on section 1601 to obtain books and records; and (2) because Defendant did not make a demand for inspection under Delaware law, this decision did not address whether he validly waived his inspection rights. View "JUUL Labs, Inc. v. Grove" on Justia Law

The Court of Chancery granted in part and denied in part the motion for partial summary judgment filed by Applied Energetics, Inc. (the Company) on its claims against George Farley, the Company's former director and principal executive officer, and AnneMarieCo, LLC, holding that Farley lacked authority to issue himself twenty-five million shares and grant himself an annual salary of $150,000 per year but that the Company was not entitled to summary judgment on Farley's counterclaims.The Company asserted several claims based on Farley's actions. Farley filed counterclaims against the Company for breach of contract, for unjust enrichment, and to validate his actions under section 205 of the Delaware General Corporation Law. The Company moved for partial summary judgment. The Court of Chancery granted the motion in part and denied it in part, holding (1) because Farley was the Company's sole remaining director when he issued himself stock and granted himself compensation, Farley's actions were invalid; (2) because the Company had the corporate power to issue shares and compensate its officers and directors Farley's acts could be validated under section 205; (3) the Court had the power to validate Farley's decision to grant himself a salary; and (4) evidence could support Farley's claim for compensation under a theory of quantum merit. View "Applied Energetics, Inc. v. Farley" on Justia Law

The Court of Chancery quashed a subpoena the Department of Finance, acting on behalf of the State Escheator, used to AT&T Inc. in its current form, holding that the State Escheator had the authority to issue the subpoena but that AT&T met its burden to show that the scope of the subpoena was so expansive that enforcement would constitute an abuse.The Escheat Law authorizes the State Escheator to conduct examinations of companies' books and records to determine whether they had complied with statutory requirements of the Escheat Law, 12 Del. C. 1130-1190. When the Department began examining the books and records of AT&T and AT&T refused to produce two categories of information, the Department issued an administrative subpoena for the missing information. AT&T refused to comply and filed a federal action alleging that the State Escheator and two other state officials took actions that violated federal law and the Constitution. The Department responded by bringing this action to enforce the subpoena. AT&T responded with a motion to modify or quash the subpoena. The Court of Chancery quashed the subpoena in its current form, holding that enforcing the subpoena as written would be an abuse of the court's process. View "State, Department of Finance v. AT&T, Inc." on Justia Law