Justia Civil Procedure Opinion Summaries

Articles Posted in Delaware Court of Chancery
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In the Court of Chancery of the State of Delaware, the plaintiffs Dennis Palkon and Herbert Williamson, shareholders of TripAdvisor, Inc. and Liberty TripAdvisor Holdings, Inc., filed a lawsuit against the directors of the companies. The directors had resolved to convert the companies from Delaware corporations into Nevada corporations, a decision approved by controlling stockholder Gregory B. Maffei. The plaintiffs argued that Nevada law offers fewer litigation rights to stockholders and provides greater litigation protections to fiduciaries, alleging that the directors and Maffei approved the conversion to secure these protections for themselves.The defendants moved to dismiss the complaint, arguing that it failed to state a claim on which relief could be granted. The court denied the motion except regarding the plaintiffs' request for injunctive relief. The court held that the conversion constituted a self-interested transaction effectuated by a stockholder controller, and conferred a non-ratable benefit on the stockholder controller and the directors, triggering entire fairness review.The court found it reasonably conceivable that the conversion was not substantively fair, as the stockholders would hold a lesser set of litigation rights after the conversion. It also found it reasonably conceivable that the conversion was not procedurally fair, as the stockholder controller and the board did not implement any procedural protections. The court concluded that the plaintiffs had stated a claim on which relief can be granted. However, the court stated that it would not enjoin the companies from leaving Delaware, as other remedies, including money damages, could be adequate. View "Palkon v. Maffei" on Justia Law

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In a contractual dispute between Blueacorn PPP, LLC and Paynerd LLC, Paynerdier LLC, Matthew Mandell, and Taylor Hendricksen, the Court of Chancery of the State of Delaware denied the defendants' motion to dismiss Blueacorn's complaint for negligent misrepresentation. The defendants argued that there was no equity jurisdiction because there was no fiduciary or special relationship between the parties, and the relationship was governed by commercial contracts negotiated and performed at arms' length. However, Blueacorn claimed that Pay Nerd had a pecuniary duty to provide accurate information which they breached by supplying false information, and Blueacorn suffered a pecuniary loss due to reliance on that false information.The court found that Blueacorn had sufficiently alleged misrepresentation by claiming that the defendants' false statements were made with the intention of inducing a buyer to form a new company to engage in business with the seller. The court also noted that Blueacorn's claim of negligent misrepresentation had been pled with enough particularity as required by Rule 9(b). However, the court also expressed reservations about whether Blueacorn had pled a pecuniary interest strong enough to invoke equity jurisdiction based on negligent misrepresentation, noting that nearly every party involved in a business contract dispute would have a pecuniary interest in the transaction. Despite this, the court decided not to dismiss the claim at this stage, citing the interest of judicial economy. The court left open the possibility of revisiting the motion to dismiss at the conclusion of the trial. View "Blueacorn PPP, LLC v. Pay Nerd LLC" on Justia Law

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The Court of Chancery of the State of Delaware has selected the Friedlander Team as lead counsel and the NYC/Oregon Funds as lead plaintiffs in a derivative lawsuit against Fox Corporation. After the 2020 presidential election, Fox News broadcasted statements accusing two voting machine companies of facilitating election fraud, leading to defamation lawsuits against the network. Fox Corporation paid $787.5 million to settle one lawsuit, with another still pending. As a result, various stockholders filed derivative complaints, seeking to shift the losses from the corporation to the directors and officers allegedly responsible for the harm. The court was required to choose between two competing teams of attorneys to lead the consolidated actions. After evaluating the teams according to recently amended Rule 23.1, which identifies factors for consideration when resolving leadership disputes, the court selected the Friedlander Team and the NYC/Oregon Funds. The court noted the deliberate, client-driven process through which these entities were chosen, their resources and expertise, and the legitimacy conferred by the involvement of public officials. View "In re Fox Corporation Derivative Litigation" on Justia Law

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The Court of Chancery granted Petitioner's petition to hold Respondents - Hone Capital LLC and CSC Upshot Ventures I, L.P. - in contempt for failing to comply with an order to advance expenses (the advancement order), holding that coercive contempt sanctions can be used to enforce an advancement right.At issue before the Court of Chancery was whether contempt sanctions could be used to enforce the advancement order in this case where contempt is not generally available to enforce a money judgment. The Court of Chancery held (1) due to the harm that a covered person faces, the holder of an advancement right is not relegated to collection mechanisms; and (2) Petitioner was entitled to relief on her request of a daily fine to coerce compliance until Respondents comply with the advancement order. View "Gandhi-Kapoor v. Hone Capital LLC" on Justia Law

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The Court of Chancery granted Defendants' motion to dismiss the amended complaint against them under Court of Chancery Rule 12(b)(2) for lack of personal jurisdiction, holding that this Court lacked personal jurisdiction.To establish personal jurisdiction, Plaintiffs relied on sections 3104(c)(1) and 3014(c)(3) of Delaware's Long-Arm Statute and the conspiracy theory of jurisdiction. The Court of Chancery dismissed the claims without prejudice, holding (1) both theories of jurisdiction required a forum-related act or omission; (2) Plaintiffs did not adequately allege a forum-related act or omission; and (3) Plaintiffs' interpretation of section 3014(c)(3) was unsupported by caselaw. View "SDF Funding LLC v. Fry" on Justia Law

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The Court of Chancery granted Plaintiffs' motion to compel the production of documents and denied Defendants' motion for a retroactive extension in the time to respond, holding that Defendants are required to product all documents responsive to the requests for production of documents within fourteen days.Through Heartland Family Group, LLC, Alexander Burns controlled Southport Lane, L.P. and its affiliates (the Southport Entities). Plaintiffs sued Burns and Heartland, arguing that certain transactions rendered two companies acquired by the Southport Entities insolvent. Plaintiffs served requests for production of documents on Defendants. In response, Defendants invoked the Fifth Amendment. Plaintiffs then moved to compel the production of documents and responses to interrogatories. Defendants moved for a retroactive extension. The Court of Chancery granted Plaintiffs' motion to compel and denied the motion for a retroactive extension, holding that Defendants' invocation of the Self-Incrimination Clause is overruled. View "Wood v. U.S. Bank National Ass'n" on Justia Law

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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

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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

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The Court of Chancery granted Defendants' motion to dismiss two counts arising from the dilution of Plaintiff's equity and voting interests under Court of Chancery Rule 12(b)(6), holding that the complaint failed to state a claim.Plaintiff owned common stock of NexBank Capital, Inc. Plaintiff filed this complaint alleging that NexBank's board of directors and their trusts comprised a control group with concomitant fiduciary obligations to the minority stockholders of NexBank. Plaintiff took issue with 2016 and 2017 stock offerings that were allegedly offered at a discounted price to participants and alleged that his equity and voting interests were diluted because of the stock offerings. Count I claimed that the defendants breached their fiduciary duties and controllers, and Count II claimed that NexBank board members named as defendants breached their fiduciary duties as directors. The Court of Chancery held that the complaint failed to state a claim under Gentile v. Rossette, 906 A.2d 91 (Del. 2006), as to either stock offering and thus dismissed the complaint. View "Daugherty v. Dondero" on Justia Law

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The Court of Chancery granted Defendant’s motion to dismiss this complaint alleging that Defendant breached an earnest agreement for lack of subject matter jurisdiction, holding that the complaint did not seek equitable relief and that an adequate remedy existed at law.This complaint focused on Defendant’s purported breaches of the earnest agreement that the parties entered into on the same day they entered into a stock purchase agreement. Defendant moved to dismiss the complaint for lack of subject matter jurisdiction. The Court of Chancery granted the motion, holding that Defendant’s failure to perform its obligations under the earnest agreement could be remedied with money damages, and because Plaintiff had an adequate remedy at law, the Court lacked subject matter jurisdiction over this matter. View "Quarum v. Mitchell International, Inc." on Justia Law