Commentary

When Is a Seller's Word His Bond?

Edward M. McNally | June 20, 2018

Every transaction to some extent is based on trust. At least a buyer trusts that a seller is not actively trying to defraud him.

Commentary

Chancery Court Rejects Demand Futility in Absence of Particularized Allegations

Jennifer H. Rearden, Jefferson E. Bell and Michael Marron | June 13, 2018

In Steinberg v. Bearden, the Delaware Chancery Court considered whether the Aronson or Rales test for demand futility should apply to a derivative claim for breach of fiduciary duty against directors who allegedly made false and misleading statements.

Commentary

Former Client Entitled to Attorney’s Entire Litigation File Including Internal Work Product

Barry M. Klayman and Mark E. Felger | June 06, 2018

In TCV VI v. TradingScreen, Vice Chancellor J. Travis Laster addressed the scope of the materials that a lawyer must produce to a former client upon request.

Commentary

Chancery Court Declines Stockholder Invitations to Expand Transactions Subject to Appraisal Rights

K. Tyler O’Connell | June 06, 2018

Appraisal rights have been the subject of increased focus in the current, post-Corwin environment, in which a fully-informed noncoerced stockholder vote suffices to dispose of most M&A challenges.

Commentary

Court Denies TRO; Highlights the Difficulty of Board Conflicts With Controlling Stockholders

Ellis E. Herington | May 30, 2018

What obligations does a board of directors owe to a controlling stockholder? What actions can a board of directors take against a controlling stockholder?

Commentary

Appraisal, Quasi-Appraisal and Indemnification—Are Deals at Risk?

Larry R. “Buzz” Wood Jr., Adam V. Orlacchio and Craig Haring | May 30, 2018

Delaware litigators and deal lawyers around the globe are keen on accounting for the risk of dissenting stockholders exercising appraisal rights when negotiating and structuring a corporate transaction.

Commentary

Self-Dealing Conduct Supporting Fiduciary-Duty Claims Was Covered by Contractual Duties Imposed in the LLC Agreement

Albert H. Manwaring IV | May 23, 2018

The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements.

Del. Rejects Adequate Alternative Forum as an Independent Threshold Consideration for Forum Non Conveniens Applications

P. Clarkson Collins Jr. | May 17, 2018

The Delaware Supreme Court recently issued an important decision clarifying Delaware’s forum non conveniens FNC law in Hupan v. Philip Morris USA.

Commentary

The 'MFW' Framework Gains Traction Outside the Merger Context

Jason J. Mendro and Jeffrey S. Rosenberg | May 16, 2018

Controlling-stockholder transactions are a regular part of many companies’ business; in some cases, they are essential. When challenged, however, such transactions have often been scrutinized under the entire fairness standard, the most exacting standard under Delaware law.

Commentary

Delaware Proposes Updates to Its LLC Statute Regarding Series LLCs

Jonathan G. Strauss and Shannon S. Frazier | May 09, 2018

On April 6, the Delaware Corporation Law Section of the Delaware Bar Association proposed some major and minor amendments to the Delaware Limited Liability Company Act. If introduced in and approved by the Delaware General Assembly and the governor, one of the most significant changes will involve the provisions of the act dealing with series LLCs.

Bankruptcy Court Enjoins Creditor From Pursuing Claims in Chancery in Chapter 11 Trust Liquidation

Barry M. Klayman and Mark E. Felger | May 09, 2018

In JMO Wind Down, Chief Bankruptcy Judge Brendan Shannon considered a motion to enjoin a creditor from pursuing claims against various defendants that were pending in a civil action in the Delaware Court of Chancery based on the provisions of the debtor’s Chapter 11 plan of liquidation.

Commentary

Chancery Court Nullifies Cancellation of Certificate of Formation of Delaware LLCs

Lewis H. Lazarus | May 02, 2018

Parties who form Delaware limited liability companies to organize their business affairs do so to structure their relationships contractually. This enables them to organize the governance and economic rights in a manner tailored to the enterprise they are establishing.

Commentary

Court Sustains 'Bad Faith' Claim Challenging Compensation Paid to Allegedly Incapacitated Executive

K. Tyler O’Connell | April 25, 2018

In Feuer v. Redstone, the Delaware Court of Chancery considered a motion to dismiss derivative claims challenging compensation CBS Corp. paid to nonagenarian Sumner Redstone after he allegedly became physically and mentally incapacitated and ceased rendering meaningful services.

Commentary

Does a Nonresident Del. Officer's Service to a Corporation Allow Courts to Compel Testimony?

James L. Hallowell and Lee R. Crain | April 18, 2018

Does a nonresident officer’s prior service to a Delaware corporation allow the Delaware courts to compel her to appear to testify at trial as a third-party witness?

Commentary

Accepting That LinkedIn Invitation May Be a Violation of a Nonsolicitation Agreement

Hugo V. Alvarez | April 16, 2018

Social media sites like Facebook and LinkedIn are increasingly being used today for professional purposes. Those purposes include maintaining professional networks and promoting certain brands and companies.

Commentary

A Year Later: The Impact in Delaware From the US Supreme Court’s 'TC Heartland'

James S. Green Jr. | April 11, 2018

Almost one year ago, the U.S. Supreme Court decided the landmark case of TC Heartland v. Kraft Foods Group Brands. The decision upended what had been the status quo on the issue of where venue lies in patent infringement actions.

Commentary

Chancery Addresses Subrogation Rights in the Context of Claims for Indemnification

Barry M. Klayman and Mark E. Felger | April 04, 2018

In Meyers v. Quiz-Dia, Vice Chancellor J. Travis Laster addressed the question of whether a party that paid the legal fees and expenses of persons entitled to indemnification could be subrogated to their rights to recover losses incurred in defending against claims filed against them.

Commentary

Boards of Directors May Be Required to Disclose Reasons Behind a Director's Vote Abstention

Kate A. Mahoney and Christopher B. Chuff | March 28, 2018

In a recent decision by the Delaware Supreme Court, Appel v. Berkman, the court held that a board’s failure to include information about the chairman of the board’s reasons for abstaining on the vote rendered the proxy statement materially misleading.

Commentary

Is Stockholder Litigation in Trouble in Delaware? An Update

Edward M. McNally | March 21, 2018

A series of recent Delaware court decisions have caused some plaintiffs law firms to decide stockholder litigation should no longer be filed in the Delaware courts.

Commentary

Important Lessons From 'In re Oxbow Carbon' for Drafting Joint Venture Exit Provisions

Robert B. Little and Eric B. Pacifici | March 14, 2018

The Delaware Court of Chancery recently issued an opinion that offers useful guidance for parties seeking to draft joint venture exit provisions.

Commentary

Delaware Public Policy Does Not Preclude D&O Insurance Coverage for Fraud

K. Tyler O’Connell | March 14, 2018

In Arch Insurance v. Murdock, a D&O insurance coverage dispute, the Superior Court’s complex commercial litigation division reasoned broadly to hold that, absent a contrary choice of law clause, Delaware law applies to Delaware corporations’ D&O insurance policies, and that Delaware public policy does not prohibit insuring losses from insureds’ breaching the fiduciary duty of loyalty through fraudulent conduct.

Commentary

Fairness Standard of Review Applies to Transaction Approved by Independent Majority of Directors

Lewis H. Lazarus | March 07, 2018

The Delaware Court of Chancery is often called upon to assess whether a plaintiff challenging an interested transaction who fails to make demand on the board to pursue claims based on alleged self-dealing or director interest can overcome the procedural hurdle of a motion to dismiss under Rules 23.1 and 12(b)(6).

Commentary

Financial Distress Is a Prerequisite to Good-Faith Bankruptcy Filing

Barry M. Klayman and Mark E. Felger | March 07, 2018

In In re Rent-A-Wreck of America, Bankruptcy Judge Laurie Silverstein dismissed voluntarily filed bankruptcy cases on the grounds they were not filed in good faith.

Commentary

Void-Voidable Distinction Revisited by Delaware Court of Chancery

Nathaniel J. Stuhlmiller | February 28, 2018

In three recent memorandum opinions, the Delaware Court of Chancery revisited the distinction between void and voidable acts under Delaware common law.

Commentary

Del. Supreme Court Limits Stockholder Ratification of Director Compensation

James H. S. Levine and Douglas D. Herrmann | February 22, 2018

Over the past several years, the Delaware Court of Chancery has applied the stockholder ratification defense in challenges to director compensation awards made pursuant to stockholder approved equity incentive plans (EIPs).

Commentary

Court Re-evaluates Stockholder Ratification of Director Compensation for First Time in Decades

​Jefferson E. Bell and David A. Coon | February 21, 2018

In a Dec. 19, 2017, decision, In re Investors Bancorp Stockholder Litigation, the Delaware Supreme Court considered the limits of a stockholder ratification defense when directors make equity awards to themselves under an equity incentive plan or “EIP.”

Commentary

Guidance Provided to Evaluate the Implied Covenant of Good Faith and Fair Dealing

Albert H. Manwaring IV | February 21, 2018

The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements.

Commentary

Dismissal of Shareholder Derivative Action on Rule 23.1 Grounds Precludes Relitigation of Different Del. Plaintiffs

P. Clarkson Collins Jr. | February 14, 2018

The Delaware Supreme Court recently issued an important corporate law decision addressing issue preclusion in the context of multiple shareholder derivative actions.

Stockholders Agreement Interpreted to Not Run Afoul of DGCL

Barry M. Klayman and Mark E. Felger | February 14, 2018

Vice Chancellor J. Travis Laster held that a provision in a stockholders agreement that purported to limit the board’s authority to select the company’s chief executive officer was ineffective because it conflicted with the Delaware General Corporation Law.

Commentary

A Tale of Two Derivative Suits: Issue Preclusion and Comity Prevail

Michelle Reed and Matthew Lloyd | February 07, 2018

The Delaware Supreme Court declined to adopt a new standard governing issue preclusion of derivative actions, creating a tension with Delaware courts’ forceful encouragement that stockholders fully investigate their claims before pursuing such actions on behalf of a company.

Commentary

Where Do You Want to Be Sued?

Edward M. McNally | January 31, 2018

Where does your company want to be sued? Of course, the obvious answer is “nowhere.” But in this litigious country that is not realistic.

Commentary

Plaintiff Who Obtains a Corporate Benefit May Not Target a Stockholder to Pay a Fee Award

Justin T. Kelton | January 31, 2018

In a recent decision, Judge Andre G. Bouchard of the Delaware Court of Chancery addressed the question of whether a plaintiff who obtains a corporate benefit through litigation may target a particular stockholder to pay a common fund fee award.

Commentary

Chancery Greenlights Use of Books and Records Demands to Buttress Post-'Corwin' M&A Challenges

K. Tyler O’Connell | January 24, 2018

Stockholder M&A challenges in the Delaware Court of Chancery have declined in the wake of the well-known Trulia (and its federal corollary Walgreens) and Corwin decisions, which respectively reduced incentives for pre-closing M&A challenges by outlining a strict standard of review for disclosure-only settlements; and confirmed that, regardless of whether the process at issue complied with Revlon, transactions approved by an informed and uncoerced stockholder vote are subject to the protections of the business judgment rule.

Bankruptcy Judge Applies Anti-Forfeiture Statute to Save Debtor's Exercise of Option to Renew Lease

Barry M. Klayman and Mark E. Felger | January 17, 2018

In a recent decision, Bankruptcy Judge Christopher S. Sontchi addressed the question of whether a Chapter 11 debtor, the tenant under a commercial lease, could exercise an option to renew the lease during the bankruptcy proceedings, even though the debtor was in default under the lease and the lease specified that it could not be renewed if defaults existed at the time the option was exercised.

Commentary

Holiday Season Gifts Practitioners With Slew of Notable Opinions From Delaware Courts

Arthur R. Bookout | January 10, 2018

While many view the period between Thanksgiving and Jan. 1 as a hectic time of year, no one has been working harder than the Delaware courts.

Commentary

Supreme Court Reverses Chancery's Dell Appraisal Decision

Brett M. McCartney | December 27, 2017

In one of the most anticipated opinions of 2017, Delaware’s Supreme Court reversed the Court of Chancery’s appraisal decision valuing Dell, Inc.’s shares after its management-led buyout in 2013. In its unanimous en banc decision, the Supreme Court ruled that the Court of Chancery abused its discretion by relying exclusively on its own discounted cash flow (DCF) analysis while affording no weight to the transaction price when valuing the company’s shares at the time of its 2013 going-private merger.

Commentary

Chancery Adopts Federal Test to Determine Whether to Stay a Civil Case Based on a Criminal Investigation

Albert H. Manwaring IV | December 20, 2017

Neither the Delaware Supreme Court, nor other Delaware state courts have “articulated a specific test” to analyze whether to stay a civil case based on the pendency of a criminal case or investigation.

Commentary

Court of Chancery Continues Line of Pro-Arbitration Cases

Thad A. Davis and Andrea Hadjiyianni | December 13, 2017

Parties intending to enter into arbitration agreements should take note of the recent Delaware Court of Chancery decision in In re Good Technology Stockholder Litigation, No. CV 11580-VCL, 2017 WL 4857341 (Del. Ch. Oct. 27, 2017). In Good Technology, the parties agreed that “any disputes arising out of [a term sheet] shall be referred to” a specified individual “who shall have sole authority and exclusive jurisdiction to resolve any such disputes.”

Commentary

Receiver's Disallowance of Creditor's Claim Subject to De Novo Review

Barry M. Klayman and Mark E. Felger | December 06, 2017

What should be the standard of review when the Court of Chancery considers an appeal from a receiver’s disallowance of a claim pursuant to section 296(b) of the Delaware General Corporation Law? In B.E. Capital Management Fund LP v. Fund.com Inc., C.A. No. 12843-VCL (Del. Ch. Oct. 4, 2017), Vice Chancellor Laster held that a receiver’s determination is subject to de novo review and the court has discretion to go beyond the record presented to the receiver by conducting an evidentiary hearing.

Commentary

Are Directors Liable if Their Company Violates the Law? The Practical Implications of 'Kandell'

Timothy R. Dudderar and Daniyal M. Iqbal | December 06, 2017

In a case involving allegations of unusually egregious conduct by directors of a Delaware corporation, the Delaware Court of Chancery in Kandell v. Niv, C.A. No. 11812-VCG (Del. Ch. Sept. 29) (Glasscock, V.C.) found that directors of FXCM, Inc. faced a substantial likelihood of liability for demand futility purposes on a claim alleging that they knowingly allowed FXCM to engage in an illegal business practice, despite the lack of allegations suggesting that the directors were ever explicitly notified that the practice was illegal.

Commentary

Impact of ‘Trulia’ on Merger Litigation in State and Federal Courts

John A. Neuwirth, Joshua S. Amsel, Christine T. Di Guglielmo and Evert J. Christensen Jr. | November 29, 2017

Since 'Trulia', there has been a decline in Delaware in the number of run-of-the-mill challenges to nearly every public company merger transaction. But while the volume of merger litigation in Delaware has been on the decline, there has been a noticeable surge in filings in other jurisdictions, particularly federal courts.

Commentary

Court of Chancery Dismisses Derivative Action for Failure to Plead Demand Futility

Lewis H. Lazarus | November 22, 2017

A cardinal principle of Delaware law is that directors manage the business and affairs of a Delaware corporation. This includes decisions regarding whether to pursue claims against officers and directors whose breach of duty may have injured the company.

Commentary

Bridging the GAAP: Contractual Interpretation Issues in 'Chicago Bridge & Iron'

Pamela L. Millard | November 22, 2017

On June 28, 2017, the Delaware Supreme Court reversed the Court of Chancery’s prior ruling in Chicago Bridge & Iron v. Westinghouse Electric, 2016 WL 7048031 (Del. Ch. Dec. 5, 2016), rev’d, 2017 WL 2774563 (Del. June 28), holding that an independent auditor appointed to resolve purchase price adjustment disputes relating to a sale transaction was not empowered to decide challenges to the seller’s compliance with GAAP in connection with a post-closing true up of net working capital.

Commentary

Delaware Courts Uphold Strict Limitations on Liability For Oversight Claims

Jason J. Mendro and Jeffrey S. Rosenberg | November 15, 2017

It is an all-too familiar accusation to many directors: If only you had done something more, the corporation could have avoided an injury or loss. Since the mid-1990s, Delaware courts have repeatedly recognized that attempting to pin personal liability on directors for their alleged inaction is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment,” as in In re Caremark International Derivative Litigation, 698 A.2d 959, 967 (Del. Ch. 1996).

Commentary

Be Careful What You Ask For in a Section 225 Case

Edward M. McNally | November 14, 2017

Delaware recognizes the need to promptly resolve disputes over the composition of the board of directors of a Delaware corporation.

Commentary

Bankruptcy Court Affirms Authority to Approve Nonconsensual Third-Party Releases

Barry M. Klayman and Mark E. Felger | November 08, 2017

In a significant decision in a closely watched case, Bankruptcy Judge Laurie Selber Silverstein held in In re Millennium Lab Holdings II, Case No. 15-12284 (LSS) (Del. Bankr. Oct. 3, 2017), that the bankruptcy court had constitutional adjudicatory authority to approve the nonconsensual release of nondebtor, direct nonbankruptcy common law claims against third parties as part of a confirmation order.

Commentary

Chancery Approves Incorporation of Reference Condition in Section 220 Litigation

Brett M. McCartney | November 01, 2017

Books and records actions are heralded as the “tools at hand” for litigators pursuing shareholder claims against a corporation.

Commentary

Petition Denied to Remove Wilmington Trust as the Trustee of du Pont Family Trusts

Albert H. Manwaring IV | October 26, 2017

Wilmington Trust serves as the sole trustee for certain du Pont Family Trusts established in the 1940s and 1950s. For many years, Wilmington Trust…

Commentary

Chancery Finds Expert Valuations Are Inadmissible as Hearsay Evidence

Francis G.X. Pileggi and Alexandra Rogin | October 25, 2017

The Delaware Court of Chancery issued an important evidentiary ruling in Zohar II 2005-1 Ltd. v. FSAR Holdings, finding that expert valuation reports were inadmissible as hearsay.

Commentary

The Virtue of Predictability: Delaware’s Place in M&A Practice

Brian M. Lutz and Colin B. Davis | October 18, 2017

As has been widely reported, for the first time in 15 years, Delaware has been dethroned as the nation’s top court system according to a recent survey, which sought to explore “how fair and reasonable the states’ liability systems are perceived to be by U.S. businesses.”