Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

  As I have done for opinions issued in 2005 and 2006, I have prepared a review here of key corporate and commercial decisions from the Delaware Chancery Court and Delaware Supreme Court during the year 2007. See my two prior yearly summaries here. The summary was prepared as an article that was published in the Jan. 16, 2008 edition of The Delaware Law Weekly . There is a necessary subjectivity in the cases that I selected from among the 200 or so that I summarized on these pages during 2007. It is not uncommon for the  courts' decisions to be 50 to 60 (or more) pages each, and many of the opinions could easily be (and have been) the subject of separate articles in their own right. Thus, in order to cover 20 or 30 noteworthy cases in a short article, one is limited to mostly identifying the issues raised in the decisions so that an interested reader will be directed to the full opinion. (Most of the decisions are noteworthy, but it would not be practical to include them all in a short overview. Remember, they are all still available on this blog.)  I also did not spend much time on some of the more well-known cases that have already received widespread attention.

The second link above will lead you to the 2005 overview that appeared in the publication called The Delaware Corporate Litigation Reporter, as well as the 2006 review that appeared in a Bloomberg publication called the Corporate Law Report.

UPDATE:  Fortunately for me, Prof. Bainbridge graciously linked here to my summary.

UPDATE II: Today I am doubly fortunate. Prof. Ribstein kindly linked here to my summary.

 

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Here is a link to the current issue that was recently released of the Newsletter of the Business and Corporate Litigation Committee of the American Bar Association's Business Law Section. Apart from my role as Editor of the publication, the current Newsletter includes a short article I wrote concerning the recent Sample v. Morgan decision in which the Delaware Chancery Court found personal jurisdiction over a non-Delaware lawyer and his non-Delaware law firm in connection with advice they gave to a Delaware corporation.

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 The current issue of The Bencher, the national publication of the American Inns of Court, was distributed this week. The regular column on ethics that I write for it can be found here. I summarize two recent cases dealing with conflict of interest issues.

 

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I write an Ethics Column for the national publication of the American Inns of Court called The Bencher. Here is my column in the current issue that I just received today. It summarizes two recent decisions dealing with attorney conduct. One case involves deposition conduct and the other case I review addresses the contents of a brief written by a lawyer.

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Wilmington lawyer and e-discovery expert Kevin Brady, was kind enough to co-write with me, an article for the Delaware Law Weekly in May 2007 summarizing the recent update of the E-Discovery Default Guidelines for the U.S. District Court for the District of Delaware. Here is the article.

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Here is an article that provides a short summary of key Delaware corporate cases from 2006  that I wrote for Bloomberg's new Corporate Law Report publication. I omitted from my summary a few cases that have already seen extensive coverage, such as the Disney case.

Here is a  similar summary I prepared of selected 2005 cases, that also appeared here as an article in the subscription-only publication called the Delaware Corporate Litigation Reporter.

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 I wrote a short article here, in the Feb. 21, 2007  issue of Delaware Law Weekly, summarizing the Chancery Court's decision in Sample v. Morgan, 2007 WL 177856 (Del. Ch. Jan. 23, 2007), regarding the liability that directors exposed themselves to for giving the appearance at least, at the motion to dismiss stage, that they were merely doing the bidding of management, as opposed to exercising independent judgment. Because the directors involved were not regarded, at least initially, as independent, they did not enjoy the protection of the business judgment rule.

 Here is my (much longer than usual) discussion of  the case in my blog post about it, with a link to the whole decision as well as links to commentary by corporate law professors Gordon Smith and Stephen Bainbridge.

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I summarized several recent Chancery Court cases that denied requests for books and records pursuant to DGCL Section 220 in an article for Delaware Law Weekly in their Dec. 13, 2006 issue. Here is a link to the article.

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For my regular ethics column in the Jan/Feb 2007 issue of The Bencher, I summarized an opinion of the San Diego County Bar Association that determined that an unsolicited email should not be given the same confidentiality of an email from a client to his or her lawyer. Here  is the article.

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In my recent column for  The Delaware Law Weekly, I wrote a short summary of the holding in the recent Chancery Court decision in Trenwick, which held that there is no cause of action in Delaware for "deepening insolvency". The full article is here.

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Although the New Jersey Supreme Court has suspended the ruling pending its further review of the matter, the New Jersey Committee that regulates attorney conduct recently decided that the designation of "Super Lawyer" violates the NJ Rules applicable to lawyers. In my regular ethics column that I write for the national publication of the American Inns of Court,  The Bencher, I discuss it in more detail. The full article is here.

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This article discusses 2 recent Chancery Court decisions that provided creative remedies to address improprieties by the 90% owner and the 50% owner of equity in 2 separate closely-held entities.

Chancery Court Rulings Highlight Flexibility of Equitable Relief Available, Delaware Law Weekly, July 2006

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This articles discusses the conflict when the same attorney attempts to represent a shareholder and corporation.
Florida Appellate Court Allows Attorney to Represent Majority Shareholder But Not Corporation; The Bencher, January/February 2006

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This article discusses some drawbacks to arbitration.
Arbitration May Not Be As Efficient As It Seems; The Delaware Law Weekly, October 2005 .

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A recent ethics decision addressing the obligation of attorneys to maintain confidentiality, determined that the duty applies to avoiding the disclosure of metadata, which is data that is often imbedded in the electronic version of documents, but which is not always viewable on the hard copy. See the link that follows for a more complete discussion. The full article appeared in the May/June 2005 issue of The Bencher, the publication of The American Inns of Court. Download article.

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The following article appeared in the Fall 2003 issue of the publication Delaware Lawyer. It was co-written with former State Rep. Richard DiLiberto, Jr., and is an overview of our insights into lawmaking based on our work together in the Delaware State Legislature.

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By: Francis G.X. Pileggi, Esquire and Leslie B. Spoltore, Esquire

Delaware legislation makes it clear that officers, as well as directors, of Delaware corporations can be subject to the personal jurisdiction of Delaware courts for claims made against those individuals in their capacity as officers and directors of Delaware entities. Similar consent statutes apply to managers of Delaware limited liability companies. See 10 Del. C. § 3114 and 6 Del. C. Section 18-109. See also Assist Stock Management LLC v. Rosheim, 753 A.2d 974 (Del. Ch. 2000).

However, when jurisdiction over relevant individuals is not clearly within the consent statutes, in appropriate circumstances the "civil conspiracy theory of jurisdiction" may apply to secure jurisdiction over a non-resident party.

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By: Francis G. X. Pileggi and Bernard G. Conaway

Section 220 of the Delaware General Corporation Law gives a shareholder the right to inspect certain books and records of a corporation, but that right is not without limitations. The right to those books and records oftentimes seems shallow because enforcing that right, if contested, requires a substantial amount of time and money to file a lawsuit under Section 220, engage in limited discovery, and endure a trial that, only if successful, will merely establish your right to certain books and records with limitations imposed for such matters such as confidentiality of the information. A recent decision by the Delaware Chancery Court clarifies the overlap of such a special statutory summary proceeding with the discovery rights which might otherwise be available in a related lawsuit. Khanna v. Covad Communications Group, Inc., 2004 WL 187274 (Del. Ch.). The scope of discovery in a "conventional" lawsuit is much broader than that available in a Section 220 case. Documents obtainable by means of a simple discovery request in a conventional action contrasts with a Section 220 lawsuit; that only if successful after trial, would entitle one to the limited scope of documents available under Section 220.

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By: Francis G.X. Pileggi and Bernard G. Conaway

Much has been written about recent developments in electronic discovery, and the topic easily lends itself to a law review article as opposed to a short essay such as this. Nonetheless, the narrow scope of this article will be to highlight a few recent developments that should be of great importance to any litigator. For example, the United States District Court for the District of Delaware recently developed non-binding electronic discovery guidelines. As of this writing, neither the Delaware Chancery Court nor the Delaware Superior Court have formally adopted any amendments to their rules of civil procedure that specifically relate to electronic discovery issues similar to the new guidelines promulgated by Chief Judge Robinson of the District Court.

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The independence of a member of the board of directors of a company has always been an important issue under Delaware law, but the issue has gained increasing national importance based on the recent requirements for the New York Stock Exchange and Nasdaq-listed companies, as well as the recent Sarbanes-Oxley Act. In addition to the fact that most NYSE companies are incorporated in Delaware, the issue is critical for purposes of filing a derivative action against a corporation because, as a practical matter, if a majority of the board is deemed independent, and presuit demand is required, claims against a corporation may never go to trial.

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A recent Chancery Court decision reaffirmed the traditional enforceability of agreements to restrict competition by ex-employees.

The recent decision by Vice Chancellor Noble limited the period of restriction against competition to two years instead of the three years that was in the agreement. The court upheld a bar to the ex-employee's competition against his former employer, within the geographic area of northern Delaware. Although the court agreed in general with the principle of enforceability, it emphasized that there is no mathematically precise "one size fits all" form of agreement regarding the duration or scope terms that employers can use to restrict key employees from competing against them after either voluntary or involuntary termination of employment. The court stated that depending on the industry involved, or the specific type of confidential information that an employer is trying to prevent an ex-employee from using, the geographic area and the duration of time that competition is restricted will vary. The Court will consider the facts of the particular situation and the circumstances at the time that the agreement is sought to be enforced; as opposed to the time that the agreement was entered into between the employee and the employer.

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In the recent case of Orman v. Cullman, the Court of Chancery on October 20, 2004 denied a claim that the Board of Directors of General Cigar Holdings impermissibly coerced the shareholders to vote for a merger because of a lock-up provision required by the acquiring party. The Court reasoned that the public shareholders had retained full authority to veto the transaction; the Board had negotiated an effective fiduciary out, and any interested third-party was free to purchase the publicly held shares. The issues in this case could easily lend themselves to a law review article, but this is intended as a short summary limited to the Court's decision in this case only.

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Legislation in 2003 passed by the Delaware Legislature expands the Delaware Court of Chancery's jurisdiction over major business disputes involving technology issues, and also adds a cutting-edge and controversial provision that allows for confidential mediation by the Court of substantial business disputes.

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On March 18, 2004, United States Supreme Court Justice Antonin Scalia issued a memorandum that explained the reasons why he was denying a motion that he recuse himself. In that memorandum, Justice Scalia clarified the standards of recusal for justices of the United States Supreme Court. Cheney v. United States District Court, 541 U.S. ____(2004).

Some may view the decision as peculiar to the special situation that Members of the United States Supreme Court find themselves in, to the extent that "substitutes" cannot be appointed in the way that happens when a trial judge or members of many other appellate courts recuse themselves.

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On July 25, 2002, the United States Congress passed, and on July 30, 2002, President Bush signed, the Sarbanes-Oxley Act of 2002 which is a broad ranging effort to impose additional responsibility and penalties regarding the conduct of officers and directors of public companies, as well as professionals who advise them. Section 307 of the Act created a new rule of professional responsibility for attorneys "appearing and practicing" before the Securities and Exchange Commission ("SEC") "in any way in the representation of" publicly held companies. Supplanting the traditional role of each state to regulate the attorneys in each state, the Act requires the SEC to enact rules within 180 days to set forth "minimum standards of professional conduct for attorneys," including the following two rules:

1) Requiring an attorney to report evidence of a material violation of securities law or breach of fiduciary duty or similar violation by the company or any agent thereof, to the chief legal counsel or the chief executive officer of the company (or the equivalent thereof); and

2) If the counsel or officer does not appropriately respond to the evidence (adopting, as necessary, appropriate remedial measures or sanctions with respect to the violation), requiring the attorney to report the evidence to the audit committee of the board of directors of the issuer or to another committee of the board of directors comprised solely of directors not employed directly or indirectly by the issuer, or to the board of directors.

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In a decision that clarifies the confidentiality and loyalty underpinnings of the conflict of interest principles in Ohio's version of Rule 5-105 of the Code of Professional Responsibility, the United States District Court for the Northern District of Ohio very recently ruled that a law firm would not be disqualified from defending a company in litigation when another office of the same firm represented the plaintiff in an administrative proceeding in an unrelated matter. The court reasoned that: "if the attorney can show that he can represent adverse clients concurrently with equal vigor, without conflict of loyalties and without using confidential information to the detriment of either client," the presumption of a conflict in concurrent adverse representation is rebutted. Pioneer-Standard Electronics, Inc. v. Cap Gemini America, Inc., No. 1:01 CV 2185, at 7 (N.D. Ohio, March 11, 2002).

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