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

Francis Pileggi and Kevin Brady have written an article highlighting the "Top 5" key corporate and commercial cases for 2009 from Delaware's Chancery Court and Supreme Court . The article, available here, first appeared in the Delaware Law Weekly. Their article about the top corporate and commercial cases in Delaware for the first six months of the year was published in the ABA's Business Law Today magazine, available here.

A review of key corporate and commercial decisions in Delaware for each of the last four years (2005 through 2008) has appeared on this blog for the benefit of litigators and lawyers who follow these areas of Delaware law. Each of those prior annual overviews can be accessed here.

In addition to the corporate and commercial cases from 2009 highlighted in the above-linked two articles, the following Delaware decisions that did not make it into our “top 5 article” from among the 260 or so corporate and commercial decisions in 2009 that we covered on this blog, nonetheless should be of interest to those who want to keep updated on the latest corporate and commercial rulings from Delaware’s Court of Chancery and Supreme Court.

The following format merely identifies the issues addressed in other noteworthy cases from 2009 and provides hyperlinks to a fuller overview of each case as well as a link to each opinion.

Delaware Supreme Court Opinions

Gantler v. Stephens. This Delaware Supreme Court decision made it clear that fiduciary duties are also imposed on officers of corporations in addition to directors.

General Motors Corporation v. Grenier. In this opinion, the Delaware Supreme Court addresses issues related to whether or not the trial court properly allowed expert testimony after a Daubert hearing.

Olson v. Halverson. This Delaware Supreme Court decision affirmed that the statute of frauds applies to oral LLC agreements that cannot be performed within one year.

Whittington v. Dragon Group LLC. The Delaware Supreme Court establishes a bright line rule in this opinion for the creation of "contracts under seal" to which a 20-year statute of limitations applies.

Delaware Court of Chancery Decisions

Case Financial, Inc. v. Alden, No. 1184-VCP (Del. Ch., Aug. 21, 2009). Chancery Court Discusses Procedural Requirements for Parent Corporation to Pursue Claims Against Directors of Wholly-Owned Subsidiary.

Concord Steel, Inc. v. Wilmington Steel Processing Co., Inc., No. 3369-VCP (Del. Ch. Sept. 30, 2009). Chancery Enforces Restrictive Covenant and Grants Permanent Injunction.

Duthie v. CorSolutions Medical, Inc., et al., No. 3048-VCN (Del. Ch., June 16, 2009). Chancery Court Modifies Advancement Award Based on Changed Circumstances.

eBay Domestic Holdings, Inc. v. Newmark, No. 3705-CC (Del. Ch. Oct. 29, 2009). Chancery Court Rejects Request for Fees and Costs Despite Granting Second Motion to Compel Discovery Against eBay. (This is only one of many pre-trial decisions in this case that was tried in December 2009).

JAKKS Pacific, Inc. v. THQ/JAKKS Pacific, LLC, No. 4295-VCL (Del. Ch. May 6, 2009). Chancery Court Denies Books and Records Demand for LLC.

Julian v. Julian, No. 4137-VCP (Del. Ch. Sept. 9, 2009). Chancery Court Addresses: Aiding and Abetting Fiduciary Duty of LLC Manager; Right of LLC Member to Resign; and Arbitrability. (This is one of several decisions in this matter.)

Latesco, L.P. v. Wayport, Inc., No. 4167-VCL (Del. Ch. July 24, 2009). Court of Chancery Rules on Issue of First Impression: Do Fiduciary Duties Apply in the Context of a Right of First Refusal Agreement Between a Corporation and its Shareholders.

Lola Cars Int'l Limited v. Krohn Racing, LLC, No. 3379-VCN (Del. Ch. Nov. 12, 2009). Court of Chancery Decides Fiduciary Duty Claims Against LLC Manager and Allows Dissolution Claim to Proceed and Clarifies Standards for Member to Seek Dissolution of LLC.

Mickman v. American International Processing, L.L.C., Del. Ch., No. 3869-VCP (July 28, 2009). Chancery Court Grants Access to General Ledger and Right to Obtain Photocopies Based on Terms of LLC Agreement but Denies a Request for Attorneys’ Fees.  (A separate decision in this matter was highlighted on this blog here.)

NACCO Industries Inc. v. Applica Incorporated, No. 2541-VCL (Del. Ch. Dec. 22, 2009). Chancery Retains Jurisdiction over Claims of False Disclosures in Schedule 13D Filings Despite Federal Jurisdiction over Exchange Act Violations by Hedge Funds; and Allows Claim of Damages to Proceed Despite Payment of Termination Fee to Losing Bidder
 

State Line Ventures, LLC v. RBS Citizens, No. 4705-VCL (Del. Ch. Dec. 2, 2009). This letter decision of the Delaware Court of Chancery must be read by any Delaware lawyer serving as "local counsel", and more importantly, should be required reading for any non-Delaware lawyer (or any out of state attorney) who requests a Delaware lawyer to be his or her "local counsel". 

Stockman v. Heartland Industrial Partners L.P., No. 4227-VCS (Del. Ch. July 14, 2009). Court of Chancery Grants Advancement Rights and Allows Indemnification Claims. 
 

In Re: Trados Incorporated Shareholder Litigation, No. 1512-CC (Del. Ch. July 24, 2009). Post-Berger Class Action Survives Motion to Dismiss Where Common Stockholders Received Nothing and Preferred Stockholders Received $52 Million.

Triton Construction Co., Inc. v. Eastern Shore Electrical Services, Inc., No. 3290-VCP (Del. Ch. May 18, 2009). Chancery Addressed the Duty of Loyalty and other Fiduciary Duties of Departing Salaried Employees, as well as the Duty to Preserve Electronic Data and related claims.

Wayne County Employees’ Retirement System v. Corti, No. 3534-CC (Del. Ch. July 24, 2009). Court of Chancery Dismisses Fiduciary Duty Claims Regarding Vivendi Deal.

Xu v. Heckmann Corporation, No. 4673-CC (Del. Ch. October 26, 2009). Chancery Court Discusses Fiduciary Duty of Director to Disclose Information While Negotiating Release with Corporation and Whether Lack of Disclosure Could Invalidate the Release.

Five Recent Chancery Court Decisions on Electronic Discovery Issues.

Beard Research Inc. v. Kates, (May 29, 2009). Court Awards Fees For Spoliation of Evidence.

Grace Brothers Ltd. v. Siena Holdings, Inc. (June 2, 2009). Court Granted Motion to Compel Emails of Directors and Addresses Failure to Preserve

Omnicard Inc. v. Mariner Health Care Management Co.. (May 29, 2009).The Court Defines the Duty to Preserve Electronically Stored Information and Imposes Adverse Inference for Spoliation

TR Investors, LLC, et al. v. Genger, 2009 WL 4696062 (Dec. 9, 2009). The Court Imposed Harsh Penalties for Spoliation of Evidence in Violation of a Status Quo Order.

Triton Constr. Co., Inc. v. Eastern Shore Electrical Services, Inc. (May 18, 2009). The Court Addressed Spoliation of Evidence and the Duty to Preserve Evidence.

UPDATE: Professor Bainbridge kindly links to this post here, and Kevin LaCroix adds a link here after discussing his Top 10 D & O Cases of 2009.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For my regular ethics column in the current issue of The Bencher, the national publication of The American Inns of Court, I summarized a recent decision that addressed the consequences of an attorney not complying with an order requiring that certain documents in the litigation be maintained in confidence. Read article here

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Washington Legal Foundation published an article here last week that is an overview I did of the recent Delaware Chancery Court decision in Wayne County Employees’  Retirement System v. Corti, 2009 Del. Ch. LEXIS 126 (Del. Ch. 2009). The Court's opinion describes the duties of directors in the context of a contested transaction and also recites the Revlon duties of directors.

UPDATE: Professor Stephen Bainbridge, whose corporate law scholarship is often cited in Chancery Court opinions, refers to this decision here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Wilmington litigator Kevin Brady and I co-authored an article for the current issue of the ABA magazine called Business Law Today  in which we highlighted the key Delaware corporate decisions from the first half of 2009. Here is the article.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sheldon Rennie, a corporate litigation partner who was instrumental in helping me start the Wilmington office of Fox Rothschild, co-authored my regular ethics column for the current issue of The Bencher, the national publication of the American Inns of Court. Read article here. The article summarized a recent decision of the U.S. Court of Appeals for the Ninth Circuit regarding a conflict that arose due to the terms of a fee agreement with counsel representing certain representatives in a class action lawsuit. The issue arose in connection with the trial court's approval of the class action settlement. An objection to the settlement was based on the "extra" compensation a class representative would get under the fee agreement with a class representative. The appellate court remanded the case back to the trial court to address the conflict issue, which in theory puts at least some portion of the legal fees at risk.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

My regular ethics column for the national publication of the American Inns of Court, called The Bencher, in its March/April 2009 issue, presented an overview of a California decision that backed the lawyer for a corporation who refused to disclose to a corporate director certain documents that were deemed covered by the attorney/client privilege. Importantly, the corporate director involved had sued the corporation in his capacity as a shareholder. I also cite to several related Delaware case for reference. One can read the article here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

My annual review of selected key corporate and commercial Delaware decisions in 2008 is here. The Delaware Law Weekly published it in its current issue. (Due to its length, this week only Part I appeared and next week the second half of the article will be published.)

My short reviews for each of the last three years, are available  here, here and here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The latest article for my regular ethics column that will be published in the upcoming issue of The Bencher, the national publication of The American Inns of Court, is here.  It describes a recent New York decision that upheld a binding arbitration clause in a fee agreement between a law firm and a client.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Bloomberg Law Reports just published an article I co-wrote titled: Benefits of Being a Delaware Company and Recent Developments in the Governance of LLCs. The citation is  Vol. 2, No. 33 of the Bloomberg Law Reports (August 18, 2008). Here  is a copy. [ This is a "re-print" of a prior post.]

UPDATE: Prof. Gary Rosin was kind enough to post about the article on the Unincorporated Business Law Prof Blog  that he edits here.

UPDATE II: The Wall Street Journal's "Law Page" linked here to this post.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Although I do not publish as many articles as I once did, due to the time it takes for my writing on this blog (which I suppose is also publishing),  I don't think I listed here on this blog the few most recent ones, so below is a list of a few of the articles I published in the last several months. I also just finished an article on Delaware LLCs for a Bloomberg corporate publication that I will post as soon as I can.

Chancery Gives Victory to Freedom of Contract, The Harvard Law School Corporate Governance Blog, http://blogs.law.harvard.edu/corpgov/2008/05/23/chancery-gives-victory-to-freedom-of-contract/ (May 23, 2008)


Texas Court Rejects Claims against Law Firm for Exceeding Litigation Budget and Raising Fees, The Bencher (July/August 2008)

Co-author, Court Rejects Bid Due To Use of Wrong Bond Form, DCA News (May 12, 2008)

Co-author, Non-Delaware Lawyers Sued in Delaware for Advising on Delaware Law, Business Law Today (March/April 2008)


Class Member Not Entitled to Full Panoply of Attorney/Client Relationship Benefits, The Bencher (March/April 2008)

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As my regular Ethics Column in the national publication of the American Inns of Court called The Bencher, in the July/August 2008 issue, here is my article that summarizes a Texas appellate decision that exonerated a law firm that was sued in connection with a client complaining about the law firm's rates increasing in the middle of a lengthy, complex lawsuit. For lawyers in firms who routinely increase their fees each year, this court decision summarized above should be of interest.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

  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.

• Email This
• Print
• Comments
• Trackbacks (3)
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

 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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

Download file

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments (1)
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments (1)
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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.

• Email This
• Print
• Comments
• Share Link

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).

• Email This
• Print
• Comments
• Share Link