My busy schedule and the publication of multiple cases lead me to a quick summary of several recent cases on various topics as outlined below. I have also summarized a few more recent cases that I will be posting on this week. The full decisions are available at the court’s website.
Albert, et al. v. Alex Brown Management Services, Inc. This is a sequel to a prior decision which I posted about. In this recent decision, the court ruled on the issue of (1) whether any surviving claims were derivative, rather than direct claims as to which demand was neither made nor excused; and (2) whether the court could exercise personal jurisdiction over several defendants who served as agents, or employees of agents, of the partnerships. The Chancery Court found that there were some direct claims which would result in many benefits being received directly by the stockholder and the court noted that non-disclosure claims were generally considered to be direct claims to the extent that the disclosure violations did not result in harm to the entity. However, other claims involving mismanagement and breach of fiduciary duties, which would not result in a direct benefit to the stockholder, are the typical derivative claims which involve recovery going to the entity. Therefore, in such derivative claims, if no demand was first made, and demand is not excused, those claims must be dismissed. In the complaint, the plaintiffs neither alleged that they made demand nor why demand should be excused although the court gave them the opportunity to amend and replead. Finally, the court noted that it is both necessary and proper for the courts of this state to insure that the managers of a Delaware entity are held responsible for their actions in managing the Delaware entity and when a person manages such a Delaware entity it receives substantial benefit from doing so, and thus should reasonably expect to be responsible for his wrongful action relating to the Delaware entity in Delaware courts.
Heritage Homes of De La Warr, Inc. v. Alexander . In this opinion, the court interpreted an agreement that allowed for an option to purchase property. The court determined that the agreement involved was nothing more than a “bare agreement to agree” with terms so indefinite as make the entire effort nugatory. The court noted that it is a well settled principal of Delaware law that “an agreement to agree in the future without any reasonable objective controlling standards is unenforceable.” The agreement involved left the negotiation of all material terms to a later date and instead, Delaware law requires that “to be enforceable, a contract to enter into a future contract must specify all its material and essential terms and leave none to be agreed upon as a result of future negotiations.” Thus the court found that the agreement at issue was not definite enough to be enforceable.
In the Matter of the purported Last Will and Testament of Lucy B. Pietloc . In this letter opinion, Vice Chancellor Noble addressed the issue of whether or not a Settlement Agreement which provides for confidentiality should be subject to access by other parties in related litigation. The court ruled that parties to litigation do not have an absolute right to deny access to the terms of their settlement to the non-settling parties. The court cited in support of its conclusion both prior Delaware caselaw and caselaw in Kansas. The court ruled that to the extent that the prior Settlement Agreement contains information regarding claims of the estate against third parties, the disclosure of which could prejudice the pursuit of those claims, such concerns can be addressed by limiting access to the Settlement Agreement. Thus, the court ruled that the terms of the Settlement Agreement would be produced but access to its terms would be limited. Separately, the court also conditioned withdrawal of counsel on first replying to discovery requests that were pending.
FGC Holdings Limited v. Teltronics, Inc. In this case Vice Chancellor Parsons addressed a single question of whether the designee of FGC’s Series B director had an immediate right to sit on the Board of Directors of Teltronics. The court concluded that FCG was entitled to a declaratory judgment that its Series B director had an immediate right to sit on the board of Teltronics. The argument was that the Certificate of Designation for the Series B limited the size of the board to five directors and because there were already five directors that the designee of FGC could not become a board member until the next annual stockholders meeting. FGC countered that the Certificate of Designation vested the Series B stockholder with an unconditional right to elect a Series B director at any time. The court agreed with the arguments of FGC. It noted that a Certificate of Incorporation is used as a contract among shareholders and that the general rules of contract interpretation apply to its terms. That rule similarly applies to Certificates of Designation. The court noted that a contract is not ambiguous simply because the parties do not agree to its proper construction nor, the court observed, does ambiguity exist where the court can determine the meaning of a contract “without any other guide that a knowledge of the simple facts on which, for the nature of language in general, its meaning depends. The court discussed the general principles of contract interpretation including the modern view of contract interpretation that allows the court to consider “undisputed background facts that place the contract in his historic setting.”
Rockwell Automation, Inc. v. Kall . In this letter opinion, Vice Chancellor Noble addresses what confidential and proprietary information could be obtained from a dismissed employee’s computer. The court determined, based at least in part on the Employment Agreement between the parties, that the employer is entitled to access to its proprietary material stored on the computer and it was not for the court to determine whether the employer could obtain access to separate personal privilege documents because that issue is not before the court. The parties were engaged in related litigation involving issues not before the court. The practical solution that the court arrived at was to allow, at the employer’s expense, a third party service provider to retrieve and review all documents. That third party was required to provide to Rockwell all its proprietary or confidential documents, together with a list identifying each document delivered to Rockwell. The service provider was to preserve all data and documents stored on the computer equipment and not make them available to any other persons without either the agreement of all the parties or an order from a tribunal or jurisdiction over the parties.