In a departure from the manner in which most cases have been highlighted on these pages, this post includes a collection of short blurbs about recent Delaware corporate and commercial decisions, identifying the key issues addressed, with a link to the whole opinion. This experimental approach to highlighting recent decisions was prompted by a combination of many decisions published recently and an increased workload from paying clients.
Supreme Court Interprets Bylaws and Enforceability of Contractual Deadlines
A recent decision of the Delaware Supreme Court should be read by anyone who needs to know the latest iteration of Delaware law on the following issues:
- Interpreting bylaws;
- Prerequisites for the nominations of directors; and,
- Enforceability of contractual deadlines to provide replies or information.
See Blackrock Credit Allocation Income Trust v. Saba Capital Master Funds, Ltd., Del. Supr., No. 297, 2019 (Jan. 13, 2020). Of course, a careful reading of the entire 32-page decision is warranted, but for purposes of this short blog post I merely highlight the key issues addressed for those who find the topics to be of interest.
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Chancery Explains Doctrine of Recoupment
A recent Delaware Court of Chancery decision addressed the nuances of the doctrine of recoupment, as well as the timetable/deadline by which counterclaims with such defenses must be asserted. See Claros Diagnostics, Inc. v. Opko Health, Inc., C.A. No. 2019-0262-SG (Del. Ch. Feb. 19, 2020). The entire 36-page decision should be reviewed carefully for those who need to understand the nuances of this less-than-common legal topic.
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Court Analyzes Stock Sale Under Entire Fairness
A recent decision of the Delaware Court of Chancery analyzed a stock sale that took place after suit was filed. The sale was intended to make moot a suit under DGCL Section 226 seeking to appoint a custodian based on a deadlock. In connection with that analysis, the court discussed the different levels of review applicable to such actions, in addition to the business judgment rule, based on which a court will analyze the actions of directors or others who owe fiduciary duties. See Coster v. UIP Companies, Inc., Cons., No. 2018-0440-KSJM (Del. Ch. Jan. 28, 2020).
The court also includes an instructive discussion of the nuanced analysis to determine whether or not a director should be deemed independent and/or disinterested. For example, the court cites to case law indicating that financial considerations are not the only basis to determine whether or not a director is interested. This is so, because the Court observed that: human relations and motivations are complex and
“greed is not the only human emotion that can pull one from the path of propriety; so might hatred, lust, envy, revenge, or, as is here alleged, shame or pride.”
See footnotes 219 and 220, and accompanying text. That eminently quotable above passage deserves to be memorized.
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Chancery Considers Alleged Fraudulent Transfers in a Failing Company
The Court of Chancery recently analyzed whether or not certain transfers should be treated as fraudulent conveyances, but the court concluded that the complaint was time-barred to the extent that it challenged dividends that were declared and paid beyond the allowable time period to file a claim. See Burkhart v. Genworth Financial, Inc., No. 2018-0691-JRS (Del. Ch. Jan. 31, 2020).
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Chancery Addresses Squeeze-out of Founder
For those interested in a thoughtful and careful analysis of a matter involving the squeeze-out of a founder, and claims related thereto, see Ogus v. Sporttechie, Inc., No. 2018-0869-AGB (Del. Ch. Jan. 31, 2020).