In Bonham v. HVH Holdings, Inc., download file, the court was called upon to interpret the provisions of a Stock Purchase Agreement (“SPA”) regarding the type of notice that was a prerequisite to making a claim against a $25 million escrow fund that was created for post-closing liabilities that might arise in connection with the $200 million sale of a business.
I summarized a prior decision in this case here, regarding a motion to stay discovery in light of a related proceeding.
In this decision, the court relied on caselaw for its recitation of basic principles of contract interpretation. Among the disputes involved here was the classification under the SPA of certain claims made for amounts held in escrow, and whether the specific claims were subject to arbitration or not. The procedural posture of the decision was a motion to dismiss under Rule 12(b)(6) which requires the court to allow the claim to proceed if, based on any reasonable inferences drawn most favorable to the non-moving party, a plaintiff would be entitled to relief under any reasonable set of facts properly supported by the complaint and any integral documents incorporated by reference therein. The court, based on that standard, allowed claims to proceed based on both the express provision in the SPA for good faith, as well as the implied covenant of good faith and fair dealing.

The Chancery Court denied summary judgment sought by a majority shareholder, based on claims of breach of loyalty for alleged actions in connection with a merger. Crescent/Mach I Partnership, L.P. v. Turner, download file, involved the claim that a majority shareholder breached his fiduciary duty in connection with a merger agreement in which it was alleged he made “side deals” for his personal benefit that were not shared by the other shareholders. The court analogized this case to similar claims in the matter of Parnes v. Bally Entertainment Corp., 722 A.2d 1243, 1245 (Del. 1999). The Parnes case also involved allegations that the acquired corporation’s chief executive officer a key representative in the negotiations process, had conditioned his consent to the merger upon the receipt of substantial special payments and that such conduct had a direct impact on the merger price to be received by the shareholders because the merger consideration was reduced in order to accommodate his demands or so it was alleged. In this context the court determined that the plaintiff has the burden of showing that the alleged conduct was “so egregious as to materially affect the price paid in the transaction.” (citing Dieterich v. Harrer, 857 A.2d 1017, 1027 (Del. Ch. 2004)). The court found that the claim failed for two reasons. First, Turner did not condition his assent to the merger on any special consideration and second, the “side deals which he did receive did not materially affect the merger price.” However, summary judgment was denied to the extent that there was a claim that Turner, the majority shareholder, supplied to his fellow directors and shareholders a pessimistic projection of 3% growth which was inconsistent with a proper growth projection of 4% that was consistent with the views of management. The claim was that Turner did not act loyally and in the best interest of the company and its shareholders by using these pessimistic projections that reduced the merger price. The court found a sufficiently material factual issue on that point to deny summary judgment on that issue.

Penn Mart Supermarkets, Inc. v. New Castle Shopping LLC, download file, is a factually intensive case that involved a claim that the landlord and another tenant of a shopping center breached a covenant in a lease that prohibited other tenants from selling certain types of products that would compete with the Penn Mart Supermarket. Although the court granted an injunction, preventing the breach of the restrictive covenant, due to a failure to prove damages, it only awarded nominal damages of $1.00. It also rejected the defense of “legal impracticability” based on a bankruptcy court order which authorized the assignment of the lease to the offending tenant, on the basis that the bankruptcy order did not amend the terms of the lease of the party that sought to enforce its restrictive covenant.

For links to articles and other writings about a corporate law debate raging in the blawgosphere among corporate law experts, see the overview by Prof. Bainbridge here. The labels are progressive v. conservative, but regardless of the labels, the discussion is educational for those interested in competing schools of thought regarding the proper role of directors and the analytical framework to consider the various relationships among corporate constituencies.

The Conglomerate blog posts about day 3 of the Alito hearings.
It may be telling that among the most notable part of the hearings on day 3 was not about the testimony of the nominee, but sparring between senators on the committee about whether a letter that one sent to the other was actually received, and the nominee’s wife leaving the room in tears due to mean-spirited attacks on her husband.

Prof. Bainbridge has a post here about Judge Alito and “the little guy”. I saw the opening of the hearings last night on C-Span and was moved and impressed by the SCOTUS nominee’s brief overview of how he came from humble beginnings. He described how a friend lending his father $50 for “tuition and a used suit” made the difference between his father, an Italian immigrant, working in a factory after high school and going to college. Still, due to discrimination against Italian-Americans, it was hard for his dad to find work after college. Nonetheless, the nominee said that he learned by example from his parents, the virtues of hard work, perseverence, fairness and responsible behavior. His mother was there at the hearings, and she had every right to be proud.

For those who take legal (and judicial) ethics seriously, Prof. Bainbridge posts here an analysis by legal ethics expert Ronald Rotunda, about why having a mutual fund with Vanguard would not necessarily create a conflict for a reviewing jurist, anymore than a judge having a bank account at Bank of America would create a necessary conflict for a judge reviewing a case involving that entity (depending on the nature of the case). Of course, those who are raising ethics issues in the SCOTUS hearings for Judge Alito that began today, may not be doing so from the vantage point of the experts in legal ethics like Rotunda, and likely have motives that have nothing at all to do with a concern for legal ethics.