Recent Practice Columns

R. Stephen McNeill

Judge Requires Successor Agent to Produce Documents in Possession of Predecessor

By R. Stephen McNeill |

U.S. Bankruptcy Judge Mary Walrath of the District of Delaware followed a growing line of precedent in ordering Wilmington Savings Fund Society FSB, as successor collateral and administrative agent under a term loan facility with TSA Stores Inc. and certain of its affiliates (the debtors), to produce documents in the possession of its predecessor agent.

P. Clarkson Collins Jr.

High Court Clarifies Role of Deal Price in Appraisal Fair Value Determination

By P. Clarkson Collins Jr. |

Corporate practitioners have been closely following developments in Delaware's shareholder appraisal litigation.

Planning for the Suddenly Wealthy: Call in the SWATT Team

By Jonathan Rikoon and Steven Olenick |

Coming into money can be both a blessing and a curse. Special attention from a team of professional advisors can avoid negative consequences from the windfall.

Barry M. Klayman and Mark E. Felger

Bankruptcy Court Predicts Del. Will Recognize Existence of De Facto LLCs

By Barry M. Klayman and Mark E. Felger |

In a case characterized as a "matter of great local interest," Bankruptcy Judge Kevin Gross determined a question of much wider interest to practitioners: whether a contract was void ab initio because the Delaware limited liability company that executed it had not yet been formed.

Food for Thought: Supermarket, Grocer and Distributor Chapter 11 Filings

By Edward E. Neiger |

This article focuses on filings in the grocery and food distribution sector as companies struggle in the face of pricing fluctuations and increasing online competition. The column delves into the bankruptcy proceedings of Central Grocers, Rupari Food Services and Marsh Supermarkets.

patent

'Waive' Goodbye: Developments in Patent Litigation

By Roy H. Wepner |

The seemingly endless war between certain types of patent owners (often socalled "nonpracticing entities" or NPEs) and certain types of defendants (typically corporations perceived to have deep pockets) has been fought on many fronts over the last decades.

Robert Greco

Questions Raised on Required Clarity of Disclosures in SEC Filings

By Robert B. Greco |

Two recent decisions of the Delaware Court of Chancery separated by only two weeks took seemingly contradictory positions regarding the extent to which corporate disclosures must be made clear in proxy statements and other SEC filings.

Brett McCartney

Chancery Declines Applying 'Garner' Exception to Privileged Documents in Books-and-Records Action

By Brett M. McCartney |

The Delaware Court of Chancery has declined to compel the production of attorney-client privileged documents in a books-and-records action.

Benyamin Ross, left, and Taylor Hathaway-Zepeda, right, of Gibson, Dunn & Crutcher.

Thicker Than Water: Families, Fiduciary Duties and Controlling Stockholders

By Benyamin S. Ross and Taylor Hathaway-Zepeda |

When is an extended family a control block? The Delaware Court of Chancery acknowledged that while familial relations among a group of stockholders are not per se sufficient to establish a controlling stockholder block, a family that regularly refers to itself as a single unit may constitute a controlling stockholder block.

Preclusion in Derivative Litigation: New Uncertainty

By Joseph M. McLaughlin and Yafit Cohn |

Until the Delaware Supreme Court provides definitive word, managers and stockholders of Delaware corporations must make strategic decisions based on conflicting guidance on whether successive stockholders are barred from seeking to relitigate demand futility allegations.

Albert Manwaring of Morris James

Chancery Recommends Rule to Determine Preclusive Effect of Judgments in Prior Derivative Actions

By Albert H. Manwaring IV |

The predominant approach in most jurisdictions to determine whether the dismissal of a derivative action based on the failure to adequately plead demand futility bars re-litigation of this issue in a subsequent derivative action brought by a different stockholder plaintiff is to apply the traditional legal test for issue preclusion.

Barry M. Klayman and Mark E. Felger

Drop Shipped Goods Failed to Qualify for Administrative Expense Priority in Bankruptcy

By Barry M. Klayman and Mark E. Felger |

In order for a creditor who supplies goods to a debtor within 20 days before the bankruptcy petition is filed to recover the value of the goods as a priority administrative expense under Section 503(b)(9) of the Bankruptcy Code, the debtor must have had physical possession of the goods and not merely constructive receipt.

Travis J. Ferguson

Chancery Court's Equitable Jurisdiction to Compel Transfer of Escrowed Funds

By Travis J. Ferguson |

Three recent decisions by Delaware courts have addressed the appropriateness of equitable relief to acquire funds held in escrow post-closing of a transaction.

Jacqueline P. Rubin and Matthew D. Stachel

Losing Stockholder Standing to Assert and Enforce Corporate Inspection Rights

By Jacqueline P. Rubin and Matthew D. Stachel |

The rights of stockholders to demand to inspect a corporation's books and records under state corporation laws are a powerful method of ensuring the stockholders' rights and interests are safeguarded

James G. McMillan III

Slights Finds a Limit on Corporate Power to Validate Acts Under DGCL Section 204

By James G. McMillan III |

In a case of first impression, Vice Chancellor Joseph R. Slights III of the Delaware Court of Chancery ruled that Section 204 of the Delaware General Corporation Law cannot be used to validate an "unauthorized" corporate act.

Lewis H. Lazarus

Court Upholds Stockholder's Share Ownership and Books-and-Records Request

By Lewis H. Lazarus |

Companies often defend against stockholder requests to inspect books and records by contending that the plaintiff stockholder lacks a proper purpose or that his or her stated purpose is not the real purpose.

Aric Wu

Court: Certificate of Incorporation Doesn't Grant Preferred Stockholders Liquidation Preference

By Aric H. Wu |

A recent Chancery Court decision illustrates that courts are reluctant to imply preferred stockholder rights that are not clearly set forth in the documents containing the preferred stock terms.

Edward M. McNally

How to Open the Door to Chancery

By Edward M. McNally |

Sometimes more is not a good idea. That is the case when a complaint alleges multiple bases to invoke the jurisdiction of the Delaware Court of Chancery, but still fails to sustain that subject matter jurisdiction.

Barry M. Klayman and Mark E. Felger

Standing in Foreclosure Actions Requires Holding Both Mortgage and Note

By Barry M. Klayman and Mark E. Felger |

A divided Delaware Supreme Court recently held that a mortgage assignee must be entitled to enforce the underlying obligation that the mortgage secures in order to foreclose on the mortgage.

Brett McCartney

Chancery Holds That Deal Price Is Fair Value in Massive Appraisal Fight

By Brett M. McCartney |

In In re Appraisal of PetSmart, one of Delaware's largest appraisal litigations in history, the Delaware Court of Chancery held that the deal price in PetSmart Inc.'s going-private transaction was the best evidence of fair value.

Mezzanine Debt Versus Preferred Equity

By David Broderick and Brian Donnelly |

Mezzanine Debt versus Preferred Equity: which investment structure is utilized by the subordinate capital provider is often determined by the regulatory and other circumstances and objectives of the senior lender and not the preferences of the subordinate capital provider.

James S. Green Jr

'TC Heartland': High Court Reverses 30 Years of Patent Venue Law

By James S. Green Jr. |

In a highly anticipated opinion that many observers expect will have a significant impact on patent litigation, the U.S. Supreme Court unanimously ruled that a domestic corporation resides only in its state of incorporation for purposes of patent venue.

Albert Manwaring of Morris James

Structural Coercion in Stockholder Vote to OK Transaction Negated Cleansing Effect Under 'Corwin'

By Albert H. Manwaring IV |

Under a Delaware Supreme Court's decision, business judgment review applies to cleanse a fiduciary challenge to a noncontrol transaction that was approved by an uncoerced, fully informed, disinterested stockholder vote.

Albert H. Manwaring IV

Structural Coercion Negated Cleansing Effect Under 'Corwin'

By Albert H. Manwaring IV |

Under the Delaware Supreme Court's decision in Corwin v. KKR Financial Holdings, 125 A.3d 304 (Del. 2015), business judgment review applies to cleanse a fiduciary challenge to a noncontrol transaction that was approved by an uncoerced, fully-informed, disinterested stockholder vote.

Adam H. Offenhartz, Jefferson E. Bell and Anna Karamigios

When Do Derivative Claims "Survive" Mergers—'Massey II' Adds Clarity

By Adam H. Offenhartz, Jefferson E. Bell and Mark H. Mixon Jr. |

M&A practitioners are regularly faced with the question of whether derivative claims will survive a merger after which the plaintiff will no longer be a stockholder.

Barry M. Klayman and Mark E. Felger

Court Lacks Personal Jurisdiction Over Nonresident Blogger, Website Host

By Barry M. Klayman and Mark E. Felger |

The Delaware Superior Court has ruled on an issue over an allegedly defamatory article that caused injury to a Delaware corporation hosted on a website outside of Delaware.

Gregory Herrman

Observations in the Wake of Narrowing of Patent Venue in 'TC Heartland'

By S. Gregory Herrman |

In a recent unanimous decision that is still reverberating throughout the patent litigation world, the U.S. Supreme Court reversed the U.S. Court of Appeals for the Federal Circuit's broad interpretation of the patent venue statute, limiting a corporation's residence for the purpose of venue in patent cases to "only the state of incorporation."

Lewis H. Lazarus

Court of Chancery Dismisses Post-Closing Challenge to Merger Transaction

By Lewis H. Lazarus |

Stockholders who believe that a board breached its fiduciary duties in connection with information provided to stockholders asked to vote for a merger transaction can either seek to enjoin the transaction or seek damages post-closing.

Rupert M. Barkoff

Franchisees Sitting on My Board? Never!

By Rupert M. Barkoff |

Franchising columnist Rupert M. Barkoff writes: There are many situations today where a group or a constituency wants to make sure that it has a voice at the decision-making table by having a representative on its franchisor's board of directors—a so-called "constituency director." Is this a good or bad idea?

Ryan C. Cicoski and Jesse L. Noa

Recent Order Highlights Push for Trial Experience for New Attorneys

By Ryan C. Cicoski and Jesse L. Noa |

A 2017 standing order from U.S. Magistrate Judge Christopher Burke of the District of Delaware is part of an uptick in federal judges encouraging the participation of newer attorneys at trial.

Patricia A. Winston and Edward McNally, of Morris James

Where Is Delaware Corporate Litigation Going?

By Edward M. McNally and Patricia A. Winston |

There are always risks involved in buying a company. Until you are actually inside a company's operations, you can never be sure you know everything about it.

Jennifer H. Rearden, Jefferson E. Bell and Michael Marron

Del. Supreme Court Clarifies, Applies Choice of Law to Multistate Disputes

By Jennifer H. Rearden, Jefferson E. Bell and Michael Marron |

In a recent decision, the Delaware Supreme Court considered the "fundamental question" of whether "Delaware courts are required to treat insurance contracts that are part of a broad insurance program as legal documents with meaning that varies substantially based on where each claim happens to arise."

Barry M. Klayman and Mark E. Felger

Tribal Sovereign Immunity of Casinos in Preference Actions

By Barry M. Klayman and Mark E. Felger |

In a recent opinion, U.S. Bankruptcy Judge Christopher Sontchi of the District of Delaware addressed the interesting issue of the applicability and scope of the sovereign immunity of Indian tribes in the context of preference actions brought by a Chapter 11 trustee.

What to Consider When a US Public Company Acquires a Non-US Company

By By Jennifer V. Audeh and Corey R. Brown |

When it's time to sell a company, there are many financial and legal steps a target should consider regarding a merger or acquisition

Brett McCartney

Stockholders' Complaint Survives Chancery's 'Corwin' Analysis

By Brett M. McCartney |

After a series of successful applications of the Corwin doctrine in Delaware's Court of Chancery, a plaintiff has finally survived a motion to dismiss where Corwin was applied.

Clockwise, starting from top, Christopher B. Chuff, Joanna J. Cline, Douglass D. Herrmann, and James H.S. Levine

Boards Should Consider Adopting 'Director-Specific' Limits in Compensation Plans

By Christopher B. Chuff, Joanna J. Cline, Douglass D. Herrmann and James H.S. Levine |

A recent decision by the Delaware Court of Chancery serves as a reminder that boards of directors of Delaware corporations should consider amending their company's director compensation plans to include specific limits on the amount of compensation that a director may be awarded in a given year.

High Court May Shake Up 27 Years of Patent Venue Selection With 'TC Heartland'

By Alan R. Silverstein and Dominique A. Meyer |

The U.S. Supreme Court will soon decide whether the plain language of the patent venue statute—or the Federal Circuit's 27-year-old deviation from it—will dictate the appropriate venue for patent infringement litigation.

Shmuel Vasser and Andrew C. Harmeyer

'Millennium Lab': the Death Knell for Non-Consensual, Third-Party Releases?

By Shmuel Vasser and Andrew C. Harmeyer |

The D.C. District Court potentially has upended an assumption in bankruptcy courts, suggesting that in many cases, they lack that authority under Article III of the U.S. Constitution to enter a final order granting non-debtor, third-party releases, at least without the affected party's consent.

Kimberly A. Brown

Bankruptcy Court Upholds the Sanctity of the Final Order

By Kimberly A. Brown |

The U.S. Bankruptcy Court has denied a request by an Official Committee of Unsecured Creditors and its affiliated debtors-in-possession to reconsider and modify a final cash collateral order almost one year after its entry.

Robert B. Little and Louis J. Matthews

Supreme Court Suggests Caution for MLPs in Conflicted Transactions

By Robert B. Little and Louis J. Matthews |

The Delaware Supreme Court recently reviewed the limited partnership agreement of a master limited partnership in the context of a conflicted transaction.

Francis G.X. Pileggi

Removal of Director, Members of Nonstock Corporation Invalid

By Francis G.X. Pileggi, Justin M. Forcier and Alexandra Rogin |

The Delaware Court of Chancery recently held that a pro se defendant was not effectively removed as a director, officer or member of a Delaware nonstock corporation, Rainbow Mountain Inc.

Albert Manwaring of Morris James

Stockholder Vote Enjoined Over Banker's Financial Interest in Merger

By Albert H. Manwaring IV |

Investment bankers play a central role in the exploration, evaluation, selection and implementation of strategic alternatives for Delaware companies.

Court Rules That Professional Fees May Not Be Capped by Standard Carve-Out Provisions

By John C. Tishler and Tyler N. Layne |

Secured creditors and debtor-in-possession (DIP) lenders that rely on standard carve-out provisions to limit the impact of bankruptcy professional fees on their collateral would be well-advised to take notice of a U.S. Bankruptcy Court decision from earlier this year.

Lewis H. Lazarus

Court Gives Great Weight to Pre-Merger Negotiations

By Lewis H. Lazarus |

Contract interpretation is a staple of litigation in the Delaware Court of Chancery. Disputes over the meaning of commercial contracts, foundational documents such as certificates of incorporation or bylaws or agreements governing alternative entities such as limited liability companies or limited partnerships require the court to interpret language in contracts. So too do merger, stock purchase or sale of asset agreements. With the expansion of jurisdiction under Section 111(a)(2) of the Delaware General Corporation Law (DGCL) in 2016, disputes over the interpretation of agreements arising out of stock purchase and asset sale agreements may be expected to increase the number of cases requiring the court to interpret parties' agreements. The recent case of Shareholder Representative Services v. Gilead Sciences, C. A. No. 10537-CB (March 15), illustrates the methodology the court uses to interpret a contract and provides a primer for litigants seeking guidance on how the Court of Chancery resolves contract disputes.

Barry M. Klayman and Mark E. Felger

Delaware's Anti-SLAPP Statute Limited to Land Use Disputes

By Barry M. Klayman and Mark E. Felger |

In a rare case involving resort to a Delaware statute's legislative history, Vice Chancellor J. Travis Laster held that Delaware's anti-SLAPP statute is to be construed narrowly so as to be applicable only to public petition and participation in land use proceedings, and is not a broad legal protection against defamation claims.

P. Clarkson Collins Jr.

Del. Justices Award Attorney Fees Under Promissory Note Fee-Shifting Provisions

By P. Clarkson Collins Jr. |

Persuaded by the arguments of the appellant noteholders, the Delaware Supreme Court ruled that two fee-shifting provisions in the promissory notes entitled them to recover attorney fees the noteholders incurred filing suit to secure warrants issuable under the notes.