Recent Corporate and Alternative Entity Decisions from the Delaware Courts
Xu Hong Bin, et al. v. Heckmann Corp., et al., C.A. No. 4637-CC, Chandler, C. (Del. Ch. Oct. 26, 2009). The Court granted the plaintiffs’ motion to dismiss defendants’ counter-claims based on breach of contract and conversion as failing to state a claim, but denied the dismissal of defendant’s breach of fiduciary duty counter-claim. The Court found that there were disputed issues of fact as to whether a contract between the parties which plaintiff claimed contained a release of the fiduciary duty claim, was enforceable.
Total Holdings USA, Inc. v. Curran Composites, Inc., C.A. No. 4494-VCS, Strine, V.C. (Del. Ch. Oct. 9, 2009). The Court denied defendant Curran Composites’ motion to dismiss for lack of personal jurisdiction, and held that Section 15-114 of Delaware’s Revised Uniform Partnership Act provided a basis for the court to exercise personal jurisdiction over Curran as a non-resident partner of a Delaware general partnership. The Court found, among other matters, that the general partnership agreement clearly chose Delaware law to govern, and the controversy involved a dispute over the meaning of the partnership agreement.
In Re John Q. Hammons Hotels Inc. Shareholder Litig., C.A. No. 758-CC, Chandler, C. (Del. Ch. Oct. 2, 2009). Plaintiffs brought this class action seeking damages for the allegedly inadequate price paid for the publicly held Class A shares of John Q. Hammons Hotels, Inc. (the “Company”) arising out of a merger of the Company with a third party. Plaintiffs alleged that the consideration paid in the merger to John Hammons, the Company’s controlling stockholder, for his Class B stock unfairly favored him at the expense of the Class A stockholders, and claimed that Hammons and the Company board breached their fiduciary duties. The Court, on cross-motions for summary judgment, held that although the use of procedural protections for the minority shareholders could have resulted in the application of the business judgment rule, the procedures used were not sufficient and therefore the entire fairness standard of review was appropriate. The Court, however, denied the motions for summary judgment as to the fairness of price and fair dealing because of the existence of material factual issues.
In Re NYMEX Shareholder Litig.; Greene v. New York Mercantile Exchange, et al., C.A. Nos. 3621 and 3835, Noble, V.C. (Del. Ch. Sept. 30, 2009). These actions challenged the acquisition of NYMEX Holdings, Inc. by CME Group, Inc. Claims were brought by former shareholders of NYMEX and Class A Members (i.e. “seat holders”) of the NYMEX Exchange, a subsidiary of NYMEX. The Court granted defendants’ motion to dismiss the shareholder breach of fiduciary claims, finding that NYMEX’s 102(b)(7) exculpating provision protected the NYMEX directors from liability for duty of care breaches, that the shareholder plaintiffs did not sufficiently plead a breach of the duty of loyalty claim, and failed to sufficiently support their other breach of fiduciary claims. The Court also dismissed certain derivative claims which were brought as direct claims. The Court further dismissed the Class A Member fiduciary duty claims finding that the NYMEX Defendants did not owe fiduciary duties to the Class A Members. The Court also dismissed the remaining Class A Member claims based on a provision of the NYMEX Exchange bylaws.
City of Westland Police & Fire Retirement System v. Axcelis Technology, Inc., C.A. No. 4473-VCN, Noble, V.C. (Del. Ch. Sept. 28, 2009). The Court dismissed plaintiffs’ action under Section 220 of the General Corporation Law of Delaware for books and records of the defendant company, finding that the plaintiff failed to demonstrate a credible basis from which the Court could infer mismanagement, waste or wrongdoing as required to state a proper demand for books and records. The Court specifically noted as to one of plaintiffs’ claims, that plaintiff must point to something other than a precipitous drop in stock price to be granted Section 220 inspection rights.
Zrii, LLC v. Wellness Acquisition Group, Inc., C.A. No. 4374 – VCP, Parsons, V.C. (Del. Ch. Sept. 21, 2009). Plaintiff, a limited liability company, brought an action against members of the Company’s executive management team and contractors who were distributors of the Company’s products, for, among other matters, breach of contract and breach of fiduciary duty. In this decision, the Court of Chancery considered and granted Plaintiff’s motion for a preliminary injunction. Specifically, the Court found that Plaintiff had shown a reasonable probability of success on its civil conspiracy claim, its fiduciary duty claim, and its claim that defendants breached certain non-solicitation provisions in their contracts with the Company. The Court also found that the Company would suffer irreparable harm if defendants were not enjoined from recruiting the Company’s distributors and that the balance of equities favored Plaintiff. Thus, the Court granted an injunction against defendants for 3 months, enjoining them from disclosing trade secret information and recruiting Company distributors.
Summaries prepared by The Delaware Counsel Group LLP® and submitted by Elissa Optsbaum Habbart, Esq.
If you would like to review a complete copy of the decisions or have any questions regarding this article, please contact The Delaware Counsel Group, LLP® by calling 302.576.9600. This article should not be relied upon as legal advice. Copyright © 2008 The Delaware Counsel Group, LLP.
Delaware Laws Governing Business Entities The essential resource for legal professionals who need quick and easy access to Delaware’s Annotated Business Statutes.
