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Stockholder-plaintiff KT4 Partners LLC appealed the Court of Chancery’s post-trial order granting in part and denying in part KT4’s request to inspect various books and records of appellee Palantir Technologies Inc., a privately held technology company. The Court of Chancery found that KT4 had shown a proper purpose of investigating suspected wrongdoing in three areas: (1) “Palantir’s serial failures to hold annual stockholder meetings”; (2) Palantir’s amendments of its Investors’ Rights Agreement in a way that “eviscerated KT4’s (and other similarly situated stockholders’) contractual information rights after KT4 sought to exercise those rights”; and (3) Palantir’s potential violation of two stockholder agreements by failing to give stockholders notice and the opportunity to exercise their rights of first refusal, co-sale rights, and rights of first offer as to certain stock transactions. The Court ordered Palantir to produce the company’s stock ledger, its list of stockholders, information about the company’s directors and officers, year-end audited financial statements, books and records relating to annual stockholder meetings, books and records relating to any cofounder's sales of Palantir stock. The Court otherwise denied KT4's requests, including a request to inspect emails related to Investors' Rights Agreement amendments. Both sides appealed, but the Delaware Supreme Court was satisfied the Court of Chancery did not abuse its discretion with respect to all but two issues: (1) denying wholesale requests to inspect email relating to the Investors' Rights Agreement; (2) and requests to temper the jurisdictional use restriction imposed by the court. "Given that the court found a credible basis to investigate potential wrongdoing related to the violation of contracts executed in California, governed by California law, and among parties living or based in California, the basis for limiting KT4’s use in litigation of the inspection materials to Delaware and specifically the Court of Chancery was tenuous in the first place, and the court lacked reasonable grounds for denying the limited modifications that KT4 requested." View "KT4 Partners LLC v. Palantir Technologies, Inc." on Justia Law

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This case involved questions of how the attorney-client privilege should apply in the context of derivative litigation. The nonprofit corporations involved in this matter were the Pittsburgh History and Landmarks Foundation (“the Foundation”) and its subsidiary, the Landmarks Financial Corporation (“the Corporation”), which managed the Foundation’s endowment. Plaintiffs were five former members of the Boards of Trustees of the Foundation and the Corporation who alleged they were improperly and ineffectively removed from the Boards in an attempt to thwart their oversight of the Foundation’s president, whom they believed was engaging in actions that were improper and not in accord with the Foundation’s mission. The Foundation’s Board created a Governance Task Force to review various practices of the Foundation; the Task Force recommended that both Boards be reduced substantially in number. The Foundation Board approved this recommendation and removed all trustees then serving from both Boards; significantly smaller boards were elected and as a result of these consolidations, and Derivative Plaintiffs lost their seats on the Boards. In accord with standard procedures for bringing a derivative action adopted by the Pennsylvania Supreme Court in Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997). The Supreme Court rejected the Commonwealth Court’s adoption of a qualified attorney-client privilege as set forth in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970), which the Supreme Court viewed as inconsistent with prior Pennsylvania caselaw emphasizing predictability in the application of the attorney-client privilege. However, the Commonwealth Court’s decision not to apply the fiduciary or co-client exceptions to the attorney-client privilege under the facts of this case was affirmed. The matter was remanded for further al court and the Commonwealth Court and remanded the matter to the trial court for further proceedings. View "Pgh History v. Ziegler" on Justia Law

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The Mississippi Supreme Court previously unanimously held that KPMG, LLP could not enforce arbitration agreements attached to five annual engagement letters with Singing River Health System (Singing River), a community hospital, because the terms and condition of the letters were not sufficiently spread upon the hospital board’s minutes to create an enforceable contract. In this appeal, KPMG sought to enforce the very same arbitration agreements attached to the very same engagement letters with Singing River - this time against Jackson County, Mississippi, which acted as Singing River’s bond guarantor. For the same reason the Supreme Court affirmed the trial court’s denial of KPMG’s motion to compel arbitration in KPMG, LLP v. Singing River Health System, the Court reversed and remanded the trial court’s grant of KPMG’s motion to compel arbitration in this case. View "Jackson County, Mississippi v. KPMG, LLP" on Justia Law

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Two of Oxbow Carbon LLC’s minority Members, Crestview Partners, L.P. and Load Line Capital LLC, attempted to force a sale of Oxbow over the objection of Oxbow’s majority Members, William Koch and his affiliates (the “Koch Parties”). This dispute centered on the proper interpretation of the governing Third Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”). Although the Court of Chancery found that the minority investors affiliated with Koch, Ingraham Investments LLC and Oxbow Carbon Investment Company LLC (collectively, the “Small Holders”), could block the sale unless it met certain payment conditions, the court nonetheless found a contractual gap in the LLC Agreement because the Board did not specify the terms and conditions under which the Small Holders acquired their units. Using the implied covenant of good faith and fair dealing, the Court of Chancery filled that gap by implying a “Top-Off” option for the Small Holders’ units, effectively stripping them of the right to block the proposed transaction. On appeal, Oxbow claimed that: (1) the trial court improperly applied the implied covenant; (2) there was no contractual gap; (3) Oxbow did not breach the LLC Agreement; and (4) the court’s rulings on remedies were made in error. The Delaware Supreme Court determined the Court of Chancery correctly interpreted the LLC Agreement’s plain language, but erred by finding a contractual gap concerning the admission of the Small Holders. Thus, the Court affirmed in part, reversed in part, and remanded the Court of Chancery’s February 12, 2018, decision, and vacated its August 1, 2018, decision on remedies. View "Oxbow Carbon & Minerals Holdings, Inc., et al. v. Crestview-Oxbow Acquisition, LLC, et al." on Justia Law

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Consumer banks Hudson and M&T merged. Hudson’s shareholders claimed they violated the Exchange Act, 15 U.S.C. 78n(a), and SEC Rule 14a-9, by omitting facts concerning M&T’s regulatory compliance from their joint proxy materials: M&T’s having advertised no-fee checking accounts but later switching those accounts to fee-based accounts (consumer violations) and deficiencies in M&T’s Bank Secrecy Act/anti-money laundering compliance program. They argued that because the proxy materials did not discuss M&T’s noncompliant practices, M&T failed to disclose significant risk factors facing the merger, rendering M&T’s opinion statements regarding its adherence to regulatory requirements and the prospects of prompt approval of the merger misleading under Supreme Court precedent (Omnicare). The Third Circuit reversed, in part, the dismissal of the suit. The shareholders pleaded actionable omissions under the SEC Rule but failed to do so under Omnicare. The joint proxy had to comply with a provision that requires issuers to “provide under the caption ‘Risk Factors’ a discussion of the most significant factors that make the offering speculative or risky.” It would be reasonable to infer the consumer violations posed a risk to regulatory approval of the merger, despite cessation of the practice by the time the proxy issued. The disclosures were inadequate as a matter of law. View "Jaroslawicz v. M&T Bank Corp" on Justia Law

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1st Century was a Delaware corporation headquartered in Los Angeles; its shares were publicly traded on the NASDAQ. 1st Century and Midland announced merger plans. Midland was to acquire 1st Century for $11.22 in cash per share, a 36.3 percent premium over 1st Century’s closing share price on March 10, 2016. The merger was subject to approval by the holders of a majority of 1st Century’s outstanding shares. A shareholder vote on the proposed merger was scheduled. 1st Century’s certificate of incorporation authorized its directors “to adopt, alter, amend or repeal” the company’s bylaws, “subject to the power of the stockholders of the Corporation to alter or repeal any Bylaws whether adopted by them or otherwise.” 1st Century’s board of directors exercised that power when it approved the merger agreement, adding a forum selection bylaw providing that, absent the corporation’s written consent, Delaware is “the sole and exclusive forum for” intra-corporate disputes, including any action asserting a breach of fiduciary duty claim. The trial court stayed a putative shareholder class action, concluding that the bylaw’s forum selection clause was enforceable. The court of appeal affirmed, holding that a forum selection bylaw adopted by a Delaware corporation without stockholder consent is enforceable in California. View "Drulias v. 1st Century Bancshares, Inc." on Justia Law

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Maynard, Cooper & Gale, P.C. ("MCG"), petitioned the Alabama Supreme Court for a writ of mandamus to direct the Jefferson Circuit Court to vacate its July 30, 2018 order denying MCG's motion for a change of venue and to enter an order transferring the underlying action to the Madison Circuit Court on the basis of the doctrine of forum non conveniens. In late 2017, AAL USA, Inc. ("AAL"), a Delaware corporation doing business in Alabama, and Oleg Sirbu, a resident of Dubai, United Arab Emirates (collectively, "the plaintiffs"), sued MCG, asserting a claim of legal malpractice pursuant to the Alabama Legal Services Liability Act ("the ALSLA"), and seeking, among other relief, disgorgement of all attorney fees paid by the plaintiffs to MCG. AAL maintained, repaired, and overhauled helicopters through various government contracts or subcontracts on United States military bases. MCG represented the plaintiffs from 2014 through October 28, 2016; two MCG attorneys, Jon Levin and J. Andrew Watson III, were shareholders of MCG whose allegedly wrongful conduct was performed within the line and scope of their employment with MCG. The events giving rise to this litigation began in September 2016, when AAL received a "base-debarment" letter notifying it that it no longer had access to certain military bases outside the continental United States. MCG chief financial officer Keith Woolford forwarded this letter to MCG, and, according to the plaintiffs, MCG "immediately embarked in a central role in [MCG CEO Paul] Daigle's and Woolford's scheme to steal the assets of AAL." The complaint alleged that Levin worked closely with Woolford and Daigle to draft the APA pursuant to which Black Hall Aerospace, Inc., Daigle, and Woolford would purchase all of AAL's assets, as a way to cure the base-debarment problem. The plaintiffs alleged that MCG knew that the APA would "gut" the plaintiffs –- its current clients –- while simultaneously benefiting Daigle, Woolford, and BHA –- other clients of MCG -- and that this "clear and irreconcilable conflict of interest ... was never disclosed to [the plaintiffs]." The Alabama Supreme Court concluded MCG carried its burden of showing that Madison County's connection to the action was strong and that Jefferson County's connection to the action was weak. Thus, the circuit court exceeded its discretion in refusing to transfer the case to the Madison Circuit Court in the interest of justice. MCG's petition for a writ of mandamus was granted. View "Ex parte Maynard, Cooper & Gale, P.C." on Justia Law

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Former shareholders alleged that Altisource and several of its officers (collectively AAMC) inflated the price of its stock through false and misleading statements. When these mistruths were revealed to the market, they claimed, the price of AAMC’s stock plummeted, costing shareholders billions of dollars. The district court dismissed the complaint, concluding that Plaintiffs failed to satisfy the requirements of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u– 4. The Third Circuit affirmed. Plaintiffs failed to adequately plead three elements of a Rule 10b-5 claim: a material misrepresentation (or omission), scienter, and loss causation, with “particularity” as required by PSLRA. The economic harm suffered by AAMC’s investors is "regrettable," but plaintiffs failed to plausibly allege that this harm arose from fraud. When a stock experiences the rapid rise and fall that occurred here, it will not usually prove difficult to mine from the economic wreckage a few discrepancies in the now-deflated company’s records. View "City of Cambridge Retirement System v. Altisource Asset Management Corp." on Justia Law

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Olagues is a self-proclaimed stock options expert, traveling the country to file pro se claims under section 16(b) of the Securities and Exchange Act of 1934, which permits a shareholder to bring an insider trading action to disgorge “short-swing” profits that an insider obtained improperly. Any recovery goes only to the company. In one such suit, the district court granted a motion to strike Olagues’ complaint and dismiss the action, stating Olagues, as a pro se litigant, could not pursue a section 16(b) claim on behalf of TimkenSteel because he would be representing the interests of the company. The Sixth Circuit affirmed that Olagues cannot proceed pro se but remanded to give Olagues the opportunity to retain counsel and file an amended complaint with counsel. View "Olagues v. Timken" on Justia Law

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The question before the Delaware Supreme Court in this case was whether the Court of Chancery properly applied Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) by reading it as: (1) allowing for the application of the business judgment rule if the controlling stockholder conditions its bid on both of the key procedural protections at the beginning stages of the process of considering a going private proposal and before any economic negotiations commence; and (2) requiring the Court of Chancery to apply traditional principles of due care and to hold that no litigable question of due care exists if the complaint fails to allege that an independent special committee acted with gross negligence. In the Supreme Court's previous affirmance of the Court of Chancery in Swomley v. Schlecht, 128 A.3d 992 (Del. 2015), the Court held that an interpretation of MFW based on these principles was correct. Accordingly, the Court affirmed. View "Flood v. Synutra International, Inc., et al." on Justia Law