Justia Corporate Compliance Opinion Summaries

This putative class action was before the court on an application for the approval of settlement of the class's claims for, among other things, breaches of fiduciary duty in connection with a merger of two publicly traded Delaware corporations. The target's largest stockholder, which acquired the vast majority of its shares after the challenged transaction was announced, objected to the proposed settlement. In addition, defendants' and plaintiffs' counsel disagreed about the appropriate level of attorneys' fees that should be awarded. The court certified the class under Rules 23(a), (b)(1), and (b)(2) with NOERS as class representative; denied BVF's request to certify the class on only an opt out basis; approved the settlement as fair and reasonable; and awarded attorneys' fees to plaintiffs' counsel in the amount of $1,350,000, inclusive of expenses. View "In re Celera Corp. Shareholder Litigation" on Justia Law

This was an action under 8 Del. C. 291 for the appointment of a receiver for an insolvent, closely held corporation, MHI. MHI intended to transfer all of its assets and liabilities to a newly formed corporation, NewCo, in exchange for 100% of NewCo's stock. Then, NewCo would pay off the federal tax liability of the appraised value of MHI's tangible assets and MHI would dissolve, distributing it's sole asset - NewCo stock - to its shareholders pro rata. Under the proposed transaction, neither NewCo's business nor its capital structure would be any different than MHI's, except for the discharge of a $1.9 million liability. The board and a major holder of nonvoting stock disagreed, however, on how to implement this reorganization. The court concluded that there was exigency in this case and appointed a receiver to ensure that MHI maximized the company's value for its stakeholders by effecting the settlement with the IRS, if possible, and then, making a recommendation as to the disposition, if any, of MHI's remaining assets.View "Badii v. Metropolitan Hospice, Inc." on Justia Law

Plaintiff appealed the district court's dismissal of his complaint against defendant Justin Korn. Plaintiff, a former shareholder and officer of defendant GVC, sought indemnification from GVC after successfully defending a suit brought by GVC in Delaware, and also sought to pierce the corporate veil to hold Korn accountable for any resulting judgment. The district court entered a stipulated judgment against GVC, but dismissed the complaint against Korn. Because the district court erroneously held that plaintiff could not pursue both indemnification and an alter-ego veil-piercing theory, the court vacated the order of dismissal and remanded for further proceedings. View "Kertesz v. General Video Corp." on Justia Law

This action arose out of the merger of American Surgical with merger Sub, a wholly-owned subsidiary of Holdings, which, in turn, was an affiliate of Great Point. Plaintiff brought this purported class action to challenge the merger and alleged that American's Surgical Board and its Control Group breached their fiduciary duties in connection with the merger. Plaintiff also alleged that the Purchasing Entities aided and abetted those breaches of fiduciary duty. The court granted defendants' motion to dismiss Cause of Action IV, which alleged that the Purchasing Entities aided and abetted the breaches of fiduciary duty committed by the members of the Control Group and Board. The court, however, denied the motion to dismiss as to Causes of Action I, II, and III. View "Frank v. Elgamel, et al." on Justia Law

Two lawsuits alleging violations of the federal securities laws were filed against Hecla Mining Company in federal court. In this action, Plaintiffs, alleged holders of a number of Hecla shares, sued derivatively to recover on behalf of Hecla the damages that the Company had suffered and will suffer from the federal securities actions and the safety violations. Defendants, several individuals associated with the Company, moved to dismiss for failure to make demand or adequately plead demand futility. The Court of Chancery granted the motion and dismissed the complaint with prejudice and without leave to amend as to the named plaintiff, holding that Plaintiffs failed to provide adequate representation for Hecla. The Court noted, however, that the dismissal of Plaintiffs' complaint should not have preclusive effect on the efforts of other stockholders to investigate potential claims and, if warranted, to file suit. View "South v. Baker" on Justia Law

This action principally challenged the purported removal of Ak-Feel, a Delaware limited liability company, as the sole managing member of Oculus, also a Delaware limited liability company. Section 18-109(a) of the Delaware Limited Liability Company Act (LLC Act), 6 Del. C. 18-109(a), empowered the court to exercise personal jurisdiction over NHA, a New York limited liability company, for purposes of the courts asserting breaches of duty to Oculus. Once jurisdictionally present in Delaware for these claims, NHA was subjected to the court's jurisdiction for the other claims as well, all of which arose out of a common nucleus of operative fact and related to actions NHA took purportedly on behalf of Oculus. The individual defendants, by contrast, have raised sufficient questions about the court's jurisdictional reach to warrant deferring a ruling on the motion pending jurisdictional discovery and further briefing. Therefore, the motion to dismiss was denied.View "Feeley, et al. v. NHAOCG, LLC, et al." on Justia Law

Stockholder plaintiffs sought a preliminary injunction to enjoin a merger between El Paso and Kinder Morgan. The CEO of El Paso undertook sole responsibility for negotiating the sale of El Paso to Kinder Morgan in the merger but did not disclose to El Paso's Board his interest in working with other El Paso managers in making a bid to buy El Paso's exploration and production (E&P) business. Further, the Board and management of El Paso relied in part on advice given by a financial advisor, Goldman Sachs, which owned 19% of Kinder Morgan and controlled two Kinder Morgan board seats. The court concluded that plaintiffs have a reasonable likelihood of success in proving that the merger was tainted by disloyalty. Because, however, there was no other bid on the table and the stockholders of El Paso, as the seller, have a choice whether to turn down the merger themselves, the balance of harms counseled against a preliminary injunction. Although the pursuit of a monetary damages award could not be likely to promise full relief, the record did not instill in the court the confidence to deny, by grant of an injunction, El Paso's stockholders from accepting a transaction that they could find desirable in current market conditions, despite the disturbing behavior that led to its final terms.View "In Re El Paso Corporation Shareholder Litigation" on Justia Law

This derivative action challenged a series of related-party transactions. Defendants moved for judgment on the pleadings, contending that laches barred the bulk of the claims. Defendants were partly right, laches barred the challenges to certain stock options granted in 2004 and 2005. Laches also barred a portion of the challenge to compensation received under certain employment agreements and rent-free sublease. With respect to these claims, the doctrine applied to the extent the compensation was paid and rent-free space provided before March 18, 2008. The doctrine did not apply to the extent that compensation was paid and rent-free space provided on or after March 18, 2008. On a final set of claims, the court granted plaintiffs leave to replead because although the complaint alleged facts sufficient to invoke the doctrine of equitable tolling, the pleading failed to identify when plaintiffs subsequently found out about the self-dealing transactions.View "Buerger, et al. v. Apfel, et al." on Justia Law

The Court of Chancery held that Defendants-Appellants, Americas Mining Corporation (AMC), a subsidiary of Southern Copper Corporation's (Southern Peru) controlling shareholder, and affiliate directors of Southern Peru, breached their fiduciary duty of loyalty to Southern Peru and its minority stockholders by causing Southern Peru to acquire the controller’s 99.15% interest in a Mexican mining company, Minera Mexico, S.A. de C.V., for much more than it was worth (at an unfair price). The Plaintiff challenged the transaction derivatively on behalf of Southern Peru. The Court of Chancery found the trial evidence established that the controlling shareholder through AMC, "extracted a deal that was far better than market" from Southern Peru due to the ineffective operation of a special committee. To remedy the Defendants' breaches of loyalty, the Court of Chancery awarded the difference between the value Southern Peru paid for Minera ($3.7 billion) and the amount the Court of Chancery determined Minera was worth ($2.4 billion). The Court of Chancery awarded damages in the amount of $1.347 billion plus pre- and postjudgment interest, for a total judgment of $2.0316 billion. The Court of Chancery also awarded the Plaintiff's counsel attorneys' fees and expenses in the amount of 15% of the total judgment, which amounts to more than $304 million. Defendants raised five issues on appeal pertaining to their perceived errors at trial, the valuation of the shares and companies involved and the awarding of attorneys fees. Upon review, the Supreme Court determined that all of the Defendants' arguments were without merit. Therefore, the judgment of the Court of Chancery was affirmed. View "Americas Mining Corp. v. Theriault Southern Copper Corp." on Justia Law

Atlantic, a New Jersey pipe foundry, and four of its managers were convicted of conspiring to commit environmental pollution and worker safety violations, attempting to cover up or impede federal investigation of those violations, and violations of the Clean Water Act (33 U.S.C. 1251) and the Clean Air Act (42 U.S.C. 7413(c)). Defendants illegally pumped contaminated water into storm drains that drained into the Delaware River; unlawfully burned 50-gallon drums of paint waste in a cupola and emitted the fumes into the air; and attempted to cover up work-related accidents at its facility, one of which resulted in the death of an employee who was run-over by a forklift. The district court imposed sentences of 70, 41, 30 and six months’ imprisonment on the managers and applied the Alternative Fines Act, 18 U.S.C. 3571(c)(1), rather than the CWA and CAA, and fined Atlantic the maximum penalty of $500,000 per violation on conspiracy, four counts of obstruction, eight CWA counts, and one CAA count for a total fine of $8 million. It also sentenced Atlantic to 4 years’ probation, with a court-ordered monitor to ensure regulatory compliance. The Third Circuit affirmed, rejecting challenges to evidentiary rulings, jury instructions, and the sentences. View "United States v. Maury" on Justia Law