Justia Corporate Compliance Opinion Summaries

This case involved a claim for breach of the fiduciary duty of loyalty that stemmed from a dispute regarding assets of IFCT, a now defunct tech startup company founded by Stephen Marsh to develop potentially revolutionary micro fuel cell technology. The crux of plaintiff's argument was that the Director Defendants conducted an unfair and disloyal bidding process, whereby they favored the Echelon-backed bid and refused to follow up on or negotiate with other superior bids. As a result, IFCT missed its chance to sell its assets at the peak of their value and was forced to sell its assets at a discount in bankruptcy. Given that the Director Defendants have conceded the applicability of entire fairness review and given the fact-intensive nature of that review, the court found that the Director Defendants have not met their burden at this stage to achieve summary judgment against Encite. The court also found that material facts remained as to the liability of Echelon for aiding and abetting the alleged breach of fiduciary duty by the Director Defendants and therefore, the court denied Echelon's motion for summary judgment on that claim. The court finally found that material facts also remained regarding Echelon's third party claims, and so denied Marsh's motion for summary judgment. View "Encite, LLC v. Soni, et al." on Justia Law

This case involved a dispute over earn-out payments related to a merger between Viacom and Harmonix where plaintiff was one of the selling stockholders of Harmonix. Plaintiff sued on behalf of the selling stockholders, alleging that Viacom and Harmonix purposefully renegotiated the distribution contract with EA so as to reduce the earn-out payments payable to the Harmonix stockholders, and thus breached the covenant of good faith and fair dealing implied in the Merger Agreement. The court dismissed plaintiff's claim and held that it would be inequitable for the court to imply a duty on Viacom and Harmonix's part to share with the selling stockholders the benefits of a renegotiated contract addressing EA's right to distribute Harmonix products after the expiration of the earn-out period. View "Winshall v. Viacom Int'l, Inc., et al." on Justia Law

This matter came before the court on the basis of two competing motions related to a petition for the appointment of a receiver under 8 Del. C. 279 for Kraft-Murphy Company, Inc., a defunct Delaware corporation that had been dissolved for more than twelve years. The first motion was a motion to perfect service on the company brought by petitioners, who were claimants in various asbestos-related tort suits filed against the company in various jurisdictions in the mid-Atlantic region. The second motion was a motion to dismiss, filed by the company's insurers on behalf of the company. The court held that service of process could be perfected on the dissolved corporation and that petitioners conceivably could be able to show that a receiver should be appointed for the corporation to enable it to respond to claims brought against it, because the corporation's informal plan of dissolution contemplated using its insurance contracts for that purpose. Therefore, the court granted petitioners' motion to perfect service and denied the company's motion to dismiss. View "IMO Krafft-Murphy Co., Inc." on Justia Law

Plaintiff brought this action under 8 Del. C. 220 to inspect certain books and records of defendant. More specifically, plaintiff sought to inspect one document that defendant refused voluntarily to disclose: an interim report (Covington Report) prepared by defendant's outside counsel in connection with an internal investigation into sexual harassment allegations made against defendant's former CEO. The Court of Chancery denied plaintiff relief and held that plaintiff had not demonstrated a need to inspect the Covington Report sufficient to overcome the attorney-client privilege and work product immunity protections. The court affirmed, but on the alternative ground that plaintiff had not shown that the Covington report was essential to his stated purpose, which was to investigate possible corporate wrongdoing. View "Espinoza v. Hewlett-Packard Co." on Justia Law

This appeal arose out of an action commenced by the New York State Attorney General against defendants, seeking injunctive and monetary relief as well as civil penalties for violations of New York's Executive Law and Consumer Protection Act, Executive Law 63(12) and General Business Law 349, as well as the common law. The primary issue on appeal was whether federal law preempted these claims alleging fraud and violations of real estate appraisal independence rules. The court held that the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) governed the regulation of appraisal management companies and explicitly envisioned a cooperative effort between federal and state authorities to ensure that real estate appraisal reports comport with the Uniform Standards of Professional Appraisal Practice (USPAP). The court perceived no basis to conclude that the Home Owners' Loan Act (HOLA) itself or federal regulations promulgated under HOLA preempted the Attorney General from asserting both common law and statutory state law claims against defendants pursuant to its authority under Executive Law 63(12)and General Business Law 349. Thus, defendants' motion to dismiss on the grounds of federal preemption was properly denied. The court also agreed with the Appellate Division that the Attorney General had adequately pleaded a cause of action under General Business Law 349 and that the statute provided him with standing. Accordingly, the order of the Appellate Division was affirmed. View "People v First Am. Corp." on Justia Law

George Christian filed petitions for temporary injunction and declaratory relief, alleging that the clerk of the State Corporation Commission (SCC) failed to provide requested public records relating to all overpayments or unused payments that the Commission's authority to order a refund had lapsed, and any complaints or grievances arising therefrom. The SCC dismissed the petition, finding (1) no controversy existed given the clerk's timely response to Christian's request for records; and (2) because no controversy existed, it was not necessary to address Christian's other arguments, including whether the Virginia Freedom of Information Act (VFOIA) was applicable to the SCC. The Supreme Court affirmed, holding (1) a live controversy persisted because Christian would be entitled to recover his costs and fees if he prevailed; (2) however, the VFOIA was inapplicable to the SCC; and (3) therefore, Christian's assignments of error were resolved or rendered moot. View "Christian v. State Corp. Comm'n" on Justia Law

This case involved the interpretation of two provisions in a merger agreement between defendant corporation and a company whose former stockholders were represented by plaintiff. The two provisions at issue dealt with contingent payments due in certain circumstances from defendant to those stockholders. The court found that the language of the merger agreement was unambiguous, and that per its provisions, defendant's obligations under the merger agreement were assumed by the acquiring company, thus avoiding the acceleration of the remaining revenue contingent payments. Therefore, the court denied plaintiff's motion for summary judgment and granted summary judgment in favor of defendant. View "Coughlan v. NXP B.V." on Justia Law

Plaintiff contended that holders of common stock of Wesco were entitled to appraisal rights under Section 262 of the General Corporation Law, 8 Del. 262, in connection with a forward triangular merger among Wesco, its parent, and an acquisition subsidiary. The parties cross-moved for partial summary judgment on the availability of appraisal rights. The court held that because Wesco common stockholders were not required to accept consideration other than stock listed on a national securities exchange and cash in lieu of fractional shares, they were not entitled to appraisal rights. Accordingly, summary judgment on this issue was entered in favor of defendants. View "Krieger v. Wesco Financial Corp., et al." on Justia Law

This case was a class action brought on behalf of the former shareholders of Alloy, challenging a going-private transaction (Merger) that cashed out the company's public shareholders for allegedly inadequate consideration. Although the shareholders voted to approve the Merger, two of Alloy's nine directors retained their senior management positions at and received an equity interest in the now privately-held company. The former shareholders claimed that those two directors thus unfairly extracted for themselves an opportunity to share in Alloy's continued growth without offering the same opportunity to the public shareholders. Regarding the alleged breaches of fiduciary duty by the directors in negotiating and approving the Merger, the court found that the complaint failed to state a claim for damages. The court also found that the complaint failed to allege sufficient facts to support an inference that the alleged disclosure violations were the product of anything other than good faith omissions by the directors who authorized them. Because of the exculpatory provision of Alloy's certificate of incorporation, the complaint thus failed to state a claim for damages against the Alloy directors for beach of their duty of disclosure. Finally, the court also dismissed the claims for aiding and abetting against defendants who were not affiliated with Alloy. Therefore, the court granted defendants' motions to dismiss in all respects. View "In re Alloy, Inc. Shareholder Litigation" on Justia Law

Plaintiff, individually and as trustee of the Peter R. Brinckerhoff Revocable Trust, was the holder of limited partnership units (LP units) of Enbridge Energy Partners, L.P. (the Partnership). Plaintiff, both derivatively, on behalf of the Partnership, and directly, on behalf of the public holders of the Partnership LP units, brought various claims against defendants. Defendants subsequently moved to dismiss all of plaintiff's claims. The court held that Count I was dismissed because plaintiff failed to plead facts suggesting that defendants acted in bad faith; Count II and IV were dismissed for failure to state a claim; and Count III was dismissed because plaintiff could not plead an implied covenant claim. View "Brinckerhoff v. Enbridge Energy Co., Inc., et al." on Justia Law