Duane Morris Delaware Business Law

November 7, 2014November 7, 2014 by Christopher M. Winter

Delaware Supreme Court Finds Secured Lender’s Subjective Intent Irrelevant to Effect of UCC Termination Statement

The subjective intent of a secured lender is not relevant to a determination of whether a termination statement was effective under the Delaware Uniform Commercial Code (“UCC”) to terminate the secured lender’s perfected security interest, the Delaware Supreme Court has ruled.

The Delaware Supreme Court considered the issue as a question certified to it by the US Court of Appeals for the Second Circuit in In re: Motors Liquidation Company, 755 F.3d 78, 86 (2d Cir. 2014). The opinion serves as a reminder (and cautionary tale) for agents, lenders and their counsel to closely scrutinize not only transaction documents, but also financing statements and termination statements being filed as part of a closing. Continue reading “Delaware Supreme Court Finds Secured Lender’s Subjective Intent Irrelevant to Effect of UCC Termination Statement”

August 29, 2014September 10, 2014 by Richard L. Renck

Corporations Don’t Independently Owe Fiduciary Duties to Stockholders

On August 7, 2014, Vice Chancellor Glasscock issued a letter opinion in the matter Buttonwood Tree Value Partners, L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG that is not attention-grabbing because it wrestles with some nuanced topic du jure of Delaware corporate law, but rather because it deals nearly entirely with the rather pedestrian, but not often explicated, principal that a Delaware corporation does not independently owe its stockholders fiduciary duties. Rather, fiduciary duties are owed to the stockholders (and the company) by the directors and officers who are the actual actors on behalf of the company. Continue reading “Corporations Don’t Independently Owe Fiduciary Duties to Stockholders”

August 25, 2014September 10, 2014 by Richard L. Renck

Fee-Shifting Corporate Bylaws–The Judicial Challenges Begin

As discussed in a previous post, the Delaware General Assembly has tabled its consideration of a bill that would ban fee-shifting bylaws for traditional corporations until the next legislative session. This legislative push followed the Delaware Supreme Court’s holding, in responding to certified questions of law, that “fee shifting provisions in a non-stock corporation’s bylaws can be valid and enforceable under Delaware law”. See ATP Tour, Inc., et al. v. Deutscher Tennis Bund (German Tennis Federation), et al., No. 534, 2013 (Del. Supr. May 8, 2014). The fee-shifting bylaws being considered are designed to shift the company’s costs (including attorneys’ fees) of successfully defending against litigation prosecuted by a company’s stockholders to the stockholder plaintiff. As one might imagine, such a scenario might be seen as a “game changer” with regard to shareholder representative litigation.

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June 26, 2014August 25, 2014 by Christopher M. Winter

Delaware Fee-Shifting Bill Shelved For 2014

A joint resolution of the Delaware State Senate and House of Representatives, with the approval of Governor Markell, has shelved a bill to ban Delaware stock corporations from adopting bylaw provisions to shift attorneys’ fees and expenses in corporate litigation to unsuccessful plaintiffs.

The bill was drafted and approved by the Delaware State Bar Association and presented to the General Assembly following the May 8, 2014, en banc response of the Delaware Supreme Court to certified questions of law from the U.S. District Court for the District of Delaware in ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), et al., No. 534, 2013 (Del. May 8, 2014). The Supreme Court stated in ATP that a “fee shifting” bylaw provision in a non-stock corporation’s bylaws “can be valid and enforceable under Delaware law.” The bylaw at issue would shift the company’s defense fees and costs to a member who had sued the company (or any other member) and was unsuccessful in “substantially achiev[ing], in substance and amount, the full remedy sought” in the litigation.

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May 28, 2014September 10, 2014 by Richard L. Renck

Recent Developments in Business and Commercial Courts

While once somewhat of a novelty, the creation and adoption of specialized business or commercial courts—designed to adjudicate complex business and commercial disputes in an efficient manner to meet the needs of a jurisdiction’s corporate and commercial citizens—continues to mature. Moreover, the resources available discussing these specialized courts or dockets are constantly expanding.

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May 19, 2014August 25, 2014 by Christopher M. Winter

Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)

A proposed amendment to the Delaware statute of limitations for contract claims should go a long way toward eliminating uncertainty in parties’ attempts to extend limitations periods by written agreement or by entering into contracts under seal. Parties generally cannot extend (or waive) a statutory limitations periods by agreement, and the requisite formalities required to enter into contracts under seal can be easily botched due to a lack of guidance and inconsistent caselaw. The amendment would allow parties to extend the limitations period in writing to up to 20 years and would only apply to contracts involving at least $100,000.

Continue reading “Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)”

May 15, 2014September 10, 2014 by Richard L. Renck

DGCL Now Provides Mechanism to Ratify Certain Defective Corporate Acts

As of April 1st, the Delaware General Corporation Law contains a new § 204, which provides Delaware corporations with a statutory safe harbor procedure for ratifying acts or transactions (including stock issuances) that due to a “failure of authorization” would be void or voidable. A copy of the Synopsis and Bill are attached here.

This is an important addition to the DGCL, as it allows companies to “clean up” certain prior missteps in approving corporate events, and represents the General Assembly’s intent to overturn case law such as STARR Surgical Co. v. Waggoner, 588 A.2d 1130 (Del. 1990), which made it difficult to ratify or otherwise seek validation on equitable grounds acts that were taken but not in strict compliance with the DGCL or the company’s governing documents.

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May 14, 2014September 10, 2014 by Richard L. Renck

A Minute About Minutes

Drafting minutes of meetings—particularly for meetings of boards of directors or special committees of boards—is an art rather than a science, and while there are certainly many ways to accurately record the proceedings, understanding the ways minutes might be used later is very important.

In the world of Delaware corporate law, minutes of board meetings often play a pivotal role in shareholder litigation challenging the acts of the directors. Indeed, in a recent high-profile decision in which the Court of Chancery refused to enjoin the annual meeting for Sotheby’s in the face of a vigorous proxy fight, the Vice Chancellor’s opinion remarks upon the contents of board minutes on several occasions, and in a manner that provides some practical tips for consideration when drafting minutes. See, Third Point LLC v. Ruprecht, et al., C.A. Nos. 9469-VCP; 9497-VCP, Mem. Op. (Del. Ch. May 2, 2014).

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May 12, 2014September 10, 2014 by Richard L. Renck

“Fee-Shifting” Bylaws–A New Tool to Stem the Tide of Shareholder Litigation?

On May 8, 2014, the Delaware Supreme Court issued an en banc response to certified questions of law from the U.S. District Court for the District of Delaware, in which the Supreme Court held that a “fee shifting” bylaw provision in a non-stock corporation’s bylaws “can be valid and enforceable under Delaware law.” ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), et al., No. 534, 2013 (Del. May 8, 2014). The bylaw at issue would shift the company’s defense fees and costs to a member who had sued the company (or any other member) and was unsuccessful in “substantially achiev[ing], in substance and amount, the full remedy sought” in the litigation.

Continue reading ““Fee-Shifting” Bylaws–A New Tool to Stem the Tide of Shareholder Litigation?”