Blogs

Delaware Chancery Law Blog
The Delaware Court of Chancery is widely considered the preeminent forum for resolving disputes involving the internal affairs of the multitude of Delaware corporations and other business entities through which a vast amount of the world's commercial affairs is conducted. Join Carl as he helps guide you through the complex landscape of legal issues and analysis arising before this Court.
View Blog

Delaware Bankruptcy Litigation Blog
Carl shares his knowledge of Delaware bankruptcy proceedings in a blog entitled, "Delaware Bankruptcy Litigation." He offers his take on corporate bankruptcy proceedings not only in Delaware but throughout the United States, as well as industry insight on topics such as preference litigation, tenant bankruptcy and defending avoidance litigation.
View Blog

Recent Blog Posts

  • Preference Actions Filed in Draw Another Circle Bankruptcy On June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, filed approximately 69 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and and 550 of the Bankruptcy Code.  The Liquidating Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code. Draw Another Circle, LLC and its affiliated debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District... More
  • The Original Soupman, Inc. Files for Chapter 11 Protection in Delaware On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code.  According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million. Shortly after the commencement of the bankruptcy case, the Debtors filed a number of first-day motions, including a critical vendor motion, and a DIP financing motion.  The first-day... More
  • Sections 204 and 205 of the DGCL Cannot Remedy Unauthorized Corporate Acts In a matter of first impression, the Court of Chancery considered whether an “unauthorized” act–one that the majority of stockholders entitled to vote deliberately declined to authorize–but that the corporation nevertheless determined to pursue, may be deemed a “defective corporate act” under Section 204 that is subject to later validation by ratification of the stockholders via Section 205 of the DGCL. Vice Chancellor Slights addressed this issue in the opinion of Nguyen v. View, Inc., C.A. No. 11138-VCS (Del. Ch. June 6,... More
  • Chancery Appraises Corporation Below Merger Price Due to Synergies In a recent appraisal action before the Court of Chancery, In re Appraisal of SWS Group, Inc., C.A. No. 10554-VCG (Del. Ch. May 30, 2017), Vice Chancellor Glasscock found that the fair value of the acquired entity, SWS Group, Inc., (“SWS” or the “Company”), was less than deal price as a result of synergies between SWS and the acquiring company, Hilltop Holdings, Inc. (“Hilltop”).  Prior to the merger, SWS was a relatively small bank holding company. Although the Court acknowledged that “a public... More
  • Deal Price Upheld by Chancery in PetSmart Inc. Appraisal Action In the recent PetSmart, Inc. appraisal proceeding, styled as In re Appraisal of PetSmart Inc., C.A. No. 10782-VCS (Del. Ch. May 26, 2017), the Delaware Court of Chancery found the deal price to be the fair value of PetSmart, Inc. (“PetSmart” or the “Company”), which was acquired as a going concern by a private equity acquirer. Petitioners’ discounted cash flow valuation of the Company relied upon management projections, which is generally the preference of the Court.  However here, the Court determined the... More
  • Tidewater, Inc. Bankruptcy Update – Utilities Motion On May 17th, Tidewater, Inc. and its affiliated debtors (“Tidewater” or “Debtors”) filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware. On the same day, the Court entered an Interim Utilities Order (click here), which among other things sets forth deadlines for utility providers to object to the proposed adequate assurance procedures or the amount of adequate assurance.  The proposed Interim Utilities Order establishes the proposed amount of adequate assurance of payment to each utility... More
  • GulfMark Offshore, Inc. Files for Chapter 11 Bankruptcy On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware. According to the first day declaration of Brian J. Fox, the managing director of Alvarez & Marsal North America, LLC, the restructuring advisor to the Debtors, GulfMark will file a prepackaged plan of reorganization.  Through the plan, GulfMark will equitize $400 plus million of its unsecured... More
  • Derivative Demand Requirements Equally Apply to Actions Asserted by 50/50 Member of an LLC In Delaware, to assert a derivative action against company management, either a presuit demand must be made, or plaintiff must allege that demand would be futile because the board is not disinterested.   For derivative actions asserted by shareholder against a corporation or of an unincorporated association, Court of Chancery Rule 23.1 requires that the complaint “allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority... More
  • Chancery Finds Credible Basis for Wrongdoing Warranting Inspection of Books and Records As discussed in various prior posts, a petitioner making a Section 220 books and records demand must state a “proper purpose” to justify inspection. Commonly approved purposes include valuation of stock, and investigation of wrongdoing. The recent decision of Rodgers v. Cypress Semiconductor Corp., C.A. No. 2017-0070-AGB (Del. Ch. Apr. 17, 2017) sheds light on the standard needed to obtain inspection of books and records to investigate corporate wrongdoing.  There, a former chief executive officer sought inspection to investigate alleged excessive... More
  • Corinthian Colleges Preference Actions Filed in Delaware Bankruptcy Court Starting on April 28, 2017, Craig R. Jalbert, as Distribution Trustee of the Corinthian Distribution Trust, filed approximately 122 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548, 549 and and 550 of the Bankruptcy Code (depending upon the nature of the underlying transactions).  The Distribution Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code. Corinthian Colleges and its affiliated debtors filed voluntary petitions for bankruptcy... More
  • Creditor Lacks Standing to Bring Derivative Suit against LLC The recent decision of Trusa v. Nepo, C.A. No. 12071-VCMR (Del. Ch. April 13, 2017), stands for the proposition that a creditor lacks standing to assert a derivative claim against a limited liability company.  In Trusa, the plaintiff creditor Steven B. Trusa brought a derivative action for breach of fiduciary duty and dissolution of Xion Management, LLC (“Xion” or “LLC”).  The creditor brought such claims, among other reasons, as a result of his assertion that he lent money to the LLC under... More
  • Chancery Rules that Claims against General Partner are Direct, Allows Action to Proceed Despite Partnership’s Bankruptcy Whether a claim against company management is direct or derivative is not infrequently disputed in litigation before the Delaware Court of Chancery.  This determination becomes important in many contexts, including whether it was necessary for plaintiff to make a pre-suit demand upon the board, whether derivative claims of a company have been assigned to a receiver, or whether such claims have previously been settled in a prior litigation. In the recent decision of Sehoy Energy LP, et al. v. Haven Real... More
  • DE Bankruptcy Court Dismisses Preference Complaint Against Former Insider in Part with Prejudice Not uncommonly, a preference complaint fails to adequately allege that the transfers sought to be recovered by the trustee were made “for or on account of an antecedent debt owed by the debtor before such transfer was made”, as required under Section 547(b) of the Bankruptcy Code. Thus, when faced with a complaint to recover alleged preferential transfers, a defendant can proceed in one of two ways: (i) file an answer and raise affirmative defenses, or (ii) move to dismiss under... More
  • Carve-out Provision in DIP Financing Order Did Not Limit Fees to Committee Counsel In the recent decision of In re Molycorp, Inc., 562 B.R. 67 (Bankr. D. Del. 2017), Judge Sontchi held that a carve-out provision in a DIP financing order did not act as an absolute limit on the fees and expenses payable to counsel to the creditors committee in a case with a confirmed chapter 11 plan. The DIP financing order contained a 250K carve-out for committee fees incurred in investigating claims against the lender.  After its investigation, the committee filed a motion seeking standing to pursue... More
  • Summary Judgment Granted in Favor of Delaware Officer Due to Release When applicable, former D&Os of Delaware corporations will rely upon a release from the company to shield liability against class action or derivative lawsuits filed thereafter. The recent decision of Seiden v. Kaneko, C.A. No. 9861-VCS (Del. Ch. Mar. 23, 2017) is an interesting read on the effectiveness of such a release. The action was pursued by a receiver appointed to a Delaware holding corporation, Southern China Livestock, Inc. (“SCLI” or “the Company”), which owned a non-public, China-based operating company.  After accepting capital... More