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.
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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.
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Recent Blog Posts

  • 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
  • Chancery Opinion Provides a Roadmap to Discovery Rules and Obligations In the recent decision of In re Oxbow Carbon LLC Unitholder Litig., Consol. C.A. No 12447-VCL (Del. Ch. March 13, 2017), Vice Chancellor Laster provides a comprehensive review of pretrial discovery rules before the Delaware Court of Chancery.  This opinion is an excellent roadmap for conducting discovery in Delaware, and contains a treasure-trove of citations, authorities and maxims that would aid any Chancery practitioner. Several quotes of import from this decision are as follows: “The scope of discovery pursuant to Court of Chancery Rule... More
  • Cal Dive Offshore Contractors, Inc. Preference Actions Filed On March 2, 2017, Cal Dive Offshore Contractors, Inc. (“Cal Dive” or “Debtor”) filed approximately 136 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. Cal Dive and its affiliated debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on March 3, 2015 under Chapter 11 of the Bankruptcy Code.  According to each complaint, Cal Dive “constituted a global marine contractor that provided highly... More
  • Books and Records Demand Denied for Lack of Standing Under Section 220 of the Delaware General Corporation Law (“DGCL”), only stockholders or directors have standing to make a demand to inspect a Delaware corporation’s books and records.  What happens if, after a books and records demand is made upon the corporation, but before an action is commenced before the Court of Chancery, the stock of the demanding stockholder is extinguished through a merger?  This precise issue was addressed in the recent decision of Weingarten v. Monster Worldwide, Inc., C.A. No.... More
  • Books and Records Demand Played Role in Selection of Lead Counsel In selecting lead counsel for a stockholder derivative litigation, the Court of Chancery applies the factors set forth under Hirt v. U.S. Timberland Service Co., 2002 WL 1558342 (Del. Ch. July 3, 2002).  These factors are as follows: the “quality of the pleading that appears best able to represent the interests of the shareholder class and derivative plaintiffs;” the relative economic stakes of the competing litigants in the outcome of the lawsuit (to be accorded “great weight”); the willingness and ability of all the contestants to... More
  • Court Appoints Custodian to Deadlocked Corporation to Serve as 7th Director In the recent decision of Kleinberg v. Aharon, C.A. No. 12719-VCL (Del. Ch. Feb. 3, 2017), the Court of Chancery appointed a custodian over a Delaware corporation under Section 226 of the Delaware General Corporation Law (“DGCL”) to break deadlock.  A voting agreement allowed for 6 board seats, 3 of which were controlled by Defendant Refeal Aharon, the founder and CEO of Applied Cleantech, Inc. (“Applied Cleantech” or the “Company”).  Aharon had traditionally appointed only 2 directors, but fearing that a... More
  • Sanctions Affirmed by Delaware Supreme Court Delaware follows the “American Rule”, which mandates that each party bear their own attorneys’ fees regardless of the outcome of the litigation.  However, as an exception to this rule, the court may order fee shifting if there is sufficient bad faith or litigation misconduct by a party.  The Delaware Supreme Court, in its recent decision of Shawe v. Elting, No. 487, 2016 (Del. Feb. 13, 2017), affirmed the Delaware Court of Chancery’s ruling granting such a fee award in light of... More
  • Delaware Bankruptcy Court Issues 2017 Local Rule Amendments Earlier this month, the U.S. Bankruptcy Court for the District of Delaware (the “Delaware Bankruptcy Court”) released an update to the Local Rules for the United States Bankruptcy Court District of Delaware (Effective February 1, 2017) (the “Local Rules”).  According to Local Rule 1001-1(e), the 2017 version of the Local Rules governs all cases or proceedings filed after February 1, 2017, and also applies to proceedings pending on the effective date, except to the extent that the Court finds that it... More
  • Indemnification of Affirmative Claims Analyzed by the Court of Chancery In the recent post-trial memorandum opinion of Dore v. Sweports, Ltd., C.A. No. 10513-VCL (Del. Ch. Jan. 31, 2017), Vice Chancellor Laster addressed indemnification for fees incurred in pursuing affirmative claims brought by an indemnified individual.  The underlying lawsuits giving rise to this indemnification action were substantially premised on the attempts of a law firm to collect legal fees.  A partner of the firm was also a director of the company, and had to defend himself when the company filed counterclaims against the plaintiffs that were... More
  • S.D.N.Y. Bankruptcy Court Dismisses Preference Action Involving International Transfer In the recent decision of Spizz v. Goldfarb Seligman & Co. (In re Ampal-American Israel Corp.), 2017 WL 75750 (Bankr. S.D.N.Y. Jan. 9, 2017), the United States Bankruptcy Court for the Southern District of New York dismissed a preference complaint filed by a trustee of chapter 7 debtor headquartered in Israel, where the payment was made from the debtor’s Israeli bank to an Israeli supplier.  The Court held that Section 547 of the Bankruptcy Code does not have extraterritorial effect and the transfer did... More
  • Delaware Supreme Court Addresses the Implied Covenant of Good Faith and Fair Dealing In a very recent Delaware Supreme Court decision, Dieckman v. Regency GP LLC, et al., No. 208, 2016 (Del. Jan. 20, 2017), the High Court reversed the Court of Chancery and upheld claims based upon breach of the implied covenant of good faith and fair dealing.  The decision is noteworthy because the limited partnership agreement disclaimed fiduciary duties, and provided for conflict resolution safe harbors which defendants asserted were met.  However, the manner in which such safe harbors were obtained... More
  • Chancery Strikes Bylaw Requiring Two-Thirds Stockholder Vote to Remove Director It goes without saying that a corporation’s bylaws must comply with the applicable provisions of the Delaware General Corporation Law (“DGCL”).  The recent decision rendered by Vice Chancellor Glasscock, Fretchter v. Zier, et al., C.A. No. 12038-VCG (Del. Ch. Jan. 24, 2017) considered whether a corporate bylaw, requiring a two-thirds stockholder vote to remove a director, complied with the DGCL. Among other things, plaintiff brought a declaratory judgment action that the removal provision of the bylaws violates Section 141(k) of the DGCL,... More