Justia Delaware Supreme Court Opinion Summaries

The buyers of a pharmaceutical business appealed the Superior Court’s dismissal of their fraudulent-inducement and indemnification claims against the sellers. The trial court determined that the buyers had waived their fraudulent-inducement claims and that the indemnification claim was time-barred. The court’s waiver determination was based on its interpretation of a letter agreement between the parties, executed after the buyers’ acquisition of the business and following governmental proceedings involving FDA and Department of Justice investigations. The sellers argued that the letter agreement precluded further litigation, including the buyers’ claims. The buyers contended that the letter agreement only limited the size and scope of claims for losses attributable to the governmental proceedings. The Superior Court agreed with the sellers and dismissed the buyers’ fraudulent-inducement claims.The Superior Court found that the buyers’ indemnification claim was untimely because it was filed more than 60 months after the acquisition closed, as required by the Purchase Agreement. The court rejected the buyers’ argument that the survival period was tolled due to the sellers’ fraudulent concealment, reasoning that the buyers were on inquiry notice of the alleged breaches well within the limitations period.The Supreme Court of Delaware reviewed the case and held that the buyers’ interpretation of the letter agreement was reasonable, as was the sellers’ and the trial court’s. The court found the relevant provision of the letter agreement to be ambiguous, making it inappropriate to dismiss the buyers’ fraudulent-inducement claim. The court also concluded that the buyers adequately pleaded that the sellers had fraudulently concealed the facts giving rise to the indemnification claim, potentially tolling the survival period. Consequently, the court reversed the Superior Court’s judgment and remanded the case for further proceedings. View "LGM Holdings, LLC v. Gideon Schurder" on Justia Law

The defendant was convicted of stalking, harassing, and making terroristic threats against his ex-girlfriend while in prison. The threats, made via telephone and text messages, were numerous and vile, often including a racial slur. The evidence consisted of recordings of phone calls and a log of text messages. The racial slurs were not directed at the ex-girlfriend nor integral to the specific threats.The defendant moved to redact the racial slur from the evidence, arguing it was irrelevant and prejudicial. The trial court denied the motion, ruling that the defendant had no basis to object to the jury hearing the slur since he had used it. The court did not consider whether the probative value of the slur was substantially outweighed by its prejudicial effect, which was an error.The Delaware Supreme Court reviewed the case and found that the trial court erred by not conducting the required balancing test under Delaware Rule of Evidence 403. The Supreme Court held that the admission of the racial slur was an error but concluded that the error was harmless beyond a reasonable doubt due to the overwhelming evidence against the defendant. The court also addressed other issues raised by the defendant, including challenges to jury instructions and a double jeopardy claim, but found them without merit.The Delaware Supreme Court affirmed the defendant's convictions, holding that the trial court's error in admitting the racial slur did not affect the outcome of the trial. The court emphasized the importance of conducting a proper balancing test when considering the admissibility of potentially prejudicial evidence. View "Jewell v. State" on Justia Law

Donovan Kent was indicted on six counts, including Rape Second Degree and Unlawful Sexual Contact, involving a minor, S.A., who was six years old at the time. The incidents allegedly occurred between July 1, 2017, and October 11, 2017, at S.A.'s aunt's residence and S.A.'s home. During the trial, the State amended one count to change the location of the incident but was denied an amendment to extend the date range. Kent was found guilty of several counts, including Attempted Rape Second Degree and Continuous Sexual Abuse of a Child. He was sentenced to 29 years of incarceration followed by probation.Kent's motions for judgment of acquittal and a new trial were denied by the Superior Court. On direct appeal, Kent argued that the evidence was insufficient for some convictions and that the jury instructions were confusing. The Delaware Supreme Court rejected these claims and affirmed the Superior Court's rulings.Kent then filed a motion for postconviction relief, claiming ineffective assistance of counsel. He argued that his trial counsel unreasonably introduced evidence of a second potential victim and failed to move for judgment of acquittal on the Continuous Sexual Abuse charge. The Superior Court held an evidentiary hearing and denied the motion, finding that trial counsel's strategy was reasonable and that there was sufficient evidence to support the conviction for Continuous Sexual Abuse.The Delaware Supreme Court reviewed the case and affirmed the Superior Court's judgment. The court agreed that trial counsel's decision to impeach a witness was a reasonable strategy and that there was no prejudice from not moving for judgment of acquittal, as the evidence supported the jury's findings. View "Kent v. State" on Justia Law

Alexion Pharmaceuticals, Inc. develops therapies for rare disorders and was insured under two director and officer liability insurance programs covering different periods. The first program provided $85 million of coverage for claims made between June 27, 2014, and June 27, 2015 (Tower 1). The second program provided $105 million of coverage for claims made between June 27, 2015, and June 27, 2017 (Tower 2). In 2015, the SEC issued a formal investigation order against Alexion, which led to a subpoena seeking information related to Alexion’s grant-making activities and compliance with the Foreign Corrupt Practices Act (FCPA). Alexion disclosed this investigation to its Tower 1 insurers.The Superior Court of Delaware found that the SEC investigation and a later securities class action against Alexion were unrelated, placing the securities class action coverage in Tower 2. The court applied the “meaningful linkage” standard and concluded that the connection between the SEC investigation and the securities class action was insufficient to make them related.The Supreme Court of Delaware reviewed the case and disagreed with the Superior Court’s conclusion. The Supreme Court found that the securities class action was meaningfully linked to the wrongful acts disclosed in Alexion’s 2015 notice to its Tower 1 insurers. Both the SEC investigation and the securities class action involved the same underlying wrongful acts, including Alexion’s grant-making activities and compliance with the FCPA. The Supreme Court held that the securities class action claim should be deemed to have been first made during the Tower 1 coverage period, and therefore, coverage should be under Tower 1. The judgment of the Superior Court was reversed. View "In re Alexion Pharmaceuticals, Inc. Insurance Appeals" on Justia Law

The case involves a dispute over the decision by the directors, officers, and stockholders of Tripadvisor, Inc. and Liberty TripAdvisor Holdings, Inc. to change their corporate domiciles from Delaware to Nevada. Plaintiffs, who are stockholders, argue that the Conversions would provide non-ratable benefits to the Defendants, particularly in the form of reduced liability exposure, and thus should be reviewed under the entire fairness standard. Defendants argue that the business judgment rule applies.The Court of Chancery denied Defendants' motion to dismiss, holding that Plaintiffs had adequately alleged that Defendants would receive a non-ratable benefit from the Conversions, thus triggering entire fairness review. The court found that the Conversions could provide a material benefit to the Defendants by reducing their litigation risk and that the Complaint supported a reasonable inference that the Conversions were not entirely fair.On appeal, the Supreme Court of Delaware reversed the Court of Chancery's decision. The Supreme Court held that the business judgment rule, not the entire fairness standard, applies to the Conversions. The Court reasoned that the alleged benefits of reduced liability exposure under Nevada law were too speculative and not material enough to constitute a non-ratable benefit. The Court emphasized the importance of temporality in determining materiality, noting that the absence of any existing or threatened litigation weighed heavily against finding a material, non-ratable benefit. The Court also highlighted the principles of comity and the policy of allowing directors flexibility in determining an entity's state of incorporation. View "Maffei v. Palkon" on Justia Law

Conduent State Healthcare, LLC (Conduent) was hired by the State of Texas to administer its Medicaid program. In 2012, Texas began investigating Conduent for allegedly helping orthodontics offices overbill for services. Texas sued several orthodontic providers in 2014, and the providers sued Conduent. Texas terminated its contract with Conduent and sued Conduent under the Texas Medicaid Fraud Prevention Act. Conduent was insured by AIG Specialty Insurance Company, ACE American Insurance Company, and Lexington Insurance Company, among others. The insurers provided defense coverage for the provider actions but denied coverage for the state action, claiming it involved fraudulent conduct excluded by the policies.The Superior Court of Delaware found that the insurers breached their duty to defend Conduent in the state action. The court also ruled that Conduent was relieved of its duties to cooperate and seek consent before settling with Texas due to the insurers' breach. The jury found that Conduent acted in bad faith and fraudulently arranged the settlement but did not collude with Texas or settle unreasonably. The Superior Court granted a new trial due to evidentiary issues and the jury's inconsistent verdicts.The Supreme Court of Delaware affirmed the Superior Court's rulings. It held that the insurers' breach of their duty to defend excused Conduent from its duties to cooperate and seek consent. The court also ruled that the policy's fraud exclusion did not bar indemnity coverage because the settlement was allocated to breach of contract damages. The court found that the evidentiary issues and the jury's inconsistent verdicts justified a new trial to prevent manifest injustice. View "AIG Specialty Insurance Company v. Conduent State Healthcare, LLC" on Justia Law

A father appealed a Family Court order terminating his parental rights. The Department of Services for Children, Youth and their Families (DFS) took custody of the father's son shortly after birth due to the father's mental health issues, substance abuse, unstable housing, employment status, previous involvement with DFS, history of domestic violence, and failure to plan for the child. DFS moved to be excused from case planning with the father under 13 Del. C. § 1103(d), arguing that grounds for termination existed under 13 Del. C. § 1103(a)(7) because the father's parental rights to another child had been involuntarily terminated in an earlier proceeding. The Family Court granted the motion and later terminated the father's parental rights after finding clear and convincing evidence that termination was in the best interests of the child.The father argued on appeal that Section 1103(d) is unconstitutional. The Supreme Court of Delaware reviewed the case and concluded that Section 1103(d) is not unconstitutional as applied to the father. The court found that the Family Court's analysis under Sections 1103(a)(7) and 1103(d) was supported by the record and that termination of the father's parental rights was in the best interests of the child. The court also rejected the father's argument that the "least restrictive means" standard should be applied, instead following the due process framework established by the U.S. Supreme Court in Mathews v. Eldridge.The Supreme Court of Delaware affirmed the Family Court's judgment, holding that the statutory grounds for termination were met and that the termination was in the best interests of the child. The court found that the father received sufficient process before the termination of his parental rights and that the Family Court's findings were supported by clear and convincing evidence. View "Schnell v. Department of Services for Children, Youth and their Families" on Justia Law

A borrower misrepresented his authority to act on behalf of two corporations he intended to acquire, providing false documents to a lender. Despite having documents contradicting the borrower's claims, the lender proceeded with a $7 million loan, including a confession-of-judgment affidavit naming the corporations as additional borrowers. When the borrower defaulted, the lender sought a confessed judgment against all borrowers, including the corporations, whose true officers were unaware of the transaction until served with notice of the judgment.The Superior Court of Delaware conducted a hearing and entered judgment in favor of the lender, finding that the borrower had apparent authority to bind the corporations. The court focused on the borrower's conduct and representations, concluding that they created the impression of authority sufficient to warrant the entry of a confessed judgment against the corporations.The Supreme Court of Delaware reviewed the case and found that the Superior Court's formulation of the test for apparent authority was flawed. The Supreme Court emphasized that apparent authority must be based on the principal's manifestations, not solely on the agent's conduct. The evidence did not support a finding that the corporations acted in a way that created a reasonable belief in the lender that the borrower was authorized to bind them. Consequently, the Supreme Court reversed and vacated the Superior Court's judgment, concluding that the borrower lacked apparent authority and that the corporations did not effectively waive their due process rights. View "Caribbean Sun Airlines Inc. v. Halevi Enterprises LLC" on Justia Law

Jason Terrell, M.D., provided consulting services and served on the board of directors of Kiromic Biopharma, Inc. between December 2014 and May 2021. During this period, Kiromic awarded Terrell stock options through three separate agreements. The first agreement granted Terrell an option to purchase 500,000 shares at $0.50 per share for consulting services. The second agreement, made when Terrell joined the board, granted him an option to purchase 500,004 shares at $0.17 per share. The third agreement, which included a waiver clause, granted him an option to purchase 500,004 shares at $0.19 per share. After Terrell resigned from the board in September 2019, Kiromic refused to honor the options from the first two agreements, claiming that Terrell waived his rights to those options in the third agreement.The Court of Chancery dismissed Terrell’s complaint seeking specific performance of the first two option grants, finding that the waiver clause in the third agreement unambiguously extinguished Terrell’s rights to the previous option awards. The court held that the language in the waiver clause, which stated that Terrell had no other rights to any other options or securities of the company, was clear and that the carveout for "securities issued" did not include unexercised options.The Supreme Court of the State of Delaware reviewed the case and found that the waiver language was susceptible to more than one reasonable interpretation. The court noted that the term "securities" could reasonably include options and that the parties' use of the word "issued" did not exclusively refer to shares. Therefore, the court concluded that the waiver clause was ambiguous and that the case should not have been dismissed at the pleadings stage. The Supreme Court reversed the Court of Chancery’s dismissal of the complaint and remanded the case for further proceedings. View "Terrell v. Kiromic Biopharma, Inc." on Justia Law

Oracle Corporation acquired NetSuite Inc. in 2016. Following the acquisition, Oracle stockholders filed a derivative suit against Oracle directors and others, alleging that Lawrence Ellison, a co-founder and substantial equity holder in both companies, forced Oracle to overpay for NetSuite. After the Court of Chancery denied the defendants’ motion to dismiss, the Oracle board formed a special litigation committee (SLC) to review the plaintiffs’ derivative claims. The SLC investigated and tried to settle the suit but eventually returned the case to the plaintiffs to pursue. The parties litigated over five years, and the Court of Chancery held a ten-day trial, ultimately entering judgment for the remaining defendants.The Court of Chancery found that the special committee negotiated the NetSuite transaction untainted by Ellison’s or Oracle management’s influence. The court concluded that Ellison did not exercise general control over Oracle or specific control over the transaction. The court also found that neither Ellison nor Catz withheld material information or misled the Oracle board and special committee.On appeal, the stockholders contended that the court erred by allowing the SLC to withhold its interview memos, applying business judgment review to a transaction involving an alleged controlling stockholder, employing the wrong legal standard when evaluating whether Ellison misled the special committee, and finding that Ellison’s alleged undisclosed future operational plans were immaterial.The Supreme Court of Delaware affirmed the Court of Chancery’s judgment. The court held that the SLC did not waive work product protection during mediation and that the plaintiffs did not demonstrate substantial need or undue hardship for the interview memos. The court also affirmed the application of business judgment review, finding that Ellison did not exercise actual control over Oracle or the transaction. Finally, the court agreed that Ellison’s undisclosed post-closing plans were immaterial to the special committee’s evaluation and negotiation of the transaction. View "In re Oracle Corporation Derivative Litigation" on Justia Law