Justia Delaware Supreme Court Opinion Summaries

The issue common for forty-five defendants (whose cases were consolidated for this opinion) was whether a defendant who pled guilty after a colloquy and admitted to crimes involving the possession of illegal narcotics should have her conviction vacated because she was unaware of serious problems at the Office of the Chief Medical Examiner (the “OCME”) involving the handling of narcotics evidence. The Superior Court answered that question no, and held that the defendants were bound by their pleas. A 2014 investigation by the Delaware State Police and the Department of Justice revealed that some OCME employees had stolen drug evidence stored at the OCME due in large part to flawed oversight and security. To date, those problems, although including substantial evidence of sloppiness and allegations of “drylabbing,” did not involve evidence-planting. Much of the uncovered misconduct seemed to be inspired by the reality that the evidence seized from defendants in fact involved illegal narcotics, and the temptation this provided to certain employees to steal some of that evidence for their personal use and for resale. In prior decisions, the Delaware Supreme Court made clear that if a defendant knowingly pled guilty to a drug crime, he could not escape his plea by arguing that had he known that the OCME had problems, he would not have admitted to his criminal misconduct in possessing illegal narcotics. In those prior decisions, the Court found that defendants' please did not invalidate their freely-made pleas. The Court reached the same conclusion after review of this case, and affirmed the Superior Court. View "Aricidiacono,et al. v. Delaware" on Justia Law

This case involved an appeal from a complicated transaction between a private company whose equity was wholly owned by the family of A.R. Sanchez, Jr., Sanchez Resources, LLC (the “Private Sanchez Company”), and a public company in which the Sanchez family constituted the largest stockholder bloc with some 16% of the shares and that was dependent on the Private Sanchez Company for all of its management services, Sanchez Energy Corporation (the “Sanchez Public Company”). The transaction at issue required the Sanchez Public Company to pay $78 million to: (i) help the Private Sanchez Company buy out the interests of a private equity investor; (ii) acquire an interest in certain properties with energy-producing potential from the Private Sanchez Company; (iii) facilitate the joint production of 80,000 acres of property between the Sanchez Private and Public Companies; and (iv) fund a cash payment of $14.4 million to the Private Sanchez Company. In this derivative action, the plaintiffs alleged that this transaction involved a gross overpayment by the Sanchez Public Company, which unfairly benefited the Private Sanchez Company by allowing it to use the Sanchez Public Company‟s funds to buy out their private equity partner, obtain a large cash payment for itself, and obtain a contractual right to a lucrative royalty stream that was unduly favorable to the Private Sanchez Company and thus unfairly onerous to the Sanchez Public Company. As to the latter, the plaintiffs alleged that the royalty payment was not only unfair, but was undisclosed to the Sanchez Public Company stockholders, and that it was the Sanchez family's desire to conceal the royalty obligation that led to a convoluted transaction structure. The Court of Chancery dismissed the complaint, finding that the defendants were correct in their contention that plaintiffs had not pled demand excusal under "Aronson v. Lewis," (473 A.2d 805 (1984)). "Determining whether a plaintiff has pled facts supporting an inference that a director cannot act independently of an interested director for purposes of demand excusal under "Aronson" can be difficult. And this case illustrates that." Because of that, the Supreme Court found that plaintiffs pled facts supporting an inference that a majority of the board who approved the interested transaction they challenged could not consider a demand impartially. Therefore, the Court reversed and remanded so that plaintiffs could prosecute this derivative action. View "Delaware County Employees Retirement Fund, et al. v. Sanchez, et al." on Justia Law

The plaintiffs filed a challenge in the Court of Chancery to a stock-for-stock merger between KKR & Co. L.P. ("KKR") and KKR Financial Holdings LLC ("Financial Holdings") in which KKR acquired each share of Financial Holdings's stock for 0.51 of a share of KKR stock, a 35% premium to the unaffected market price. The plaintiffs' primary argument was that the transaction was presumptively subject to the entire fairness standard of review because Financial Holdings's primary business was financing KKR's leveraged buyout activities, and instead of having employees manage the company's day-to-day operations, Financial Holdings was managed by KKR Financial Advisors, an affiliate of KKR, under a contractual management agreement that could only be terminated by Financial Holdings if it paid a termination fee. As a result, the plaintiffs alleged that KKR was a controlling stockholder of Financial Holdings, which was an LLC, not a corporation. The Court of Chancery held that the business judgment rule was invoked as the appropriate standard of review for a post-closing damages action when a merger that is not subject to the entire fairness standard of review has been approved by a fully informed, uncoerced majority of the disinterested stockholders. For that and other reasons, the Court of Chancery dismissed plaintiffs' complaint. In this decision, the Delaware Supreme Court found that the Chancellor was correct in finding that the voluntary judgment of the disinterested stockholders to approve the merger invoked the business judgment rule standard of review and that the plaintiffs' complaint should have been dismissed. "Delaware corporate law has long been reluctant to second-guess the judgment of a disinterested stockholder majority that determines that a transaction with a party other than a controlling stockholder is in their best interests." View "Corwin, et al. v. KKR Financial Holdings LLC., et al." on Justia Law

This case centered on a question of priority between two lien creditors: who was entitled to be paid first from the proceeds of a mortgage foreclosure sale, the creditor who recorded its lien against the property first, or a second creditor who recorded later, but did so as part of a refinancing in which it discharged preexisting mortgages and judgment liens on the same property. Eastern Savings Bank, FSB, the second creditor to record its lien, argued that the doctrine of equitable subrogation protected its right to receive the proceeds of the foreclosure sale first, even though it recorded its mortgage after the first creditor, CACH, LLC recorded its judgment. The Court of Common Pleas and the Superior Court both disagreed, and held that CACH was entitled to be paid before Eastern Savings under Delaware's pure race recording statute. Eastern Savings appealed. Eastern Savings argued that the Superior Court erred by failing to apply the doctrine of equitable subrogation to place the priority of its mortgage above CACH's lien. After review, the Supreme Court disagreed and found that the doctrine of equitable subrogation as inapplicable to the facts of this case. Thus, the parties' priorities are governed by Delaware's race recording statute, and the judgment of the Superior Court was affirmed. View "Eastern Savings Bank, FSB v. Cach, LLC" on Justia Law

In October, 2014, a Superior Court jury convicted Irvan Adams of possession of a firearm by a person prohibited, possession of ammunition by a person prohibited, carrying a concealed deadly weapon, and conspiracy second degree. The Superior Court judge sentenced Adams to five years at Level V on the conviction for possession of a firearm by a person prohibited, and suspended the terms of imprisonment on the remaining offenses for probation. On appeal. Adams argued the Superior Court abused its discretion when it refused to admit into evidence a prior consistent statement of Adams's brother, Javan Cale. Adams claimed the affidavit supported Cale's exculpatory testimony at trial and rebutted the State's implication of recent fabrication on Cale's part. The trial judge refused to admit the affidavit, ruling it was superfluous. The Supreme Court found that the trial court erred when it sustained the State's objection and excluded the affidavit from evidence, and that the exclusion was not harmless error beyond a reasonable doubt. The Court therefore reversed Adams's conviction and remanded for further proceedings. View "Adams v. Delaware" on Justia Law

Defendant-appellant Akeem Cropper was indicted on multiple firearms possession charges. He filed a motion to suppress, which was denied after a hearing. Following a bench trial, the Superior Court found defendant guilty of Possession of a Firearm by a Person Prohibited and Possession of Ammunition By a Person Prohibited. On appeal, defendant argued the warrantless seizure and pat-down search was not supported by reasonable suspicion, and the evidence seized from him should have been suppressed. After review of the superior court record, the Supreme Court concluded defendant's argument on appeal lacked merit, and affirmed his conviction. View "Cropper v. Delaware" on Justia Law

"Adam" was born in early 2015 addicted to narcotics. Adam was eventually released to his parents, David Hunt and Carey Land. A few months later, Adam was found unconscious and unresponsive. He was transported to the hospital. The parents offered no explanation as to why Adam had been found unresponsive or unconscious. Though they were home when emergency personnel arrived, neither parent accompanied the child to the hospital. Due to the seriousness of the child's condition, he was transported to a trauma center. Medical personnel determined the child had sustained multiple trauma caused by "unexplained abusive trauma." In addition to multiple fractures, Adam's other diagnoses included chronic bilateral subdural hematomas, destruction of brain tissue, seizures, respiratory failure, malnourishment and splitting of the layers of the retina in his left eye. Emergency custody would ultimately be awarded to the Department of Family Services. This expedited proceeding was the parents' appeal of a Family Court decision granting the attorney guardian ad litem's motion to instruct Adam's medical providers to de-escalate intervention and place a do-not re-intubate order and a do-not-resuscitate order and a "comfort measures" order on Adam's medical chart. The appeal presented four issues for the Delaware Supreme Court's review: (1) whether the Family Court had jurisdiction to de-escalate medical care, a no re-intubate order and do not resuscitate order on the minor's chart; (2) whether the Family Court had authority to allow such orders when the parental rights have not been terminated; (3) whether the Family Court violated the parents' procedural due process rights by not providing the parents adequate notice and process prior to issuing the orders; and (4) were the parents' due process rights violated without receiving evidence from an independent medical expert. The Supreme Court found no reversible error in the Family Court's decision, and affirmed. View "Hunt v. DFS & Office of the Child Advocate" on Justia Law

The United States Court of Appeals for the Second Circuit certified a question of Delaware law to the Delaware Supreme Court: "If a shareholder demands that a board of directors investigate both an underlying wrongdoing and subsequent misstatements by corporate officers about that wrongdoing, what factors should a court consider in deciding whether the board acted in a grossly negligent fashion by focusing its investigation solely on the underlying wrongdoing?" The plaintiffs in this case made a demand that the board of JPMorgan Chase & Co. investigate two related issues regarding a high-profile situation, what the Second Circuit has called the "London Whale debacle." According to the Second Circuit, these issues were: (1) the failure of JPMorgan‘s risk management policies to prevent the trading that resulted in corporate losses; and (2) supposed false and misleading statements made by JPMorgan management in the wake of the emergence of the problem. According to the plaintiffs, the board investigative committee only made findings as to the former issue by arguing that what management knew when it made disclosures was the subject of several pages of the report. In the Delaware Supreme Court's view, Delaware law on the relevant topic required that the decision of an independent committee to refuse a demand should only be set aside if particularized facts were pled supporting an inference that the committee, despite being comprised solely of independent directors, breached its duty of loyalty, or breached its duty of care, in the sense of having committed gross negligence. The Court concluded that the determination of what constituted gross negligence in the circumstances by definition required a review of the relevant circumstances facing the directors charged with acting. The Court requested more information from the Second Circuit prior to answering the certified question. View "Espinoza v. Dimon, et al." on Justia Law

The Department of Services for Children, Youth and Their Families (the “Department”) appealed a September 18, 2014 Family Court order finding that the Department failed to establish probable cause at a Preliminary Protective Hearing (“PPH”) to retain an infant in the Department's custody. The Department filed an emergency ex parte petition on September 12, 2014, alleging that A.F., a newborn infant, was dependent, neglected, or abused by Mother, John Tower, and Unknown Father. An investigative worker for the Department, testified that the Department received a hotline report on August 1, 2014, claiming Mother had given birth into a toilet and had appeared to the hotline reporter to be high on drugs, with glassy eyes and slurred speech. The worker contacted Mother at St. Francis Hospital, where Mother and child had been taken following the birth. A.F. was born with methadone and benzodiazepines in his system and remained in the hospital at the time of the PPH for opiate dependence treatment. After hearing all the evidence, the Family Court concluded in its September 18 order that the Department did not establish probable cause to believe that A.F. was dependent, neglected, or abused in the care of Mother and Tower. According to the Family Court, the Department failed to establish that any of the drugs Mother was taking were taken without a doctor's knowledge of her condition or in violation of her physicians' instructions. The court also credited Tower's account of the circumstances of A.F.'s birth over the report from the hotline. The court viewed the remainder of the Department's evidence as insufficient to justify removal of the child from the custody of his parents. The Department argued on appeal that the Family Court failed to apply the correct probable cause standard when it dismissed the Department's petition. The Supreme Court found no merit to the Department's argument and affirmed the Family Court. View "Dept. of Serv. Children Fam. v. Fowler" on Justia Law

Appellant, Murphy & Landon, P.A. (the “Firm”), disputed the decision of the Unemployment Insurance Appeal Board which found that Chelsey Pernic, a paralegal at the Firm, had not been fired for just cause and was thus entitled to unemployment benefits. The Firm appealed to the Supreme Court, arguing that the Board's conclusions were not supported by substantial evidence in the record. Further, the Firm contended that this error resulted largely because the Firm was unfairly restricted from presenting evidence of the broader scope of Pernic's poor job performance, including her lateness, disrespectful and uncooperative attitude, and shirking, in its hearing before the Appeals Referee. After review, the Supreme Court found that the Board's conclusions were not rationally grounded in the record, and thus, the Court found no need defer to them. "The uncontradicted record evidence shows that Pernic received a warning that her insubordination and poor performance could lead to her termination, but she continued to act disrespectfully and was therefore terminated. The Firm should not be penalized because it did not anticipate the precise form that Pernic's last act of misconduct would take. Nor should it be penalized for allowing Pernic time to improve her deficient performance. To do so would create a perverse incentive for an employer to discharge an employee at the first instance of poor performance in order to avoid the outcome that the Firm suffered here." Accordingly, the case was reversed and remanded for further proceedings. View "Murphy & Landon, P.A. v. Pernic" on Justia Law