Insights Archive

The Delaware Supreme Court issued an important opinion holding that federal forum selection provisions adopted by Delaware corporations requiring that stockholders file actions arising under the Securities Act of 1933 (1933 Act) in federal court - and not state court - are facially valid.

In an Order issued Saturday, March 21, 2020, the U.S. District Court for the District of Delaware announced that it would reopen the J. Caleb Boggs Courthouse and Federal Building on Monday, March 23, 2020, at 8:00 a.m. Per the Order, “[a] thorough deep-cleaning of the affected areas was performed this weekend.”

As we collectively respond to the Coronavirus (COVID-19) outbreak in our country, many have turned their attention to completing estate planning documents. Because clients, especially seniors, are socially-isolated and unable to obtain witnesses and notarization of signatures, we have been fielding numerous questions about the legal requirements for validly executing Delaware trust agreements.

COVID-19’s disruption to the economy has prompted a number of questions from Delaware corporations about their ability to preserve capital if they have already declared a cash dividend.  This memo, released jointly by the Delaware firms listed at the bottom, addresses some of the issues a board of a Delaware corporation might consider in such circumstances.

Effective immediately, the U.S. District Court for the District of Delaware is closing the J. Caleb Boggs U.S. Courthouse and Federal Building until further notice.

On March 16, 2020, the United States Bankruptcy Court for the District of Delaware implemented a General Order in response to the outbreak of COVID-19.  As part of our effort to help our clients and friends navigate this challenging time, the Morris Nichols Business Reorganization & Restructuring Group has summarized this important announcement from the Delaware Bankruptcy Court.

The U.S. District Court for the District of Delaware remains open during the coronavirus outbreak, but the Court issued a new Standing Order today continuing jury selections and jury trials scheduled to begin before April 30, 2020. Jury proceedings affected by the Order will be reset by further order of the assigned judge.

The U.S. District Court for the District of Delaware remains open during the coronavirus outbreak, but has implemented procedures to restrict access to the courthouse and protect Court personnel, attorneys, and litigants.

The State of Delaware’s unclaimed property program faces continued legal challenges from the holder community.  In December 2019 alone, four new holders filed complaints in the U.S. District Court for the District of Delaware raising a series of constitutional challenges to Delaware’s conduct of its unclaimed property audits. 

The American Bar Association (“ABA”) Business Law Section has published a new resource for M&A transaction planners entitled, The Model Tender Offer Agreement. Morris Nichols partner Eric S. Klinger-Wilensky co-edited the book with Michael G. O’Bryan of Morrison & Foerster LLP.

Morris Nichols partners Robert J. Dehney and Matthew B. Harvey co-authored a book chapter, “Seeing the Future: The Case of Seegrid Corporation” in Global Restructuring Review’s new book The Art of the Pre-Pack.

Morris Nichols partners Lou Hering, David Harris, and Jason Russell are coauthors of the Bloomberg BNA Corporate Practices Series Portfolio, Limited Liability Companies: Legal Aspects of Organization, Operation, and Dissolution. Morris Nichols attorneys Sean Sullivan and Melanie Young are also acknowledged for their significant contributions.

In its 2019 session, the Delaware legislature passed a number of amendments to the Delaware General Corporation Law and the Delaware “alternative entity” statutes - the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act, and the Delaware Revised Uniform Partnership Act.

In June, Delaware enacted its latest installment of annual trust legislation. Trust Act 2019 includes many revisions and clarifications, but two new statutes, Sections 3343 and 3344 of Title 12 of the Delaware Code, represent material advancements in the law.

The DLLCA is amended annually to ensure that it is the preeminent statute governing LLCs and to ensure that the DLLCA addresses the needs of practitioners and persons using the LLC form, including the needs of M&A practitioners.  The amendments that took effect on August 1, 2019 provide for creation of “registered series” (Amendments), among other things.

The U.S. District Court for the District of Delaware continues to consider the best allocation of judicial resources now that it has a full complement of four District Court Judges and four Magistrate Judges, following the swearing in of new U.S. Magistrate Judge Jennifer L. Hall.

Delaware Governor John C. Carney has signed House Bill 72 into law (“Trust Act 2019”).  The legislation further improves and modernizes Delaware trust law.

Congress designed Chapter 11 to be flexible to promote the twin goals of rehabilitating distressed businesses and maximizing stakeholder returns. Several recent decisions from the U.S. Bankruptcy Court and District Court for the District of Delaware highlight how Chapter 11’s inherent flexibility promotes these goals.

On Monday, May 20th, the Delaware Secretary of State issued a notice announcing that the State will distribute letters this week inviting companies to enter the Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program (“VDA Program”).  This is a continuation of the State’s heightened enforcement initiative that we highlighted earlier this year.  We believe this round of invitations will be targeted at privately held Delaware incorporated companies with an apparent history of little or no prior reporting of unclaimed property to Delaware.

The American Bar Association Business Law Section has published a new book titled, The Role of Directors in M&A Transactions: A Governance Handbook for Directors, Management and Advisors. Morris Nichols partner Patricia O. Vella is one of four editors of the Handbook that gives directors, management, and legal and financial advisors a framework for providing effective oversight of merger and acquisition deals.

The U.S. Supreme Court will soon render a decision that could have a significant impact on the manner in which some states tax income accumulated in nongrantor trusts.

If approved by the legislature and signed by the Governor, the amendments will become effective on August 1, 2019.

For those who thought the State of Delaware had gone out of the unclaimed property business - think again. After a 2017 overhaul of Delaware’s unclaimed property laws and an increased emphasis on voluntary compliance with those laws, Delaware is sending out dozens of “invitations” to companies to enter its Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program (the “VDA Program”).

In recent years, many states have enacted pre-mortem validation statutes enabling testators or settlors to take proactive steps to avoid will or trust contests.

On February 28, 2019, the United States District Court for the District of Delaware announced the selection of Jennifer L. Hall to fill a newly created fourth Magistrate Judge position on the Court.  When Ms. Hall joins the bench, the District of Delaware will have four magistrate judges to serve alongside the Court’s four district court judges.

Morris Nichols maintains a Cumulative Survey of Delaware case law relating to alternative entities that is updated annually, organized by subject area and includes most cases that address significant alternative entity issues.

In Oxbow Carbon & Minerals Holdings, Inc. v. Crestview-Oxbow Acquisition, LLC, the Delaware Supreme Court affirmed in part and reversed in part a decision by the Court of Chancery that used the implied covenant of good faith and fair dealing to permit minority members (the “Minority Members”) of a Delaware limited liability company (the “LLC”) to cause a sale of the LLC despite the right of certain holders (the “Small Holders”) to block the sale. 

On January 16, 2019, the U.S. District Court for the District of Delaware released a Notice regarding Court operations during the current lapse in appropriations.

On August 1, 2018, the Delaware Limited Liability Company Act (DLLCA) was amended to add, among other things, a division statute (Amendments). The Amendments included new Section 18-217 which permits a Delaware limited liability company (LLC) to divide into two or more LLCs (each a Division company).

Over the last decade, trust law has evolved so the role of trustee can better reflect the open architecture that modern families desire. It’s now commonplace for trust settlors to design so-called “directed trusts,” and existing trusts are frequently transferred to new jurisdictions to be modified through the use of techniques such as decanting, non-judicial settlements agreements, consent modifications, court orders and trust mergers so they can become directed trusts.

On October 1, 2018, the U.S. District Court for the District of Delaware provided an update on case assignments and magistrate judges. The announcement was issued a month and a half after the Court welcomed new Judges Colm F. Connolly and Maryellen Noreika and eliminated the vacant judgeship docket.

The 2018 amendments to the Delaware General Corporation Law (the "DGCL") were recently enacted. The amendments update the ratification statute, Section 204, to address recent case law. Nonstock or "membership" corporations are now also permitted to use the statutory ratification provisions to cure corporate defects.

Recently enacted legislation (“Trust Act 2018”) provides settlors, beneficiaries, fiduciaries and nonfiduciary powerholders with an even greater ability to accomplish their objectives using Delaware trusts.

Delaware recently passed amendments to the Delaware Limited Liability Company Act that enable a new type of series of an LLC known as a “registered series.” The changes address historical uncertainty among lenders seeking to perfect a security interest with respect to a secured lending transaction involving a series of a Delaware limited liability company as a borrower.

In its last session, the Delaware legislature passed a number of amendments to the Delaware General Corporation Law (the “DGCL”) and the Delaware “alternative entity” statutes - the Delaware Limited Liability Company Act (the “DLLCA”), the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”), the Delaware Revised Uniform Partnership Act (the “DRUPA”) and the Delaware Statutory Trust Act (the “DSTA”).

On August 10, 2018, the U.S. District Court for the District of Delaware officially welcomed the Honorable Colm F. Connolly and the Honorable Maryellen Noreika as United States District Court Judges. Both were sworn in to office this week.

We are pleased to announce that Maryellen Noreika and Colm Connolly were confirmed by the U.S. Senate on August 1 to serve as District Judges on the United States District Court for the District of Delaware.

Statutory appraisal remedies allow stockholders who believe they have received inadequate consideration in certain transactions, such as mergers or consolidations, to obtain a judicial determination of the fair value of their shares. Over the years, courts, litigants, and experts alike have grappled with how to make an appropriate fair value determination. To marshal the evidence necessary to most favorably present their case, it is vital for counsel involved in appraisal proceedings to understand the relevant statutory requirements and stay up to date on the shifting case law, including the valuation approach courts are likely to prefer in a given situation.

In In re Energy Transfer Equity L.P. Unitholder Litigation, the Court of Chancery of the State of Delaware concluded that a private offering of securities by Energy Transfer Equity, L.P. (ETE) breached its limited partnership agreement (LPA).

On April 6, 2018, the Corporation Law Section of the Delaware State Bar Association approved amendments to the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq. (the “DLLCA”), the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. (the “DRULPA”), and the Delaware Revised Uniform Partnership Act, 6 Del. C. §§ 15-101 et seq. (the “DRUPA”).

Morris Nichols maintains a Cumulative Survey of Delaware case law relating to alternative entities that is updated annually, organized by subject area and includes most cases that address significant alternative entity issues.

On February 6, 2018, the District of Delaware announced new case assignment procedures in light of Senior Judge Sleet’s decision to retire from the bench this fall and the two judicial vacancies.

In Miller v. HCP & Company, 2018 WL 656378, the Court of Chancery granted defendants’ motion to dismiss an action seeking relief under the implied covenant of good faith and fair dealing under the subject company’s limited liability company agreement (LLC Agreement) in connection with a sale of the subject company pushed by the defendants. 

For many years Delaware corporate law was mainly public company law. But now there is a critical mass of case law relevant to private and venture-backed companies, with 2017 adding to that law perhaps more than any prior year.

New rules for partnership tax audits (the “New Rules”) included in the Bipartisan Budget Act of 2015 shall become effective for partnership tax returns filed for tax years beginning after December 31, 2017.

Morris Nichols attorneys A. Gilchrist Sparks III and Daniel D. Matthews co-authored the closing chapter in a treatise on legal developments in Delaware and the First State’s contributions to US corporate law.

On December 20, 2017, the President nominated Maryellen Noreika and Colm F. Connolly to serve as judges on the United States District Court for the District of Delaware. When confirmed, they will fill the vacancies created by Judge Robinson’s retirement and Judge Sleet taking senior status.

Litigation in Delaware in 2017 has somewhat turned on its head the long-held expectation that “every public deal draws a lawsuit” but “private company stockholders rarely sue.”

Delaware enacted a major overhaul of its unclaimed property statute on February 2, 2017. The New Act affects companies currently under audit, companies in the Delaware voluntary disclosure program (a “VDA”) and any other companies that have unclaimed property reporting obligations to Delaware.

On August 30, 2017, Delaware Governor John Carney signed House Bill 169 into law (“Trust Act 2017”), which provides settlors, beneficiaries and fiduciaries of Delaware trusts with more tools and greater flexibility to confidently accomplish their various objectives.