By Ellen BardashOf the DLW

An act that would lay out Delaware’s first official procedures for compen-sating the wrongly convicted is being considered in the state House of Representatives.

Introduced by Rep. Sean Lynn, D-Dover, on March 17, the  Delaware Wrongful Imprisonment Compensation Act would require those who claim they’re eligible for compensation to back up their case and have payout amounts from a state fund determined by the Superior Court.

If the act is signed into law, Delaware would join 33 other states and Washington, D.C., in having a for-mal process to compensate  people for spending time in prison and expend-ing attorney fees for crimes they didn’t commit. The bill is sponsored by several Democrats in both chambers, as well as Rep. Brian Pettyjohn, R-Georgetown.

In order to be eligible for the compensation, a convicted person would be required to file a complaint establish-ing that they were convicted of at least one crime in Delaware and served at least part of their sentence in a state correctional facility. The complaint would also need to show the conviction was overturned, either with charges being dismissed or a jury finding the person not guilty in a re-trial, and provide proof that new evidence shows the person didn’t commit the crime and wasn’t an accomplice.

Once that complaint is filed, Delaware’s attorney general would have a chance to contest it.

The bill  narrows who exactly would be eligible to get compensation, making wrongful conviction charges all or noth-ing: if a person was convicted of multiple offenses for the same incident, and not all of those convictions were overturned, they don’t qualify.

Otherwise, the compensation rate for each year of imprisonment would be the same across the board, with a wrongfully convicted person who’s successfully made their case eligible for $50,000 in compensa-tion for every year they were incarcerated. That amount would be prorated for those who spent less than a year in prison—1/365th of $50,000, or about $136.99, for every day. Parole time wouldn’t be eligible for compensation.

Reimbursement of attorney fees for the wrongfully convicted would also be made available under the act. The re-coverable amount is either up to 10% of the total amount someone received in initial compensation or $50,000, which-ever is less. Attorney fees incurred while someone was serving a consecutive or concurrent sentence aren’t eligible.

Also ineligible would be costs for injuries sustained while a person was wrongfully

By Jacqueline ThomsenThe National Law Journal

Dominion Voting Systems has filed a $1.6 billion defamation lawsuit against Fox News, alleging the network sought “to lure viewers back—including President Trump himself—by intentionally and falsely blaming Dominion for President Trump’s loss by rigging the election.”

The lawsuit was filed March 26 in Delaware Superior Court. Clare Locke at-torneys, who have filed Dominion’s pre-vious defamation complaints, are on the lawsuit alongside lawyers with Susman Godfrey and the Delaware firm Farnan.

The 141-page complaint—joined with hundreds of pages of exhibits—alleges that

Fox News kept sharing the false statements about Dominion “because the lies were good for Fox’s business.”

“Fox took a small flame and turned it into a forest fire. As the dominant media

company among those viewers dissatisfied with the election results, Fox gave these fic-tions a prominence they otherwise would never have achieved,” the complaint reads.

“With Fox’s global platform, an audience of hundreds of millions, and the inevi-table and extensive republication and dissemination of the falsehoods through social media, these lies deeply damaged Dominion’s once-thriving business.”

“FOX News Media is proud of our 2020 election coverage, which stands in the highest tradition of American journalism, and will vigorously defend against this baseless lawsuit in court,” the network said in a statement.

MARCH 31, 2021 • VOLUME 24 • NUMBER 13 www.DelawareLawWeekly.com

DELAWARE LAW WEEKLY

AN PUBLICATION • $10.00

Dominion alleges that its employees have been repeat-edly harassed as a result, with some receiving death threats.

Dominion Sues Fox News, AllegingNetwork Aired False Statements

Fox News continues on page 4

Prison Time continues on page 5

Rep. Introduces Bill to Compensate Wrongly Convicted for Prison Time

IN THIS ISSUE

Young Conaway DEI DirectorHonored by Women’s Law Forum ..................... 2

Elliott Greenleaf Reflects on What Recently Deceased Partners Left Behind ....... 3

Digests ................................................................... 7

2 • Delaware Law Weekly March 31, 2021

Young Conaway DEI DirectorHonored by Women’s Law Forum

Young Conaway Stargatt & Taylor an-nounced that the Seton Hall Law Women’s Law Forum honored Deborah Edwards, the fi rm’s diversity, equity and inclusion director, at the organization’s annual Woman of Substance Gala.

Edwards was honored at the virtual event alongside Veronica Allende, direc-tor of the New Jersey division of criminal justice. 

Edwards joined Young Conaway in February as the fi rm’s DEI director. Her prior experience includes a stint as assistant dean for diversity and inclusion at Seton Hall Law School and as an executive assistant attorney general for the New Jersey Attorney General’s Offi ce. She was also chief of staff and counsel to the attorney general. 

Edwards earned her Juris Doctor from the Villanova University Charles Widger School of Law.

Morris Nichols Partner to SpeakOn Delaware Real Estate Law

Morris, Nichols, Arsht & Tunnell partner Tarik Haskins is set to speak on “Delaware Law for Real Estate Lawyers” at 10 a.m. Wednesday, according to a press release from the fi rm.

His discussion will be part of a two-day webcast hosted by the Practising Law Institute. 

Haskins will address pre-negotiation agreements; negotiations, pitfalls and

Senior Counsel at Potter AndersonSet to Discuss Tech Arbitration

Josh Martin, senior counsel at Potter Anderson & Corroon, is slated to speak at the American Bar Association Dispute Resolution Spring Conference as part of a panel on “Exercising Opportunities for Control in Technology Arbitrations.” 

Th e panel, scheduled to be held April 16, will address techniques for arbitration related to technology. 

Martin focuses on mediation and ar-bitration and counsels businesses on telecommunications, public utilities and governmental relations. Earlier in his ca-reer, he was president and CEO of Verizon Delaware and also served as a judge on the Delaware Superior Court. 

He is a former president of the Delaware State Bar Association and helped to form the organization’s multicultural judges and lawyers section.

NEWS IN BRIEFminefields; common deal elements; special servicing; and looking ahead to foreclosure.

At Morris Nichols, Haskins focuses his practice on alternative entity counseling and fi nancings and structured transac-tions. He serves on the fi rm’s executive committee and lawyer development committee and is chair of the diversity committee. 

He is also a member of the Delaware State Bar Association statutory trust committee.

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March 31, 2021 Delaware Law Weekly • 3

Elliott Greenleaf Reflects on What Recently Deceased Partners Left BehindBy Justin HenryThe Legal Intelligencer

For Pennsylvania-based Elliott Greenleaf, which has a presence in Wilmington, the recent death of one co-founder was followed sooner than expected by his co-founder’s unexpected death.

Co-founder, chairman and CEO John Elliott died March 12 of a heart attack at the age of 79. Just weeks before, the firm said goodbye to his co-founder, Stewart Greenleaf, who was also a known name in Pennsylvania politics.

It was a sad and challenging time for the firm, which firm president Frederick Santarelli described as an extension of a tight-knit family, “to lose two people who are literally our big brothers and partners in a personal and professional sense.” Elliott had been actively involved in management until his death, according to the firm.

But the firm did have a path forward. In 2015, John Elliott led Elliott Greenleaf through a leadership personnel change, putting a succession plan in place: Santarelli stepped into the role of presi-dent, succeeding shareholder Henry F.

Siedzikowski, who had served in the role since the firm’s inception in 1990; son Jack Elliott was named managing shareholder; and John Elliott’s brother Thomas Elliott

became vice president.Leaders at the firm said John Elliott

maintained a “next-man-up philoso-phy,” easing a challenging moment in the firm’s history.

‘Door Was Always Open’Elliott maintained a cohesive culture

through personal interactions with col-leagues and maintaining an well-known presence in the community.

“His door was always open, so who-ever wanted to walk in at any time, whether it was personal or business, he was there and no matter how busy he was he would take 10 minutes to make you the epicenter of his life,” John “Jack” Elliott, son of John Elliott and manag-ing shareholder of the firm’s Blue Bell office, said.

Firm leaders like Santarelli credit the loyal team of attorneys and staff, many of whom have stayed at the firm since its 1990 founding, to small gestures like Elliott recalling the names of spouses and children. When the COVID-19 pan-demic arrived on U.S. shores, forcing business to adapt to a remote work-ing environment, leadership said they refused to lay off any employees at the 31-lawyer firm.

“I would describe the firm culture here as one of a family, where John was some-thing of a father and a big brother to us at the same time,” Santarelli said. “That translated into how he kept us all together and moving forward.”

Family members and associates close to Elliott recall him as a proud son of Schuylkill County, where his grandfa-ther and great grandfather, the latter of whom was an Irish immigrant, worked in the mines.

One of his most notable legal accom-plishments, fueled by a strong identifica-tion with his Irish heritage, was in 1979, when he won a posthumous pardon from Pennsylvania Gov. Milton Shapp for  Jack

Elliott Greenleaf continues on page 5

Elliott

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This is the second defamation lawsuit from a voting technology company against Fox News over its coverage of the 2020 election results. In February Smartmatic sued the news network, as well as three of its anchors and Trump-tied attorneys, seeking $2.7 billion in damages. Attorneys for Fox News have since filed multiple motions to dismiss the case.

Dominion has filed several other defamation lawsuits over comments made about the voting company tied to the 2020 election. Trump attorneys Sidney Powell and Rudy Giuliani, as well as MyPillow CEO Mike Lindell, are all facing suits in the U.S. District Court for the District of Columbia.

Powell’s attorneys earlier last week filed a motion to dismiss that complaint over her fraud claims, saying that “no reasonable person would conclude that the statements were truly statements of fact.” If the judge in the case—U.S. District Judge Carl Nichols—doesn’t dis-miss the complaint outright, Powell’s

lawyers are asking him to transfer it to the Northern District of Texas.

In last week’s suit, Dominion alleges that the false claims platformed by Fox News “transformed Dominion into a household name,” and that its employees have been repeatedly harassed as a result, with some receiving death threats.

“Fox sold a false story of election fraud in order to serve its own commercial pur-poses, severely injuring Dominion in the process,” the complaint reads. “If this case does not rise to the level of defamation by a broadcaster, [than] nothing does.”

At a press briefing March 26, Clare Locke partner Tom Clare said the law-suit is the start of Dominion’s next phase of defamation litigation, targeting media outlets that platformed the false claims. When asked why the suit did not target individual Fox News personalities who were referenced in the complaint, Susman Godfrey partner Stephen Shackelford said the company has not ruled out future suits against them.

“Ultimately, though, the buck stops with Fox,” Shackelford said. “It was Fox as

the common denominator. Fox knowingly put these lies on its air over and over again, knowingly rebroadcast these lies, endorsed the lies, amplified the lies.”

As for Susman Godfrey joining Dominion’s legal team, Shackelford said the firm has “been speaking with the folks at Dominion for quite some time” about working on its litigation. An attorney with the firm also filed notices of appearance in the lawsuits against Powell, Giuliani and Lindell on March 26.

“The volume of disinformation about Dominion out there is unprecedented, so given that fact and the geographical reach of the attacks Dominion’s facing expanding the legal team was inevitable,” Shackelford said.

“Tom and his firm are exceptionally talented and we’re very happy to be part-nering with him on this. And when it came time to file this lawsuit, it made sense for us to join the team and work hand-in-hand with Tom,” he added.

Jacqueline Thomsen can be contacted at jathomsen@alm.com.

Fox NewsContinued from page 1

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imprisoned, but the bill clarifies sepa-rate actions for that type of compensation aren’t barred by the act. It does, however, stipulate that being awarded compensa-tion isn’t an admission of wrongdoing and can’t be used in civil actions relating to the facts of the case in any way.

Under the act, anyone who signs off on being compensated would be barred from bringing any related action against the state. They could, however, filed federal

actions against individuals involved with the wrongful conviction.

It’s up to the Superior Court to determine on a case-by-case basis whether compen-sation is awarded as a lump sum or in installments, though the first payment has to be for at least 20% of the total amount owed and the rest of the payments can’t be spread out over longer than 10 years. The court would be responsible for entering an order expunging the wrongful convic-tion and any records related to it from the convicted person’s criminal history, sealing those records from public view.

The bill is currently assigned to the House Judiciary Committee. If passed into law,  it  would take effect July 1, 2023. People wrongfully convicted be-fore then would have 18 months to file a complaint, and those wrongfully con-victed at any time after would have three years after the date their conviction was overturned.

Lynn was not available for comment on the bill.

Ellen Bardash can be contacted at ebardash@alm.com.

Kehoe, a member of a secret society in the Eastern U.S. who was hung in 1878. The society, known as the Molly Maguires, was active in the 19th century in Ireland, Liverpool and parts of the United States, known for activism among Irish American and Irish immigrant coal miners in Pennsylvania.

John Elliott’s death came a little more than one month  after the passing of Greenleaf, who co-founded the firm, served as senior shareholder and rep-resented the 12th district in the state Senate from 1979 to 2018. Greenleaf died Feb. 9 at the age of 81. A spokesper-son for Elliott Greenleaf said he died of respiratory failure.

Santarelli recalled the late state sena-tor and firm co-founder as someone who attorneys could speak with as a “sound-ing board” on ethical concerns, and who gave them ideas about how to approach a difficult opposing counsel.

“He was the person we could always go to for advice and guidance, especially on professional issues,” Santarelli said.

Of his co-founder and longtime col-league, John Elliott released a statement Feb. 10 that highlighted Greenleaf ’s “principled leadership,” which he said was highly respected by both sides of the political aisle for taking a stance on smoking in public places, expanding funding for education and enhancing transparency in judicial and legislative ethics.

Maintaining the Culture in the Next Generation

Lawyers at the firm noted that John Elliott had put in place a plan for the future that they expect will see the firm through this period.

“Preparation and action that he’s put forth for the last five to 10 years has gotten us well prepared to move onward,” Santarelli said. “John would always say ‘move on-ward with vigor,’ and we plan to honor his memory by moving onward with vigor.”

The remaining firm leaders at  Elliott Greenleaf declined to comment on plans for a successor to fill Elliott’s position as chairman and CEO, saying they will announce plans for that position in the coming months.

But they added that the firm  is in the market to grow its junior lawyer ranks and add partners who enhance the firm’s familial culture.

“If you’re stagnant, you’re going in the wrong direction,” Jack Elliott said. “We’re always looking to grow in terms of our younger lawyers and potentially with later-als as well.”

From bar association leadership roles to pro bono work, the firm has maintained a robust culture of community service, with attorneys serving in judicial roles in Pennsylvania courts and some court alumni joining the firm in shareholder positions, according to firm leaders.  Jack Elliott said his father instilled in the firm the philosophy that practitioners of law have public service duties to their communities.

In 2014, President Barack Obama nominated Mark Kearney, co-hiring and a

managing shareholder in the Pennsylvania and Delaware offices of Elliott Greenleaf, to serve as a judge of the U.S. District Court for the Eastern District of Pennsylvania. Shareholder Bruce Kauffman served as a justice of the Pennsylvania Supreme Court from 1980 to 1982, and as a judge of the U.S. District Court for the Eastern District of Pennsylvania from 1998 to 2009.

John Elliott’s own public service bona fides included his service as a chairman of the Disciplinary Board of the Supreme Court of Pennsylvania and appointment by the U.S. secretary of state to the Commission on Security and Cooperation in Europe’s Conferences on the Human Dimension in Paris and on Democratic Institutions in Oslo, the firm said in a statement.

He served as a member of the Philadelphia City Planning Commission, as a commissioner on the Delaware River Port Authority and on the Pennsylvania Environmental Quality Board, according to the firm.

Jack Elliott said his late father’s charis-matic communication style was a power-ful force in bringing in new clients and networking with talented attorneys to bring them into the firm.

“My dad was a great communicator,” Jack Elliott said. “A lot of client development comes from getting to know other lawyers, and people seeing you as capable and some-one who they want to represent their client. That’s kind of the ethos we’re continuing to develop and move forward with.”

Justin Henry can be contacted at juhenry@alm.com.

Prison TimeContinued from page 1

Elliott GreenleafContinued from page 3

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6 • Delaware Law Weekly March 31, 2021

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U.S. DISTRICT COURT OF DELAWARE

BANKRUPTCY

Chapter 11 • Comprehensive Settlement of Civil Claims • Non-Consensual Third-

Party Release of Officers and Directors • Objections of Individual Claimholders

David v. The Weinstein Co. Holdings, LLC, DEFAX Case No. D69342 (D.Del. March 16, 2021), Noreika, U.S.D.J. (18 pages).

Counsel: Frederick B. Rosner, Zhao (Ruby) Liu, The Rosner Law Group LLC, Wilmington, DE; Douglas H. Wigdor, Bryan L. Arbeit, Wigdor LLP, New York, NY; Kevin Mintzer, The Law Office Of Kevin Mintzer, P.C., New York, NY; Thomas P. Giuffra, Rheingold Giuffra Ruffo & Plotkin LLP, New York, NY for appellants. Robert J. Feinstein, Debra I. Grassgreen, Jason H. Rosell, Colin R. Robinson, Pachulski Stang Ziehl & Jones LLP, Wilmington, DE for appellee.

Bankruptcy court properly approved non-consensual third-party releases of insurers and directors/officers in liq-uidation plan where releases necessary to secure funds from released parties needed to satisfy creditor claims.

Appellants filed an emergency mo-tion for a stay pending their appeal of a confirmation order. Debtors filed voluntary Chapter 11 petitions. Debtors and the committee of unsecured credi-tors filed a plan of liquidation, which included a comprehensive settlement of all claims related to debtor’s founder Harvey Weinstein’s sexual misconduct. The proposed plan was approved by about 83 percent of the holders of sex-ual misconduct claims and by over 96 percent of general unsecured creditors.

Appellants were four individuals who each held sexual misconduct claims against Harvey Weinstein. Appellants objected to the non-consensual third party releases of insurers and for-mer directors and officers of debtor. In exchange for the release, the insur-ers were contributing over $35 million for the benefit of debtor’s estate and creditors, of which over $17 million was being set aside in trust for credi-tors holding sexual misconduct claims. The former directors and officers were

also contributing significant portions of their insurance coverage rights, includ-ing a waiver of indemnity claims against debtor and waiver of their rights under various insurance policies to seek full and priority reimbursement of their defense costs.

Appellants argued that the release did not satisfy circuit case law standards for approval because the release was not necessary to a reorganization and because the former officers and direc-tors did not give fair consideration in exchange for release. The bankruptcy court overruled appellants’ objections and confirmed the plan. Appellants ap-pealed the confirmation order and filed the present motion to stay consumma-tion of the plan.

The court denied appellants’ mo-tion for a stay. The court first noted that appellants had failed to cite to case law standing for the proposition that a plan of liquidation could never contain non-consensual third-party releases. Although appellants cited to case law that they argued held that such releases could be permissible where necessary to the reorganization of the debtor, the court noted that the cases cited by ap-pellants were from other jurisdictions, while other courts in the circuit had approved liquidation plans containing non-consensual third-party releases upon a showing of fairness, necessity, and exceptional circumstances.

The court further rejected appellants’ challenge to the bankruptcy court’s fac-tual findings of necessity, fairness, and exceptional circumstances. The court noted the bankruptcy court’s finding that the releases were necessary to obtain contributions from the insur-ance companies and former officers and directors, since without such funds debtor would have few assets to satisfy the claims of creditors. The court noted that if creditors holding sexual miscon-duct claims were required to litigate their claims through the tort system, they would face difficulties in obtaining recovery from the insurers, who would have bases to deny coverage. Thus, the court agreed with the bankruptcy court that, absent the releases, victims of sex-ual misconduct by Harvey Weinstein were unlikely to obtain any significant financial recovery.

COMMERCIAL LAW

Annuity • Named Beneficiary Dispute • Interpleader • Dismissal of Counterclaims

Delaware Life Ins. Co v. Short, DEFAX Case No. D69343 (D.Del. March 17, 2021), Stark, U.S.D.J. (9 pages).

Counsel: Marc S. Casarino, Karine Sarkisian, White and Williams LLP, Wilmington, DE for plaintiff. Barbara Barto, Wilmington DE, pro se defendant; Bernard A. Van Ogtrop, Jared Thomas Green, James S. Green, Seitz, Van Ogtrop & Green, P.A., Wilmington, DE for defendant Craig.

Counterclaims for breach of annuity contract and bad faith not dismissed where insurer delayed payment to sole named beneficiary based on insurer’s receipt of competing claim to benefits that was alleg-edly devoid of supporting evidence.

Plaintiff Delaware Life Insurance Company moved to dismiss the coun-terclaims filed by defendant Irene Craig. Delaware Life had issued an annuity policy to John Short. Initially, Short designated his daughters Ellen Short and Barbara Barto as the primary beneficiaries of the police. Thereafter, Short designated his spouse, Irene Craig, as the sole beneficiary.

Following Short’s death, defendants Ellen Short, Philip Thompson and Irene Craig engaged in litigation regarding own-ership of certain of Short’s assets. The liti-gation was ultimately settled.

Thereafter, defendant Irene Craig re-quested Delaware Life provide her with available options and required forms to secure payment of benefits under the an-nuity policy to her. Delaware Life refused, citing a notice filed by Barbara Barto claiming that Short had “told her that she was a named beneficiary” and demanding payment of benefits to herself.

Delaware Life filed the present inter-pleader action against Ellen Short, Philip Thompson, Barbara Barto, and Irene Craig, seeking to interplead the benefits of the annuity contract. Irene Craig an-swered the complaint and filed counter-claims against Delaware Life for breach of contract, bad faith, and declaratory judgment. Delaware Life filed the present motion to dismiss Craig’s breach of con-tract and bad faith claims.

The court denied the motion, find-ing that Craig had plausibly stated

DIGESTS OF RECENT OPINIONS

8 • Delaware Law Weekly March 31, 2021

her claims. The court noted Craig’s allegations included claims that Delaware Life knew that Craig was the sole beneficiary of the annuity contract and had refused to pay the benefits thereunder, and thus Delaware Life also would know that Barto’s claims that her father told her that she was a ben-eficiary would not alter its obligation to pay benefits to Craig. The court held that these allegations, if true, would support a finding that Delaware Life had delayed payment of benefits to Craig without reasonable justification.

Removal • Restrictive Covenants • Mandatory Forum Selection Clause •

Convenience • 28 U.S.C. §1404(a)

Perma-Liner Indus., LLC v. D’Hulster, DEFAX Case No. D69347 (D.Del. March 12, 2021), Andrews, J. (14 pages).

Counsel: Scott A. Holt, Alberto E. Chavez, Young Conaway Stargatt & Taylor, LLP, Wilmington, DE for plaintiff. Scott G. Wilcox, Moore and Rutt, P.A., Wilmington, DE; Robert D. Eckard, Law Office of Robert Eckard & Associates, P.A., Palm Harbor, FL for defendant.

Public policy factors warranted the transfer of this case to a federal district court in another state, even though two of the parties’ agreements contained mandatory forum selection clauses in favor of Delaware.

Plaintiff was a Delaware company with its principal place of business in Florida. Defendant had previously been an em-ployee of plaintiff. The parties executed four agreements in connection with de-fendant’s employment, all of which con-tained restrictive covenants. These cove-nants prohibited defendant from engaging in any competing business and soliciting any employees, suppliers or vendors who transacted business with plaintiff.

Defendant resigned from his employ-ment with plaintiff in April 2019. Less than a year later, defendant established a California company with a principal place of business in Florida. This com-pany engaged in the same type of busi-ness as plaintiff. Allegedly, defendant also hired several of plaintiff ’s employ-ees and solicited some of plaintiff ’s cus-tomers. Plaintiff claimed that defendant violated the restrictive covenants in the parties’ agreements.

In the matter before the court, de-fendant sought to remove this case to a federal district court in Florida, pursu-ant to 28 U.S.C. § 1404(a). This provision

allowed the court to transfer a civil case to another district based on the conve-nience of the parties and witnesses, and in the interest of justice. The court con-sidered the balancing factors stated in the matter of In re: Howmedica Osteonics Corp., 867 F.3d 390.

Two of the parties’ agreements con-tained mandatory forum selection clauses in favor of Delaware. The other two agree-ments contained permissive forum selec-tion clauses. The parties, the majority of the witnesses and the evidence were all lo-cated in Florida. Due to the Covid-19 pan-demic and uncertainty regarding vaccine access, the court noted that traveling to litigate in Delaware could be difficult. The practical consideration of having trial in Florida made it easier, less expensive and safer for public health reasons. Neither court was significantly more congested than the other. The local interest factor favored Florida, because the parties ex-ecuted their agreements there, plaintiff had its main office there, and defendant was a resident of Florida. The court noted that the local interest factor did not favor Delaware when the only known relation-ship with Delaware was the fact that one party was incorporated there.

Two of the restrictive covenants that plaintiff sought to enforce were governed by Florida law, which had one of the most pro-business non-compete laws in the country. Because Florida’s law was an out-lier, the court noted that Florida had a strong public interest in ensuring that its non-compete statute was applied in the way intended.

None of the factors weighed against transfer to Florida. Weighing all of the public interest factors together, the court concluded that this was one of the unusual cases where the interests of justice were served by favoring the forum identified in a permissive forum selection clause. Therefore, the court granted the motion to transfer.

INSURANCE LAW

Life Insurance • Stranger-Oriented Life Insurance Policy • Estate’s Recovery of

Insurance Proceeds • Motion to Stay or Dismiss

Estate of Albart v. Lavastone Capital LLC, DEFAX Case No. D69344 (D.Del. March 18, 2021), Andrews, U.S.D.J. (9 pages).

Counsel: Donald L. Gouge, Jr., Donald L. Gouge, Jr., LLC, Wilmington, DE; Daniel

R. Miller, Walden Macht & Haran LLP, Philadelphia, PA for plaintiffs. Kenneth J. Nachbar, Megan Ward Cascio, Zi-Xiang Shen, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE for defendants.

Court declined to dismiss or stay ac-tion under Colorado River abstention doctrine where moving party failed to explain how the case met any of the six factors under the doctrine to war-rant favoring a parallel action in another jurisdiction.

Defendants Lavastone Capital LLC and its securities intermediary U.S. Bank, N.A. moved to dismiss or stay the action filed by plaintiffs, the Estate of Edward Albart and the Edward Albart Living Trust. Plaintiffs filed suit against defendants concerning a $9 million life insurance policy issued on the life of Edward Albart and paid to Lavastone upon Albart’s death. Lavastone had acquired the policy from an entity known as Coventry, which was engaged in a scheme to originate life insurance policies on persons 60 or older, who were expected to live fewer than 15 years, where the two-year incontestability period had passed.

Plaintiffs alleged that the policy was a “stranger originated life insurance policy” because it was issued without an insur-able interest. Plaintiffs sought to recover the $9 million in policy benefits from Lavastone. After counsel for the estate contacted U.S. Bank regarding the pos-sibility of litigation against defendants to seek payment of the policy proceeds to plaintiffs, Lavastone filed an anticipa-tory declaratory action in Florida state court, seeking a ruling that Lavastone was the rightful owner of the proceeds from the insurance policy and that any ac-tion to adjudicate rights to the proceeds should occur in Florida and be governed by Florida law.

Lavastone subsequently moved to dis-miss or stay plaintiffs’ action in favor of the Florida action, arguing that plaintiffs lacked standing because their complaint was filed before probate orders were is-sued appointing a personal representa-tive of the estate, that the first-filed rule required deference to the Florida action, and that Florida was the more convenient forum under a forum non conveniens analysis. However, Lavastone ended up abandoning these arguments in its reply brief, conceding that courts applied the Colorado River abstention doctrine in cases such as this.

However, applying the Colorado River doctrine, the court denied Lavastone’s

March 31, 2021 Delaware Law Weekly • 9

motion. The court noted that Lavastone failed to address the six factors under the doctrine in a complete and coherent manner. The court also noted that it ap-peared that Delaware law would apply to plaintiffs’ claims, as both claims were brought under Delaware statutory and common law.

MERGERS AND ACQUISITIONS

Res Judicata • Standing • Prior Litigation • Stay

Yeransian v. Markel Corp., DEFAX Case No. D69349 (D.Del. March 16, 2021), Noreika, J. (17 pages).

Counsel: Laurence V. Cronin, Smith, Katzenstein & Jenkins LLP, Wilmington, DE; James D. Sherrets, Diana J. Bogt, Sherrets Bruno & Vogt, LLC, Omaha, NE for plaintiff. John M. Seaman, Abrams & Bayliss LLP, Wilmington, DE; Kristine Maher, Thomas Prewitt, Graydon Head & Ritchey LLP, Cincinnati, OH; Russell C. Silberglied, Travis S. Hunter, Richards, Layton & Finger, P.A., Wilmington, DE; Joseph M. Pastore, III, Pastore & Dailey LLC, Stamford, CT for defendants.

The court granted a motion to dismiss plaintiff’s claims based on res judicata and lack of standing. The remaining de-fendant was entitled to a stay of this case pending the outcome of an arbitration proceeding.

Defendant Markel Corporation ac-quired Aspen Holdings through a merger transaction in 2010. Prior to the merger, Aspen had retained one of the B. Riley defendants to act as a broker in seek-ing potential investors for Aspen. The engagement agreement provided that B. Riley would receive 1.25 percent of the aggregate consideration paid to Aspen in a sale or merger. When the merger closed, Aspen shareholders were entitled to ad-ditional consideration to be paid over a period of years, pursuant to a contingent value rights agreement.

As representative of those who held rights under the CVR agreement, plaintiff filed this action in August 2020 against Markel and the B. Riley parties for breach of contract, fraudulent misrepresentation and breach of fiduciary duty. Plaintiff had previously filed lawsuits against these parties in connection with the CVR agreement. One case which had also been filed in the federal district court for Delaware was stayed pending resolution of an arbitration proceeding. Plaintiff had filed another case in Nebraska. B.

Riley sought to dismiss the Nebraska ac-tion for lack of standing, and the court granted the motion. The Eighth Circuit Court of Appeals affirmed the holding that plaintiff lacked standing.

Markel filed a motion to stay this pro-ceeding, and B. Riley filed a motion to dismiss. B. Riley argued that the doc-trine of res judicata applied, because the Nebraska court entered a final judgment dismissing plaintiff’s claims. Res judicata applied where there had been a final judgment on the merits in a prior lawsuit involving the same parties or their privies, and the subsequent suit was based on the same cause of action. Nayak v. McNees Wallace & Murick LLC, 700 F.App’x 172. The Nebraska court had entered a final judgment. Both cases involved the same plaintiff, and the B. Riley defendants had all been named in the Nebraska case. The allegations of both complaints relied on the same facts and asserted the same theories of recovery.

Even if res judicata did not apply, the court concluded that plaintiff lacked standing because plaintiff did not have any rights under the CVR agreement and he was not a third-party beneficiary. Plaintiff responded that he was protect-ing the CVR holders’ right to receive cash under the CVR agreement and that excess payments to B. Riley would reduce the amount available to the CVR holders. The court found that plaintiff lacked standing because he did not have any rights under the CVR agreement that were particular-ized and actual. He had not yet received any potentially insufficient payments be-cause the amount owed had not yet been determined.

The court granted B. Riley’s motion to dismiss. The court granted Markel’s request for a stay, because the outcome of the pending arbitration would likely simplify the issues in this case.

DELAWARE COURT OF CHANCERY

CORPORATE ENTITIES

Dividends • Market Capitalization • Improper Venue • Ambiguity • Mandatory Language

Giesecke+Devrient Mobile Security Am., Inc. v. NXT-ID, Inc., DEFAX Case No. D69345 (Del. Ch. March 16, 2021), Fioravanti, V.C. (33 pages).

Counsel: Lewis H. Lazarus, K. Tyler O’Connell, Bryan Townsend, Morris James LLP, Wilmington, DE; Aryeh S. Portnoy, Emily Alban, Crowell & Moring

LLP, Washington, DC for plaintiff. S. Mark Hurd, Alexandra M. Cummings, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Michael T. Sullivan, David E. Danovitch, Clark A. Freeman, Sullivan & Worcester LLP, New York, NY for defendant.

The plain language of a contract pro-vided that a holder of preferred stock was entitled to dividends at a higher rate in perpetuity. The court granted summary judgment in favor of plaintiff stockholder.

Plaintiff owned preferred stock in de-fendant, a Delaware corporation. This dispute involved the payment of divi-dends on plaintiff’s stock. The certificate of designations provided for a five per-cent dividend rate, which increased to 15 percent if the corporation’s market capitalization was $50 million for more than 30 consecutive days. The parties did not dispute that the 15 percent dividend rate was triggered during the first quarter of 2018. The question was whether the higher dividend rate applied only to that quarter, or if the 15 percent dividend rate continued into perpetuity.

Defendant moved to dismiss this case based on improper venue. According to defendant, a forum selection clause in the merger agreement required that plaintiff had to pursue its claims in New York. The court concluded that the merger agreement only applied to trans-actions contemplated by that agreement. The merger agreement did not refer to the certificate of designations, nor did it govern the dividend issue in this case. The parties to the merger agreement and certificate of designations were not the same, and these two documents served different purposes. The court concluded that plaintiff’s claims were not within the scope of the forum selection clause contained in the merger agreement, so it denied defendant’s motion to dismiss for improper venue.

Next, the court considered plain-tiff ’s motion for summary judgment. Plaintiff argued that once the higher dividend rate was triggered, it continued at that rate in perpetuity. The company insisted that the market capitalization rate could only be calculated based on trading days. Plaintiff countered that a company’s market capitalization on any non-trading day was simply the same as on the most recent trading day. The court agreed with plaintiff. Defendant’s argument was contrary to the plain lan-guage of certificate of designations. If the parties had intended that the term “day”

10 • Delaware Law Weekly March 31, 2021

meant “trading day” or “business day,” they could have used those terms.

The court concluded that defen-dant’s interpretation of the duration of the higher dividend rate was not supported by the plain language of the certificate of designations. The divi-dend rate provision stated that once the threshold was met, the dividend rate “shall” increase to 15 percent. The use of the term “shall” meant that the increase was mandatory. If the par-ties had intended the dividend rate to revert to five percent, they could have provided for that. Defendant’s failure to pay plaintiff the dividends to which it was entitled was a breach of the certifi-cate of designation. The court granted summary judgment in favor of plaintiff.

CORPORATE GOVERNANCE

Breach of Fiduciary Duty • Aiding and Abetting • Corporate Controller • Disclosure

RCS Creditor Trust v. Schorsch, DEFAX Case No. D69348 (Del. Ch. March 18, 2021), Glasscock, V.C. (21 pages).

Counsel: Philip Trainer, Jr., Marie M. Degnan, Ashby & Geddes, Wilmington, DE; John P. Coffey, Gregory A. Horowitz, Jeffrey S. Trachtman, Leah S. Friedman, Kramer Levin Naftalis & Frankel LLP, New York, NY for plaintiff. Daniel A. Mason, Paull, Weiss, Rifkind, Wharton & Garrison LLP, Wilmington, DE; Allan J. Arffa, Gregory F. Laufer of Paull, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY for defendants.

The court granted summary judg-ment because a corporate controller did not breach his fiduciary duty by making a business decision regarding how he would vote his shares. However, the ex-istence of factual issues meant that the remaining claims had to proceed to trial.

Plaintiff was a creditor trust that had been assigned certain claims held by the creditors of bankrupt RCS Capital Corporation. In the complaint, plaintiff alleged claims for breach of fiduciary duty against a corporate controller, Nicholas Schorsch, as well as aiding and abetting claims against his affiliates. Defendants moved for summary judgment.

The first claim involved a failed deal between RCAP and American Realty Capital Properties. Schorsch sat on the board for both entities, but he re-cused himself from board votes pertain-ing to this transaction. The audit com-mittee for American Realty learned of

potential accounting irregularities, but that information was not disclosed to RCAP. The RCAP board voted in favor of the transaction with American Realty. Once it learned about the internal in-vestigation, RCAP terminated the deal. American Realty sued and RCAP settled that case for $60 million. Plaintiff argued Schorsch knew of the investigation prior to RCAP’s approval of the transaction, and he breached his fiduciary duty by failing to disclose it. Defendants argued Schorsch did not know enough about the substance of the investigation or the accounting issues to disclose it to RCAP. The court denied summary judgment on this matter because the issues regarding what Schorsch knew and what he did or did not do were all factual matters that were better addressed at trial.

Plaintiff ’s second claim involved potential deals with Centerbridge and Apollo Global Management. Neither of those deals were ever consummated. Plaintiff claimed that Schorsch threat-ened the special committee by saying he would not approve the Centerbridge deal. However, plaintiff did not point to any evidence that supported the existence of such a threat. Even if true, such a state-ment by Schorsch simply meant that he would vote his stock in his business inter-est. The court concluded that was not a threat to the independence of the special committee; rather, it was simply a busi-ness decision that Schorsch communi-cated to the committee. A controller was not under a duty to sacrifice on behalf of the company. Because the court found no factual issues for trial, it granted defen-dants’ request for summary judgment on this claim. With respect to plaintiff’s core claim, the court held that the creation of a trial record was needed, so it deferred its decision on that matter.

DELAWARE SUPERIOR COURT

INSURANCE LITIGATION

Reformation • Underinsured Motorist • Standing • Third-Party Beneficiary

Gonzalez-Rodriguez v. Soto, DEFAX Case No. D69346 (Del. Super. March 15, 2021), Medinilla, J. (15 pages).

Counsel: Joel Fredricks, Weik, Nitsche & Dougherty, LLC, Wilmington, DE for plaintiff. Jessica L. Tyler, Marshall, Dennehey, Warner, Coleman & Goggin, Wilmington, DE for defendant National Fire Insurance Company of Hartford.

An injured worker lacked standing to reform an insurance policy where his employer had elected not to have under-insured motorist coverage, so the court granted insurer’s motion to dismiss.

Plaintiff was injured in a motor vehi-cle accident while he was acting within the scope of his employment. At the time of the accident, plaintiff was a pas-senger in a company vehicle. The other driver’s insurance carrier tendered its policy limits of $25,000. Plaintiff ’s employer, Tri-State, had obtained in-surance coverage through defendant National Fire Insurance Company. Plaintiff sought underinsured motorist coverage through Tri-State’s policy, but insurer denied coverage because Tri-State had opted to reject all uninsured and underinsured motorist coverage when it obtained its policy.

Plaintiff filed this lawsuit against the other driver and National Fire Insurance Company. He asserted a reformation claim against insurer with respect to UM/UIM coverage. Insurer filed a mo-tion to dismiss for failure to state a claim, arguing that plaintiff lacked standing to reform Tri-State’s insurance policy. Plaintiff responded that dismissal was premature because insurer had not yet provided written discovery related to the complete underwriting file for this insur-ance policy. The court had allowed some limited discovery. One of the co-owners of Tri-State submitted an affidavit which stated that the company had not in-tended to purchase UM/UIM coverage. Insurer maintained that plaintiff could not assert claims for UM/UIM coverage where the named insured had rejected such coverage. Plaintiff insisted that employees for whom Tri-State had ob-tained insurance coverage should have standing to reform the policy if insurer violated the law by failing to provide a meaningful offer of UIM coverage.

The court found that plaintiff did not have standing to reform the insurance policy. Delaware law required that in-surance carriers had to clearly commu-nicate offers of UM/UIM coverage to their policyholders. The right to reform belonged to the policyholder, Tri-State. Plaintiff was only an employee of Tri-State, not an officer or owner of the com-pany. Plaintiff ’s status as a third-party beneficiary did not give him standing to reform the insurance policy. Because plaintiff lacked standing to reform the insurance contract, the court granted insurer’s motion to dismiss.

March 31, 2021 Delaware Law Weekly • 11

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