CURRENT MONTH (September 2018)

Business Litigation

Arbitration Continues to Be a Hot Topic Before the Supreme Court

By Leslie A. Berkoff, Moritt Hock & Hamroff LLP

Interpretation of the Federal Arbitration Act (FAA) has been the topic of both recent and pending cases on the Supreme Court’s docket.  On May 21, 2018, the Court ruled in Epic Systems v. Lewis, 138 S. Ct. 1612, that companies can prohibit workers from using class-action litigation to resolve workplace disputes, where individual arbitration clauses are contained with the underlying agreements.  In the upcoming term, the Court will consider two additional cases.  On October 3, 2018, oral argument will be held in New Prime Inc. v. Oliveira, No. 17-340, addressing:  (1) whether a court or an arbitrator must determine the applicability of Section 1 of the FAA, which applies only to “contracts of employment;” and (2) whether this section would apply to independent contractor agreements.  On October 29, 2018, oral argument will be held in the case of Lamps Plus, Inc. v. Varela, No. 17-988, as to whether the FAA precludes a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.  Given that business lawyers are the ones who both craft and litigate arbitration agreements, the ongoing analysis by the Supreme Court of these agreements should be closely followed in order to stay abreast of this developing and changing area of law.

Delaware Court of Chancery Rejects Novel "Control Group" Theory

By Benjamin M. Potts, Young Conaway

In Almond for Almond Family 2001 Tr. v. Glenhill Advisors LLC, C.A. No. 10477-CB (Del. Ch. Aug. 17, 2018), Chancellor Bouchard rejected an attempt to broaden the conception of a “control group” under Delaware corporation law for purposes of determining whether a breach of fiduciary duty claim is dually direct and derivative.  The plaintiffs had stipulated that a certain defendant (“Glenhill”) was a controller, with 92.8% stock ownership in a corporation and control over corporate decision-making.  The plaintiffs then advanced the novel theory that other small minority stockholders whose interests were aligned with Glenhill’s formed, together with Glenhill, a control group.  Chancellor Bouchard contrasted this theory with accepted “control group” theories under Delaware law and stated that the analysis for determining the existence of a control group does not apply “to glom onto a preexisting controlling stockholder additional stockholders to give them the status of a ‘control group’ . . . .”  Mem. Op. at 63.  Rather, “in order for a preexisting controlling stockholder to become part of a ‘control group’ with the other stockholders, the preexisting controlling stockholder would have to agree to share with the other stockholders, or to impose limitations on, its own control power . . . for some perceived advantage as part of a legally significant relationship with the other stockholders.”  Mem. Op. at 64.  Plaintiffs provided no evidence of such an arrangement, and thus had not shown the existence of a control group.  This conclusion ultimately led the Court to enter judgment in the defendants’ favor on the plaintiffs’ claims based on the “control group” theory.  In doing so, the Court narrowly construed what constitutes a dually direct and derivative claim (see Mem. Op. at 57-60), consistent with the Delaware Supreme Court’s decision in El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248 (Del. 2016).

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