Alarm.Com and the Open Questions Regarding Trade Secret Claims Related To Usurpation of Corporate Opportunities

This is Part 2 in a 2-part series discussing developments around contractual waivers of the corporate opportunity doctrine in the private equity realm.

In Part 1, we discussed a recent Texas Court of Appeals case which held that members of a Delaware LLC can contract around (i.e., waive) the general principle protecting against usurpation of corporate opportunities.  See Patterson v. Five Point Midstream Funds I and II, L.P., Case No. 01-19-00-643-CV (Tex. App. Dec. 8, 2020).  We discussed that the Patterson decision followed a trend in Delaware that permits parties to contract around the traditional rules prohibiting usurpation of corporate opportunities.  See Alarm.com Holdings, Inc. v. ABS Capital Partners Inc., No. CV 2017-0583-JTL, 2018 WL 3006118 (Del. Ch. June 15, 2018), aff’d, 204 A.3d 113 (Del. 2019).  In December 2019, the Delaware Supreme Court in Alarm.com, affirmed a decision penned by Vice Chancellor Laster out of the Court of Chancery dismissing a claim under the Delaware Uniform Trade Secret Act (DUTSA).

In this Part 2, we will take a deeper dive into Alarm.com, the open questions it left, and potential new developments to keep an eye out for concerning waiver of usurpation of corporate opportunities in the private equity realm.  This decision — and the open questions that have not yet been addressed by subsequent cases — is of particular importance to private equity owners that hold investment in companies governed by Delaware law.

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