Category

Private Equity

14 June 2021

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

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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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16 March 2021

Can Inspection Rights Be Waived? Some Observations on Delaware Law

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As recent decisions from the Delaware courts remind us (e.g., Murfey v. WHC Ventures, LLC), Delaware entities often have the ability to negotiate the scope of investors’ right to inspect company books and records—and perhaps even to eliminate those rights.  But few corporations, partnerships, or LLCs appear to do so.  With the proliferation of books-and-records litigation in recent years, however, more Delaware entities should consider whether opportunities may be available to limit the potential burden of such litigation and whether it would be prudent to explore those opportunities.

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28 January 2021

Texas Appeals Court Confirms That Protections Against Usurpation of Corporate Opportunities Under Delaware Law Can Be Contractually “Worked-Around”

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A recent Texas Court of Appeals case held that members of a Delaware limited liability company (LLC) can contract around (i.e., waive) the general principle protecting against usurpation of corporate opportunities. This decision is of particular importance to private equity owners that may hold other investments in companies in the same industry and closely follows recent Delaware case law. The case also should limit the ability for parties to forum shop and seek to obtain a different outcome on Delaware legal issues by filing in another forum, in this case Texas.

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