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Cedarview Opportunities Master Fund, L.P. v. Spanish Broadcasting System, Inc.

Court of Chancery of Delaware

November 27, 2018

CEDARVIEW OPPORTUNITIES MASTER FUND, L.P., CETUS CAPITAL III, L.P., CORRIB CAPITAL MANAGEMENT, L.P., LITTLEJOHN OPPORTUNITIES MASTER FUND L.P., RAVENSOURCE FUND, STONEHILL INSTITUTIONAL PARTNERS, L.P, STONEHILL MASTER FUND LTD., STORNOWAY RECOVERY FUND L.P., VSS FUND, L.P., WEST FACE LONG TERM OPPORTUNITIES GLOBAL MASTER L.P., and WOLVERINE FLAGSHIP FUND TRADING LIMITED, Plaintiffs,
v.
SPANISH BROADCASTING SYSTEM, INC., Defendant.

          ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL REARGUMENT

         WHEREAS:

         A. On August 27, 2018, the court issued a memorandum opinion granting in part and denying in part SBS's motion to dismiss the Amended Complaint in its entirety under Court of Chancery Rules 12(b)(1) and 12(b)(6) for lack of subject matter jurisdiction and for failure to state a claim for relief.[1]

         B. Count V of the Amended Complaint seeks a declaratory judgment that Section 10.4 of the Charter, which purports to allow the suspension of all rights of the stockholders of a Delaware corporation, is invalid and unenforceable under Delaware law.[2]

         C. The court denied SBS's motion to dismiss with respect to Count V, holding that Count V is ripe and that plaintiffs stated a claim that Section 10.4 is invalid as applied.[3]

         D. On September 4, 2018, SBS filed a motion for partial reargument under Court of Chancery Rule 59(f) concerning the denial of its motion to dismiss with respect to Count V (the "Motion"), to which plaintiffs filed an answer in opposition on September H, 2OI8.[4]

         IT IS HEREBY ORDERED, this 27th day of November, 2018, that:

         1. "A motion for reargument under Court of Chancery Rule 59(f) will be denied unless the court has overlooked a controlling decision or principle of law that would have controlling effect, or the court has misapprehended the law or the facts so that the outcome of the decision would be different."[5] A motion for reargument is not a mechanism to "relitigate claims already considered by the court, "[6] or to make new arguments.[7] SBS thus bears "a heavy burden on a Rule 59 motion."[8]

         2. SBS contends that the court "expressly relied on a single representation of fact (made in briefing and at oral argument) to find that Count V is ripe: Plaintiffs' assertion that SBS rejected a Section 220 books and records demand (the 'Demand') sent by West Face Long Term Opportunities Global Master L.P. ('West Face') on the basis of a suspension of stockholder rights authorized by the Charter's Enforcement Provision" in Section 10.4 of the Charter.[9]

         3. According to SBS, this representation was "inaccurate" because, insofar as its rejection of the Demand concerned West Face's potential lack of standing, "the rejection was not on the basis of any suspension of rights pursuant to the Enforcement Provision in Section 10.4 of the Charter" but instead was based on Section 10.5, which provides that any transfer of SBS's stock is ineffective if the transfer would violate the Communications Act or require prior approval of the FCC, including if the transfer results in "alien" ownership of more than 25% of SBS's stock.[10]

         4. The fundamental problem with SBS's Motion is that SBS never argued previously that Section 10.5 of the Charter was the basis for its rejection of the Demand due to a potential lack of standing.[11] Significantly, furthermore, SBS's rejection of the Demand did not identify Section 10.5 specifically as one of the reasons for the rejection. The rejection letter instead stated that "West Face's purchase of SBS stock may be invalid pursuant to Article X of SBS's" Charter and, if so, "West Face is not an SBS stockholder and lacks standing to demand books and records of the Company."[12] Article X includes both Section 10.4 and 10.5 and, thus, it was not unreasonable for plaintiffs to infer that SBS's rejection of West Face's Demand was based on Section 10.4 of the Charter.

         5. Because SBS seeks to raise a new argument that it did not previously present to the court, its Motion is improper and must be DENIED.[13]

---------

Notes:

[1] See Cedarview Opportunities Master Fund, L.P. v. Spanish Broad. Sys., Inc., 2018 WL 4057012 (Del. Ch. Aug. 27, 2018). Capitalized and abbreviated terms not defined herein have the same ...


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