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ISN Software Corp. v. Richards, Layton & Finger, P.A.

Superior Court of Delaware

February 18, 2019

ISN SOFTWARE CORPORATION, Plaintiff,
v.
RICHARDS, LAYTON & FINGER, P.A., RAYMOND J. DICAMILLO, AND MARK J. GENTILE, Defendants.

          Submitted: January 10, 2019

         COMPLEX COMMERCIAL LITIGATION DIVISION

         On Defendant's Motion to Dismiss for Failure to State a Claim GRANTED

          Christopher H. Lee, Esquire (Argued), Blake A. Bennett, Esquire, Cooch and Taylor, P.A., Timothy S. Perkins, Esquire, Underwood Perkins, P.C., Attorneys for Plaintiff

          P. Clarkson Collins, Jr., Esquire, Carl N. Kunz, III, Esquire, Kathleen A. Murphy, Esquire, Morris James LLP., George M. Kryder, Esquire (Argued), Melissa L. James, Vinson & Elkins LLP, Attorneys for Defendants

          MEMORANDUM OPINION

          MARY M. JOHNSTON, J.

         PROCEDURAL AND FACTUAL CONTEXT

         Defendants Richards, Layton & Finger, P.A., Raymond J. DiCamillo, and Mark J. Gentile, seek dismissal of this legal malpractice action on the grounds that the claims of Plaintiff, ISN Software Corporation, are time-barred. For the reasons detailed herein, this action is dismissed with prejudice.

         Following is the timeline of undisputed facts.

• November 2012 - Plaintiff requested legal advice from Defendants regarding Plaintiffs options to buy back its own shares in order to convert from a C-Corp to an S-Corp.
• Defendants developed a merger designed to cash-out three of the four non-qualifying stockholders at $38, 317 per share. These stockholders (holding a total of 356 shares) would obtain appraisal rights. The fourth stockholder (holding 544 shares) would remain a stockholder and would not obtain appraisal rights.
• Plaintiffs Buyout Reserve held sufficient funds to purchase all 900 shares at $38, 317 per share. However, if the Court of Chancery determined at the conclusion of an appraisal action that the share value was greater than $38, 317, the Buyout Reserve could be exceeded.
• January 9, 2013 - Merger consummated.
• January 15, 2013 - Defendants notified Plaintiffs counsel that the advice concerning appraisal rights was erroneous. All four stockholders in fact obtained appraisal rights.
• January 16, 2013 - The four non-qualifying stockholders were notified of their appraisal rights.
• January 17, 2014 - One stockholder (holding 155 shares) accepted the cash merger consideration of $38, 317 per share.
• January 30, 2013 - The other three stockholders indicated they might seek appraisal.
• February 14, 2013 - Plaintiff and Defendants executed a conflict consent agreement ("Consent Letter").
• April 2013 - Appraisal action filed in the Court of Chancery.
• August 11, 2016 - The Court of Chancery issued its opinion valuing the shares at $98, 783 per share. The total share value exceeded Plaintiffs Buyout ...

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