On Feb. 3, Judge Sue L. Robinson, the longest-serving member of the U.S. District Court for the District of Delaware (and the district judge with the second-highest number of patent cases assigned on a per judge basis in the country) acquired another title—that of senior judge.
There is perhaps one single obligation that most aggravates corporate boards of directors: Paying your opponent's legal fees when you are convinced he has done you wrong. How then is that not just possible, but a regular occurrence?
U.S. Bankruptcy Judge Christopher S. Sontchi has held that absent specific language in a debtor-in-possession financing order, a carve-out for a fixed dollar amount for professional fees does not serve as a cap on the amount of fees to which a professional may be entitled once a Chapter 11 plan is confirmed.
Delaware law entrusts the management of a corporation to its board of directors. Not surprisingly, circumstances arise where a consensus among directors cannot be reached on major decisions impacting a company.
In Corwin v. KKR Financial Holdings,, the Delaware Supreme Court held that the business judgment rule applies to any merger not subject to entire fairness review that has been approved by a fully informed, uncoerced vote of disinterested stockholders.
A recent Delaware decision again signals those courts will closely scrutinize personal and business relationships that are asserted as compromising a director's ability to consider a pre-suit demand impartially.
A recent decision from the Delaware Supreme Court ihighlights the potential impact that directors' business and financial arrangements can have on their independence in the context of considering shareholder demands on the board.
In a case of first impression in Delaware, Vice Chancellor J. Travis Laster held that directors of a corporation, plaintiffs in a defamation action, were public figures for the limited purpose of election-related communications among the company's investors.
Bankruptcy Judge Laurie Selber Silverstein has granted the post-confirmation motion of a trustee of trusts created pursuant to the debtors’ plan of reorganization to examine third parties regarding the cause of the debtors’ financial collapse under Federal Rule of Bankruptcy Procedure 2004.
By Benyamin S. Ross, Jefferson E. Bell and Lauren Kole
The Delaware Supreme Court has reaffirmed the continued applicability of Tooley v. Donaldson, Lufkin & Jenrette, in determining whether a claim is direct or derivative in nature, even when the claim involves a breach of contractual duty owed to a limited partnership.
Under the Delaware Limited Liability Company Act, a non-Delaware resident may be deemed to have consented to being sued in Delaware if she is a “manager” of the LLC. But who, exactly, is such a manager?
In their Corporate Litigation column, Joseph M. McLaughlin and Yafit Cohn, of Simpson Thacher & Bartlett, examine 'In re The Home Depot, Inc. Shareholder Derivative Litigation', which weighed in on a recurring question regarding the demand requirement on which courts have differed: whether pre-suit demand is required for claims alleging a violation of Section 14(a) of the Securities Exchange Act of 1934. 'Home Depot' is the latest in a series of shareholder derivative actions arising from high-profile data breaches to be dismissed in recent years, with the court holding that Delaware's demand requirement applies equally to Section 14(a) claims.
By Gary W. Lipkin, Alexandra Rogin and Justin M. Forcier
The Delaware Court of Chancery has held that a corporate bylaw ran afoul of 8 Del. C. Section 109(b), where it purported to shift attorney fees and expenses to an unsuccessful stockholder that filed an internal corporate claim outside of the state of Delaware.
The derivative complaint alleged that Zynga's CEO, Chairman and controlling stockholder Mark Pincus, along with certain other top managers and directors were given an exception from the company's standing rule preventing insider sales until three days after an earnings announcement.
In a decision with implications that extend beyond bankruptcy, Bankruptcy Judge Christopher S. Sontchi refused to order an email service provider to turn over the contents of a private email account after the owner of the account evaded service and failed to comply with several discovery orders.
Buyers unhappy with the performance of a company or assets purchased frequently assert claims that the seller fraudulently induced the purchase by providing false information of the value of the company or assets in the sale process.
The Delaware Supreme Court has affirmed a Court of Chancery holding that a term sheet setting forth the general parameters of the parties' ongoing relationship was not superseded by an operating agreement later entered into by the parties, despite the inclusion of an integration clause in the operating agreement.
Parties typically seek to narrow the scope of potentially responsive documents by meeting and conferring and reaching agreement on appropriate search terms. The parties next run those search terms against the data collected from the relevant custodians and review the resulting information for responsiveness.
In several recent statutory appraisal actions, the Delaware Court of Chancery has concluded that the fair value of the corporation was equal to the agreed-upon deal price. However, in one recent appraisal action, Chancellor Andre G. Bouchard rejected the defendant corporation's argument that the merger consideration could be "relied upon by the court to set the appraisal value."
In GAMCO Asset Management v. iHeartMedia, Delaware's Court of Chancery considered claims that a controlling stockholder's liquidity needs created conflicts in otherwise arm's-length transactions with third parties.
The Delaware courts encourage plaintiffs who bring derivative claims in Delaware without making demand on the board of directors to seek books and records under Section 220 of the Delaware General Corporation Law so as to be able to plead facts sufficient to demonstrate that demand is excused. Many claims have been dismissed under Delaware Court of Chancery Rule 23.1 because a plaintiff failed to utilize the "tools at hand" to obtain relevant books and records. When a plaintiff grounds its claim on directors' alleged failure to exercise oversight, however, even receipt of books and records may not enable a plaintiff to plead facts sufficient to demonstrate that the directors knowingly ignored their duties so as to have acted in bad faith. That high standard as articulated by the Delaware Supreme Court in Stone v. Ritter makes a Caremark claim for breach of directors' oversight duties as among the most difficult in corporate law. The Court of Chancery's recent decision in Reiter v. Fairbank, C.A. No. 11693-CB (Del. Ch. Oct. 18), demonstrates that, regardless of the injury allegedly sustained by the subject company, a pleading based on books and records obtained from the company that at best reflects awareness of "yellow flags" is not sufficient to call into question the directors' good faith and hence to excuse demand, thus requiring dismissal of the plaintiff's derivative claim.
The stated policy reasons for fee advancement make perfect sense. As the Delaware Supreme Court noted, the purposes of advancement are to "promote the desirable end that corporate officials will resist what they consider unjustified suits and claims, secure in the knowledge that their reasonable expenses will be borne by the corporation they have served if they are vindicated," and "encouraging capable women and men to serve as corporate directors and officers, secure in the knowledge that the corporation will absorb the costs of defending their honesty and integrity."
By Gail Weinstein, Christopher Ewan and Steven J. Steinman
A stockholder of a Delaware corporation who objects to the price to be paid in a proposed all-cash merger can petition the Court of Chancery to determine the "fair value" of his or her shares, so long as the stockholder has not voted for the merger or accepted the consideration paid in the merger and has complied with certain procedural requirements.
U.S. Bankruptcy Judge Brendan Shannon of the District of Delaware recently decided two issues of first impression in this circuit: first, a class-action waiver provision in an arbitration agreement between an employer and an employee violates the National Labor Relations Act (NLRA), and second, an opt-out provision in an arbitration agreement containing a provision that violates the NLRA does not save the arbitration agreement.
A recent decision by Vice Chancellor Joseph R. Slights III represents the latest Delaware Court of Chancery decision to rely on the business judgment standard of review to dismiss a Revlon challenge to a cash-out merger.
Federal Rule of Bankruptcy Procedure 3021 (FRBP) generally provides that following confirmation of a plan, distributions from a debtor's estate will be made to creditors and security holders of record as of the date the distribution is made unless a different date is selected through a confirmed plan. As the advisory committee noted when drafting the 1997 amendments to FRBP 3021, "it may be impractical for the debtor to determine the holders of record with respect to publicly held securities and also to make distributions to those holders at the same time ... [and as a result] the plan or the order confirming the plan may fix a record date for distributions that is earlier than the date on which distributions commence." Outside of a bankruptcy proceeding, distributions to equity security holders in the secondary securities markets are governed by the FINRA Uniform Practice Code (UPC). The UPC material differs from the FRBP 3021 concept of record date in that it defines two relevant milestone dates when determining the rights of security holders to receive distributions: the "record date" and "ex-dividend date." Under the UPC, the record date is the date established by the issuer of the underlying security (with FINRA approval) for determining which holders of securities are entitled to receive distributions. The ex-dividend date" is the date on and after which the security is traded without a specific dividend or distribution, (see FINRA Uniform Practice Code 11120). As a result, beginning on the ex-dividend date" the underlying security will generally trade at a discount proportional to the amount of the distribution being paid to the holder by the issuer.