Securities and Federal Corporate Law

Joseph M. McLaughlin and Yafit Cohn

Director Independence to Consider Pre-Suit Demand

By Joseph M. McLaughlin and Yafit Cohn |

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.

Nathaniel J. Stuhlmiller

Applying 'Corwin' to Mergers and Irrebutable Presumption of Business Judgment Rule

By Nathaniel J. Stuhlmiller |

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.

Albert Manwaring of Morris James

Stockholder Merger Vote Sets High Bar for Post-Closing Claims

By Albert H. Manwaring IV |

A Delaware Supreme Court decision reaffirmed the power of fully-informed, uncoerced, disinterested stockholder approval to immunize M&A transactions against stockholder challenge.

Gabrielle Levin

Effect of Director Relationships on Director Independence

By Gabrielle Levin |

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.

James H.S. Levine, Joanna J. Cline, Douglas D. Herrmann and Christopher B. Chuff

Limited Application Fee-Shifting Bylaw Violates DGCL

By James H.S. Levine, Joanna J. Cline, Douglas D. Herrmann and Christopher B. Chuff |

In a legislative response to a Delaware Supreme Court ruling, a new statute limiting the effect of fee-shifting bylaws became effective on Aug. 1, 2015.

Barry M. Klayman and Mark E. Felger

Directors Are Public Figures for Election-Related Communications Among Investors

By Barry M. Klayman and Mark E. Felger |

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.

Lewis H. Lazarus

Court Dismisses Derivative Action in Stockholder's Litigation Demand

By Lewis H. Lazarus |

The Delaware courts have been critical of litigants who bring derivative claims without first seeking books and records.

Gary J. Mennitt and Debra D. O'Gorman

Bondholder Litigation: Covenant-Light Indentures and Affiliate Transactions

By Gary J. Mennitt and Debra D. O'Gorman |

In a closely watched case of particular importance to bond lawyers, the Delaware Supreme Court has recently provided guidance on questions that often arise in bondholders' rights cases.

Benyamin S. Ross, Jefferson E. Bell, and Lauren Kole

Claims Involving a Limited Partnership Deal Are Derivative Under 'Tooley' Test

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.

P. Clarkson Collins Jr.

Del. Supreme Court Finds Demand Excused and Revives 'Zynga' Derivative Claim

By P. Clarkson Collins Jr. |

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.

Thad A. Davis and Vivek Gopalan

Delaware Supreme Court Affirms Guidance in Advancement Disputes

By Thad A. Davis and Vivek Gopalan |

Companies considering agreements to advance legal costs to directors and officers (commonly known as "advancement provisions") should take note of a recent Delaware Supreme Court decision.

Albert Manwaring of Morris James

Reliance on Extra-Contractual Statements in Fraud Claim

By Albert H. Manwaring IV |

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.

John Mark Zeberkiewicz and Stephanie Norman

Opinion Underscores Importance of Careful Drafting of Integration Clauses

By Stephanie Norman |

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.

Thomas E. Hanson, Jr.

Use of Agreed-Upon Search Terms Not Proxy for Gathering All Responsive Info

By Thomas E. Hanson Jr. |

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.

James G. McMillan III

Bouchard Rejects Merger Consideration as an Indicator of Value

By James G. McMillan III |

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."

Lewis H. Lazarus

Court Dismisses Derivative Claim for Alleged Breach of Oversight Duty

By Lewis H. Lazarus |

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.

P. Clarkson Collins Jr.

Court Relies on Fully Informed Uncoerced Stockholder Vote in 'Revlon' Challenge

By P. Clarkson Collins Jr. |

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.

William Savitt of Wachtell, Lipton, Rosen & Katz. HANDOUT.

Beating the Drum for Full Disclosure

By William Savitt |

Delaware courts have recently weighed in on three of the ­hottest issues in deal law: the standard of review governing controlling-­stockholder buyouts, the power of stockholder approval to preclude fiduciary litigation challenging a completed merger, and the law governing merger disclosure documents. The decisions push merger planners toward greater public disclosure before any stockholder vote on a proposed transaction.

Justin M. Forcier

A Comparison of the Superior Court and Chancery Court Rule 26

By Justin M. Forcier |

Anyone who practices in the Delaware Court of Chancery but sometimes finds himself or herself in the Superior Court Complex Commercial Litigation Division (CCLD) should be aware of the subtle differences between Court of Chancery Rule 26 and Superior Court Rule 26 when it comes to what information of a party's expert is discoverable. Two recent rulings from both courts, CIM Urban Lending GP v. Cantor Commercial Real Estate Sponsor, C.A. No. 11060-VCS (Del. Ch. May 19), and Green v. Nemours Foundation, C.A. No. N15C-03-208 (Del. Super. Aug. 17), help to shed light on the topic.

Adam H. Offenhartz, Jefferson E. Bell and Anna Karamigios

Chancery Court: Disclosure Claims Should Be Brought Before Closing

By Adam H. Offenhartz, Jefferson E. Bell and Anna Karamigios |

In a recent ruling, the Delaware Court of Chancery made clear that claims based on allegedly inadequate disclosures brought after a merger closes face an exacting standard on a motion to dismiss. Vice Chancellor Sam Glasscock III in Nguyen v. Barrett, C.A. No. 11511-VCG,rejected the assertion that plaintiffs with a pre-closing disclosure claim can choose to bring the claim post-closing without repercussion—clarifying that the "preferred method for vindicating truly material disclosure claims is to bring them pre-closing, at a time when the court can ensure an informed vote." Glasscock further opined that a rule that disclosure claims "pleaded but not pursued pre-close" are waived would be "salutary."

Brett McCartney

Dismissed Dell Appraisal Claimants Settle With Company

By BRETT M. McCARTNEY |

Appraisal litigation has been a topic at the forefront of the minds of many legal practitioners over the past few years. Recently, amendments to Section 262 of Delaware's General Corporation Law went into effect that were effectuated to eliminate de minimis appraisal claims while also allowing companies to make a pre-judgment payment to dissenting stockholders to reduce interest costs in connection with appraisal litigation. The Delaware Court of Chancery authored several opinions concerning appraisal arbitrage and the technical requirements of Section 262. There have even been unique appraisal cases where the court discussed the circumstances surrounding the proposed settlement of only factions of the appraisal class.

Lewis H. Lazarus

Court Applies 'Corwin' and Upholds Board's Adoption of Dissolution Plan

By Lewis H. Lazarus |

The Delaware Court of Chancery's well-reasoned decision in The Huff Energy Fund v. Gershen, C.A. No. 11116-VCS (Del. Ch. Sept. 29), illustrates the care by which a Delaware court will examine the potential contractual and fiduciary duties at issue when a board adopts a plan of dissolution following a sale of a significant portion of its assets.

Travis J. Ferguson

Chancery Extends Role of Statutory Defenses in Section 220 Demand Actions

By Travis J. Ferguson |

The Delaware Court of Chancery has held that there was no credible basis to infer a potential Caremark claim for breach of fiduciary duty for failure to exercise oversight where the stockholder's only identified use of corporate books and records was to investigate mismanagement or wrongdoing to evaluate potential litigation and the board's actions ultimately would be "fully protected" by 8 Del. C. Section 141(e).

Isaac Greaney and Daniel Gimmel

Attempted Spoliation Translates Into Fee-Shifting

By Isaac Greaney, Daniel Gimmel and Justin Avellar |

Late on New Year's Eve 2013, Philip Shawe broke into the office of his business partner, Elizabeth Elting, removed her hard drive, instructed an employee to image the hard drive, and then returned the hard drive to Elting's office after concealing any evidence that it had been taken.

Brett McCartney

Advancement Rights of Present and Future Officers Under LLC Agreement

By Brett M. McCartney |

Advancement and indemnification rights are vital in attracting the best and brightest individuals to serve as managers of Delaware entities.