On February 26, 2021, the Delaware Court of Chancery (McCormick, V.C.) issued a memorandum opinion in The Williams Companies Stockholder Litigation enjoining a “poison pill” stockholder rights plan adopted by The Williams Companies, Inc. (“Williams”) in the wake of extreme stock price volatility driven by the double whammy of COVID-19 and the Russia-Saudi Arabia oil price war.  While the pill adopted by the board in this case had unusual features (such as a 5% trigger and a broad “acting in concert” provision), the Court’s decision provides important reminders for boards in considering whether (and when) to adopt a poison pill in the face of a threat to the corporation.  This includes the types of “threats” that will justify the adoption of a pill, and the scope of protections that will be considered a “proportionate” response to those legitimate threats.  Although the Court struck down the pill in this case, that should not prevent boards from considering adoption of a pill in a situation where they are facing an identifiable threat, whether from a potential takeover or activist shareholder, and tailoring the terms of such a pill to the threat posed.

Please click here to read the full alert memorandum.

Corporate investigations under the Biden Administration’s Department of Justice (“DOJ”) are expected to increase in the coming months.  Navigating such investigations can be complex, distracting, and costly, and comes with the risk of prosecution and significant collateral consequences for the company.  Recently, Cleary Gottlieb partners and former DOJ prosecutors, Lev Dassin, Jonathan Kolodner, and Rahul Mukhi, published a chapter on “Representing Corporations in United States Attorney’s Office and DOJ Investigations,” which can serve as a useful guide for in-house counsel to prepare for an investigation or manage an ongoing matter.  The chapter, available here, covers topics including DOJ’s organizational structure, the typical path of a corporate criminal investigation, recent policy initiatives at DOJ that reflect an effort to provide greater transparency with respect to corporate investigations, the process by which federal prosecutors make critical decisions about filing charges and resolving investigations, and the opportunities for counsel to advocate for their clients along the way.

Cleary Gottlieb’s “2020 Developments in Securities and M&A Litigation” discusses major developments from 2020 and highlights significant decisions and trends ahead.

In Liu v. SEC, the most notable securities decision of 2020, the Supreme Court cemented but limited the SEC’s authority to seek disgorgement as “equitable relief” for a securities law violation.

The Circuit courts also issued opinions that impact shareholder suits alleging violations of the securities laws, addressing both the standards district courts must use in considering defendants’ efforts to rebut the fraud-on-the-market presumption of reliance by showing a lack of price impact, as well as the validity of the “price maintenance” theory of inflation. A decision from the Second Circuit also provided helpful guidance concerning the requirements for pleading scienter in securities actions and the Supreme Court granted certiorari in the matter. The Ninth Circuit also weighed in on whether unproven allegations in whistleblower lawsuits and short-seller reports may constitute corrective disclosures in fraud-on-the-market securities cases.

Please click here for a PDF version of 2020 Developments in Securities and M&A Litigation.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

As we enter 2021, shareholder activism continues to evolve. The traditional campaigns waged by repeat activists leveling familiar critiques will undoubtedly persist into the new year and beyond. But by now most companies are well-versed in the old activist playbook and have developed their own game plan. In past years, some became their own activist and dismantled or reshaped their companies before the first shot was fired. Others rightly believed their strategic plan was the right path and focused on execution while remaining on high alert and preparing behind the scenes in the event an activist emerged. And still others became ensnared in activist attacks and sought a truce unless the price of peace was too great. Against this backdrop, a new world of activism with a different set of rules continues to emerge. In the coming era, we expect that activist-like fire will come from new directions, shareholder engagement will become more visible and louder, and ESG and stakeholder purpose in many cases will be the tip of the spear. This is the activist landscape that boards must be prepared to navigate in 2021.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

As we look back on the mergers and acquisitions landscape of 2020, clear trends emerge and paint a picture of what can be expected in 2021. Certain of these trends seemingly came from nowhere, while others have long been brewing. In either case, directors of both potential acquirors and potential targets will need to consider the implications, if any, of these trends as they approach M&A in 2021.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

As the 25th anniversary of the seminal Delaware Court of Chancery decision In re Caremark Int’l Inc. Deriv. Litig. (Caremark) approaches, there has been a notable rise in the number of cases in which Delaware courts are allowing Caremark claims against company directors to survive motions to dismiss. Significant drivers of this trend appear to be plaintiffs’ increased use of books and records demands under Section 220 of the Delaware General Corporation Law and the expanding boundaries of stockholder inspection rights resulting from recent Delaware court decisions interpreting that statute. Often armed with considerable amounts of information gleaned from a corporation’s books and records with which to draft a complaint, and with the benefit of the inferences afforded to plaintiffs at the pleading stage, plaintiffs have, in some recent cases, been able to plead Caremark claims that have overcome the courts’ traditional reluctance to sustain such claims.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

Over the past few years, many boards have expanded their oversight and consideration of human capital management (HCM) to encompass issues beyond executive hiring and compensation. Before the COVID-19 pandemic, technology and the culture change brought by a new generation of workers had already commenced an irreversible shift in paradigm that established HCM as a board-level issue with vital strategic and risk oversight implications.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

Stakeholder attention to environmental, social and governance (ESG) issues continued to grow throughout 2020 driven by the COVID-19 pandemic (health and safety), the Black Lives Matter movement (diversity and inclusion) and worldwide wildfires (climate change), to name a few. Prodded by investors and other stakeholders, companies have increasingly realized the importance to their businesses of managing human capital and monitoring human rights, whether in respect of their own workforces or their supply and customer chains. Further, disclosure and engagement around companies’ human capital management (HCM) practices have become more important and even the Securities and Exchange Commission, which had in the past largely avoided specific ESG disclosure mandates, has weighed in and now requires disclosure regarding human capital resources in annual reports on Form 10-K.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

A curious feature of the past three years has been the intertwined controversies over earnings guidance, corporate “short-termism” and the quarterly disclosure system. The discussion has been illuminating, and, while further regulatory attention now seems unlikely, the perils of neglecting the long-term will likely continue to color how analysts, regulators and investors view public companies and their disclosures.

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For a PDF of the full memorandum, please click here.