In Stoyas v. Toshiba Corp., a securities class action that has produced a number of notable decisions about the application of the federal securities laws to unsponsored ADRs, the Ninth Circuit recently declined to review the district court’s ruling denying to certify a class.  In doing so, the Ninth Circuit let stand the district court’s novel ruling, which found the relevant named plaintiff to be an atypical class representative after determining that it had purchased the unsponsored ADRs in foreign transactions.[1]
Continue Reading Ninth Circuit Denies Class Cert Appeal in Toshiba Securities Litigation Concerning Unsponsored ADRs

In September 2021, the Delaware Supreme Court in United Food and Commercial Workers Union v. Zuckerberg revamped the test for pleading “demand futility” in shareholder derivative suits for the first time in decades. At the same time, the court’s decision reinforces Delaware courts’ increasing focus on the independence of directors, not only when the board is sued in a shareholder derivative action but also in other conflict situations in which independent directors are called on to exercise their business judgment on behalf of the company.
Continue Reading The Delaware Courts’ Evolving View of Director Independence

In Snow Phipps v. KCAKE Acquisition, the Delaware Court of Chancery ordered the buyer (Kohlberg) to close on its $550 million agreement to purchase DecoPac, a cake decorations supplier.  In doing so, the court easily rejected the buyer’s claims that the COVID-19 pandemic resulted in a material adverse effect (“MAE”) and that the steps

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

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

Last week, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s decision in Lebanon Cnty. Emps. Ret. Fund v. AmerisourceBergen Corp.,[1] a closely watched appeal in which the court clarified the circumstances in which stockholders are entitled to demand books and records to investigate allegations of mismanagement pursuant to Section 220 of the Delaware General Corporation Law.  In a decision that will likely continue the recent trend of an increasing number of Section 220 demands being made, particularly in the wake of allegations of corporate wrongdoing, the Delaware Supreme Court ruled that:
Continue Reading Delaware Supreme Court Clarifies Section 220’s “Proper Purpose” Test

Much has been written of late about the growing prevalence of books and records demands by stockholders under Section 220 of the Delaware General Corporation Law, and the increased willingness of Delaware courts to expand the boundaries of stockholders’ inspection rights conferred by that statute.[1]  A recent decision from the Delaware Court of Chancery exemplifies this trend and introduces an additional risk that companies should consider when determining how to respond to a Section 220 demand.  Specifically, the court’s suggestion that it would consider awarding attorneys’ fees to plaintiffs’ counsel for its costs to litigate the Section 220 action adds a new twist to the already delicate balance that companies must strike when deciding whether (and to what extent) to comply with a stockholder’s Section 220 demand.

Continue Reading Fee-Shifting—A Potential New Tool In Stockholders’ Toolbox When Seeking Books And Records

In a recent decision, the Delaware Court of Chancery found that the board omitted material information from its proxy statement recommending stockholders vote in favor of an all-cash acquisition of the company, and thus “Corwin cleansing”[1] did not apply.  Nonetheless, the court dismissed all claims against the directors because the complaint failed to adequately allege that they acted in bad faith, as required by the company’s Section 102(b)(7) exculpation provision.  See In re USG Corp. S’holder Litig., Consol. C.A. No. 2018-0602-SG (Del. Ch. Aug. 31, 2020).

This decision provides helpful guidance regarding the kind of information that should be included in a merger proxy statement.  It also provides a reminder that Corwin is not the only defense available to directors at the motion to dismiss stage.  In particular, Section 102(b)(7) remains a powerful tool to support dismissal of stockholder claims against directors, even in cases where the proxy omits material information and/or the transaction is subject to “Revlon duties.”[2]
Continue Reading Stockholder Claims Dismissed Even After Corwin Defense Fails

Three recently filed shareholder derivative lawsuits contain intentionally provocative allegations that, despite public statements emphasizing the importance of diversity within their respective organizations, the boards and executive management teams of Oracle, Facebook, and Qualcomm remain largely white and male, and have failed to deliver on their commitments to diversity.  While calls to strengthen commitments to

These days, most public company mergers continue to attract one or more boilerplate complaints, usually filed by the same roster of plaintiffs’ law firms, asserting that the target company’s proxy statement contains materially false or misleading statements.  These complaints usually also assert that the stockholder meeting to approve the merger should be enjoined unless and until the company “corrects” the false or misleading statements by making supplemental disclosures.  While not too long ago cases like this tended to be filed in the Delaware Court of Chancery and other state courts asserting breaches of state-law fiduciary duties, including the duty of disclosure, after Trulia the vast majority of these cases today are filed in federal court under Section 14 of the Securities Exchange Act of 1934.[1]
Continue Reading Rare Federal Court Decision Casts Doubt On Merger Disclosure Claims, But Will It Change Anything?