Last week, the Delaware Court of Chancery upheld the terms of an agreement requiring The Chemours Company to arbitrate a challenge to its spin-off from DuPont. In doing so, Vice Chancellor Glasscock rejected Chemours’ claims that the process DuPont followed in structuring and executing the spin-off rendered the terms of the spin-off unconscionable and thus Chemours’ consent to arbitration ineffective.[1]  The Chemours decision is important as it recognizes that parent companies rely on the parent-subsidiary relationship in structuring spin-offs and in doing so need not follow an arm’s length process with its subsidiary as would apply to a transaction with an unrelated third party.
Continue Reading Don’t Bite the Hand that Feeds You: Delaware Court of Chancery Holds Spin-Offs Are Not Unconscionable

On March 18, 2020, the Delaware Supreme Court issued an opinion in the closely watched appeal in Sciabacucchi v. Salzberg, a case involving a challenge to charter provisions of three Delaware corporations requiring stockholder plaintiffs to litigate claims under the Securities Act of 1933 (the “1933 Act”) in federal court. The en banc Supreme

Cleary Gottlieb’s “2019 Developments in Securities and M&A Litigation” discusses major developments from 2019 and highlights significant decisions and trends ahead.

In Lorenzo, the most significant securities decision of 2019, the Supreme Court clarified the scope of “scheme liability” under Rule 10b-5(a) and (c). The Court also declined to rule on several

On November 22, 2019, the First Circuit Court of Appeals held in Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, that two private equity funds, Sun Capital Partners III, LP and Sun Capital Partners IV, LP were not liable for approximately $4.5 million in multiemployer pension

Vice Chancellor Slights, of the Delaware Court of Chancery, included a slightly self-effacing, and only slightly humorous, note in his recent opinion in a fiduciary claim against the directors of Tesla, Inc., to the effect that the defendants have reason to believe that they drew the wrong judge in the case.  The case relates to the 2018 incentive compensation award to Tesla’s CEO, Elon Musk, that caps out at about $55 billion (that “b” is not a typo).  The footnote concerns, in part, Vice Chancellor Slights’ determination, in a separate recent claim alleging fiduciary breaches by the Tesla board, that members of Tesla’s board were not independent.[1]
Continue Reading Update on Director Independence

Cleary Gottlieb’s “2019 Mid-Year Developments in Securities and M&A Litigation” discusses major developments from the first half of 2019 and highlights significant decisions and trends ahead.

In Lorenzo, the most significant securities decision in 2019 so far, the Supreme Court clarified the scope of “scheme liability” under Rule 10b-5(a) and (c). The

After the Delaware Supreme Court’s recent Aruba decision,[1] many commentators predicted that, going forward, the Court of Chancery would not rely on the target’s unaffected market trading price to determine fair value in appraisal cases, other than as a “check” on other valuation methodologies.  It may therefore come as a surprise that in a decision issued last Friday, the Court of Chancery determined fair value to be equal to the target’s unaffected trading price.  See In re: Appraisal of Jarden Corporation, Consolidated C.A. No. 12456-VCS (Del. Ch. July 19, 2019).  Although still subject to appeal, this decision is also notable because the fair value determination came out 18% below the deal price despite the petitioners having some success in attacking the target board’s sale process, which involved no pre- or post-signing market check. 
Continue Reading Appraisal Update: Unaffected Market Price Makes a Comeback

Last week, the Delaware Supreme Court reversed the Delaware Court of Chancery’s dismissal of a Caremark claim[1] that arose out of the Blue Bell ice cream listeria outbreak in the mid-2010s.  See Marchand v. Barnhill, No. 533, 2018 (Del. June 18, 2019).  The Delaware Supreme Court’s opinion in this closely watched case provides useful guidance to directors on the proper role of the board in overseeing risk management.
Continue Reading Not So Sweet: Delaware Supreme Court Revives Caremark Claim, Provides Guidance On Directors’ Oversight Duties

The German Federal Court of Justice (Bundesgerichtshof) recently had the opportunity to clarify a number of important practical questions of corporate law in connection with asset disposals, the allocation of responsibilities among directors and transactions concluded with board members. We summarize the three relevant decisions from 2018/2019 below.
Continue Reading Recent Important Corporate Law Decisions by German Federal Court of Justice

In late March 2019, the Hertz Corporation and Hertz Global Holdings, Inc. (collectively, “Hertz”), filed two complaints (the “Damages Proceedings”) against its former CEO, CFO, General Counsel and a group president seeking recovery of $70 million in incentive payments and $200 million in consequential damages resulting from Hertz’s 2015 decision to restate its financial statements and an ensuing SEC settlement against Hertz and federal class action lawsuit (which was dismissed).  At the same time, the defendants in those actions each filed separate complaints (which have been consolidated in the Delaware Chancery Court) demanding advancement of their legal fees in the Damages Proceedings (the “Advancement Proceedings”).  The litigation between Hertz and its former executives raises novel questions about whether executives have a legally cognizable duty to set the right “tone at the top” and the consequences if they fail to do so.  The litigation also raises important and interesting questions regarding clawbacks and indemnification.[1]    
Continue Reading Hertz Pursues Novel Theory to Hold Former Management Team Personally Liable for Restatement and Ensuing Legal Proceedings