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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 one of the first opinions addressing fiduciary duty claims in the context of a transaction involving a special purpose acquisition company (“SPAC”), the Delaware Court of Chancery determined that the SPAC shareholders’ right to redeem can be undermined by insufficient disclosures regarding the transaction and allowed class-action claims to continue against a SPAC’s controlling…

The Delaware Supreme Court recently affirmed the Court of Chancery’s 2020 decision in AB Stable VIII LLC v. MAPS Hotels & Resorts One LLC, which blessed a buyer’s termination of a merger agreement on grounds that the target breached its covenant to operate its business in the ordinary course between signing and closing.  In this closely watched appeal, the Delaware Supreme Court held that the ordinary course covenant in this case was breached because of the unprecedented steps the target hotel company took in response to COVID-19, even though the court found those steps to have been reasonable and consistent with the actions of others in the same industry.  This decision provides important guidance both in terms of how such covenants should be drafted but also how to deal with unprecedented crises between signing and closing.[1]
Continue Reading The Delaware Supreme Court Speaks on “Ordinary Course” Covenants

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…

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 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