Board of Directors Fiduciary Duty

News & Analysis as of

Delaware Chancery Court Holds that Creditor Plaintiffs in Derivative Suits May Satisfy Standing Requirement by Showing...

In Quadrant Structured Products Co., Ltd. v. Vertin, C.A. No. 6990-VCL, 2015 WL 2062115 (Del. Ch. May 4, 2015), the Delaware Court of Chancery held that a creditor plaintiff needs only establish that a corporation was...more

Locke Lord QuickStudy: Rights of Creditors and Duties of Directors of Insolvent Delaware Entities Clarified

When companies are in financial distress the question arises as to what rights shift to creditors from shareholders or other equity owners. The Delaware Chancery Court recently addressed this issue in some detail in Quadrant...more

Delaware Offers New Guidance on Enforcing Fiduciary Duties Owed to Insolvent Corporations

On May 4, 2015, Vice Chancellor Travis Laster of the Delaware Court of Chancery issued a decision in Quadrant Structured Products Co., Ltd. v. Vertin, analyzing creditors’ standing to bring derivative claims against directors...more

Violation of Corporate Charter: Breach of Contract, Fiduciary Duties or Both

When a company takes action through its board in violation of its certificate of incorporation, may a plaintiff stockholder bring suit against the company directly for breach of its certificate—the most important of corporate...more

Delaware court of chancery issues significant ruling on the ability of creditors to assert fiduciary duty claims against...

In Quadrant Structured Products Co. v. Vertin, 2015 WL 2062115 (Del. Ch. May 4, 2015), the Delaware Court of Chancery (Vice Chancellor J. Travis Laster) announced a bright-line standard governing the threshold inquiry of when...more

CLIENT ALERT: Delaware Supreme Court Establishes Rule Permitting Dismissal of Independent Directors From Entire Fairness Suits

In re Cornerstone Therapeutics Inc. S’holder Litig., No. 564, 2014 (Del. May 14, 2015) & Leal v. Meeks, No. 706, 2014 (Del. May 14, 2015) In these interlocutory appeals, the Delaware Supreme Court resolved a...more

Court of Chancery Clarifies Creditors' Rights

A just-issued Court of Chancery decision clarifies, and possibly expands, creditors' rights. In 2007, the Delaware Supreme Court ruled that a corporation's creditors may sue its board of directors for violating its fiduciary...more

Delaware Court Limits Stockholder Ratification Defense for Derivative Claim Challenging Director Compensation - Court Permits...

In Calma v. Templeton, et al., C.A. No. 9579-CB, (Del. Court of Chancery, April 30, 2015), the stockholders of Citrix Systems, Inc. (the “Company” or “Citrix”) had previously approved a compensation plan with few limits;...more

Avoiding Personal Liability: A Guide For Directors And Officers

According to the popular media, we are living in an era of corporate crime. Scandals like Enron, HealthSouth and WorldCom stretch so far back they seem like they are not even of this millennium. Among the milestones since...more

Directors of Nonprofit Held Financially Liable for Relying on Incompetent Officers and Lack of Oversight

In a striking decision earlier this year, the 3rd Circuit Court of Appeals affirmed a jury’s findings of liability for breach of fiduciary duties and ‘deepening insolvency,’ and the award of $2.25 million in compensatory...more

Corporate Board Responsibility for Compliance

You can talk all you want about the importance of “tone-at-the-top.” People use that term all the time and everyone nods their heads in agreement. But what is the “top”? Is it the CEO? Is it senior executives? Is it the...more

How Recent Fiduciary Duty Cases Affect Advice To Directors And Officers Of Delaware And Texas Corporations

The conduct of corporate directors and officers is subject to particular scrutiny in the context of business combinations (whether friendly or hostile), executive compensation and other affiliated party transactions,...more

The Ropes Recap: Mergers & Acquisitions Law News - January 2015

In this issue: - News from the Courts - Delaware Supreme Court Clarifies Fiduciary Duties in Sale Context and Overturns Judicial Imposition of Auction in Deal with Passive Market Check - Illinois Court...more

"Insights Focus: Key Observations for Directors and Senior Executives"

Although Insights is intended to cover a wide range of issues, there are a number of topics we believe will be of particular interest to directors and senior corporate executives. Below is an introduction to these topics and...more

In re Family Dollar Stores, Inc.: No Revlon Duty to Seek Better Terms From Competing Bidder

Last month, in In re: Family Dollar Stores, Inc. Stockholder Litigation, a Delaware Chancery judge rejected the efforts of certain shareholders of Family Dollar Stores, Inc., to prevent Family Tree’s shareholders from voting...more

Five Changes to the Tennessee Nonprofit Corporation Act That You Need to Know

The following are five important changes to the Tennessee Nonprofit Corporation Act (the Act) which became effective January 1, 2015: 1. Affirmative Disclosure Requirement to Report Up the Chain of Command; 2....more

Del. Justices Reverse Injunction Halting Sale of Control Transaction

When a Delaware corporation engages in a sale of control transaction, its board's obligation is to obtain the highest value reasonably attainable. This obligation, often referred to as Revlon duties, may be fulfilled as long...more

Delaware Supreme Court Holds That Revlon Does Not Require An Active Market Check, Reverses Lower Court Order Preliminarily...

On December 19, 2014, the Supreme Court of Delaware reversed the Delaware Court of Chancery's November decision to preliminarily enjoin for 30 days a vote by C&J Energy Services stockholders on a merger with Nabors Red Lion...more

Delaware Supreme Court Reverses Injunction Requiring Thirty Day Go-Shop

In a recent decision, the Delaware Supreme Court reversed the Court of Chancery's entry of a preliminary injunction that enjoined C&J Energy Services, Inc. ("C&J") from holding a stockholder vote on its proposed merger with...more

New Delaware Decisions Provide Strong Support for Independent Board Decisions in the Sale of a Company

On December 19, 2014, the Delaware Supreme Court, in C&J Energy Services, Inc. v. City of Miami General Employees' & Sanitation Employees' Retirement Trust, issued a strongly worded decision refusing to enjoin a change of...more

No Auction Required – Delaware Supreme Court Affirms Board Flexibility under Revlon

Ruling that an active solicitation process is not necessarily required for a target board of directors to satisfy its fiduciary duties in a change of control transaction, the Delaware Supreme Court overturned a preliminary...more

In re Novell, Inc. S’holder Litig., C.A. No. 6032 (Del. Ch. Nov. 25, 2014) (Noble, V.C.)

In this memorandum opinion, the Court of Chancery granted summary judgment in favor of defendants on claims alleging that directors acted in bad faith by favoring a bidder in a sale process for reasons other than the pursuit...more

Delaware Court Provides Guidance on Acceptable Deal Protection Mechanisms and Scope of Third Party Aiding and Abetting Liability...

On November 25, 2014, the Delaware Court of Chancery issued a decision in In Re Comverge, Inc. Shareholders Litigation, which: (1) dismissed claims that the Comverge board of directors conducted a flawed sales process and...more

Waivers of IPO Lock-up

We have previously commented on the lock-up requirement in connection with IPOs and noted that it has become somewhat more frequent for underwriters to release issuers and/or their shareholders (including directors and...more

Courts Differ on Enforceability of Unilaterally Adopted Forum Selection Bylaws

While forum selection bylaws have become increasingly popular with US public companies, courts in Delaware and Oregon recently came to opposite conclusions on whether such bylaws, when unilaterally adopted by a board of...more

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