Derivative Suit

News & Analysis as of

Class Action Settlements, Cases Paralleled by SEC Up in 2015

Cornerstone Research released a report on Securities Class Action Settlements, “Securities Class Action Settlements, 2015 Review and Analysis”. It records an increased number of settled securities class actions last year....more

Court Finds Plaintiffs Are Not Privies

Yesterday’s post noted that the plaintiff in a derivative suit is bringing claims on behalf of the corporation. Thus, when a derivative suit is dismissed, does that dismissal have any effect on other pending or subsequently...more

Compromising and Settling of Derivative Suits In California

When a shareholder sues derivatively, the shareholder is seeking relief not for itself, but for the corporation. Therefore, it should be expected that the shareholder is not free to compromise or dismiss the suit absent...more

Court of Appeal Says Same Counsel Can’t Represent Corporation And Individual Defendants in Derivative Suit

Derivative suits put the corporation in the odd position of simultaneously occupying the position of a defendant and plaintiff. When the suit is initiated, the corporation is named as a nominal defendant. If, however, the...more

Why Is California’s Derivative Suit Statute Stuck In 1977?

California Corporations Code Section 800 governs derivative suits brought by both domestic and foreign corporations. The statute provides a modicum of protection to defendants by establishing a procedure by which either the...more

Seventh Circuit Applies Strong Business Judgment Rule to Reject Assertion of Demand Futility

In a recent decision in a diversity case, the Seventh Circuit deferred to a state legislature’s “strongly pro-management version of the business judgment rule,” rejecting a derivative claim filed by shareholders in an Indiana...more

Court Of Chancery Explains When A Minority Stockholder May Have Actual Control Over A Deal

This is another in a series of decisions dealing with the allegation that a minority stockholder controlled a deal through its control of a majority of the board of directors....more

Court Of Chancery Applies Demand Analysis To Changed Board

This is an interesting decision because it applies the demand rules in a derivative case to an odd situation — when some but not all of the board members have changed between when the challenged conduct occurred and when the...more

Court Of Chancery Applies Demand Rules To Amended Complaint

In general, an amended derivative complaint does not need to show that demand is excused if it was excused for the filing of the initial complaint....more

Employer Anti-Poaching Agreements. A Tale of Disney Legal Troubles

Once upon a time, the Plaintiff in a shareholder derivative suit pending against Disney and its former and current board members claimed that commencing in the mid-1980s, companies in the animation business—including Pixar...more

Two Recent Delaware Decisions Further Illustrate The Scope Of Section 220 Discovery

Two recent Delaware Court of Chancery decisions demonstrate that narrow statutory standards continue to govern access to corporate books and records pursuant to Section 220 of the Delaware General Corporation Law. In the...more

Refusal of Stockholder Demand Entitled to Presumption of Business Judgment Rule

In Oliveira v. Sugarman, No. 1980 September Term 2014 (Jan. 28, 2016), the Maryland Court of Special Appeals held that the decision of a board of directors of a Maryland corporation to refuse a stockholder demand is entitled...more

DELAWARE CORPORATE LAW AND LITIGATION: WHAT HAPPENED IN 2015 AND WHAT IT MEANS FOR YOU IN 2016

Delaware has long been known as the corporate capital of the world, and it is now the state of incorporation for 66 percent of the Fortune 500 and more than half of all companies whose securities trade on the NYSE, Nasdaq...more

Derivative Settlement With Benefit Personal to Plaintiff Rejected

In 1850, Abraham Lincoln prepared notes for a law lecture. He emphasized the importance of compromise because after litigation, "the nominal winner is often a real loser—in fees, expenses, and waste of time." Delaware law...more

The Investment Company Act And Roy M. Cohn

Last week, UFCW Local 1500 Pension Fund filed a class action and derivative lawsuit against Yahoo! Inc., its board of directors and some of its current and former officers.  (N.D. Cal. Case No. 3:16-cv-00478-RS).  According...more

Cybersecurity: What is on the horizon for 2016

JD Supra recently published an attorney perspective piece on defining cybersecurity issues for 2016. It should come as no surprise that resolution of insurance coverage issues made the list. Despite a plethora of data...more

Court Of Chancery Applies Entire Fairness To Controller Contract

This is an important and useful decision for at least two reasons. First, the Court carefully analyzes past Delaware precedent to conclude that the entire fairness test applies not just to squeeze-out mergers, but also to...more

Court Of Chancery Requires Dismissal With Prejudice Of Withdrawn Derivative Suit

When, after full briefing, the plaintiff decides that he cannot meet the heightened pleading rules of the recent Cornerstone case, may he just walk away without prejudice to his right to sue again later or must the suit be...more

Court Explains Rigorous 'Caremark' Pleading Requirements

A recent opinion containing the report and recommendation of the magistrate judge in the U.S. District Court for the District of Delaware, In re Chemed Shareholder Derivative Litigation, C.A. No. 13-1854-LPS-CJB (D.Del. Dec....more

"Enforceability of Corporate Forum-Selection Bylaws Continues to Strengthen"

In recent years, corporations have responded to the threat of duplicative stockholder lawsuits in multiple courts across the country, as well as “forum shopping” by plaintiffs, by enacting forum-selection bylaws. Under these...more

Court Of Chancery Rejects Settlement Because Of Named Plaintiff Conflict

Smollar v. Potarazu, C.A. No. 10287-VCN (January 14, 2016) - This decision points out the hazard in providing a separate benefit to the named plaintiff in connection with the settlement of a derivative suit....more

2015 Half-year in review M&A legal developments

We set out below a number of interesting English court decisions and market developments which have taken place and their impact on M&A transactions. This review looks at these developments and gives practical guidance on...more

5 Securities Litigation Issues to Watch in 2016

The coming year promises to be a pivotal one in the world of securities and corporate governance litigation. In particular, there are five developing issues we are watching that have the greatest potential to significantly...more

Look for additional data breach class action cases, standing decisions and shareholders’ derivative suits in 2016

2015 was a banner year for data breaches and associated class action litigation. Toward the end of the year, class action cases were filed the same day as the notification. Based upon the data breach fallout in 2015, there is...more

District Court Explains Caremark Proof Requirements In Pleading

To meet the pleading requirements to state a Caremark claim it is necessary that you show either the board ignored signs of wrongdoing or at least took no steps to prevent such wrongdoing. This decision contains an excellent...more

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