Derivative Suit

News & Analysis as of

Court Of Chancery Explores Risk Management Duties

As this decision notes, only if a Board is consciously failing to follow its duty is the Board potentially liable for a failure to monitor risk and the resulting harm to the corporation. That in turn requires some sort of...more

"The New Mutual Fund Exception: Ninth Circuit Allows Direct Claims to Redress Derivative Injury"

Courts have sought to simplify their approach to determining whether an action is derivative or direct — a determination that the Delaware Supreme Court has acknowledged “is sometimes difficult.” Tooley v. Donaldson, Lufkin &...more

Closely-Held Shareholder Derivative Actions are Alive and Well in Texas

After 30 years of running his family-owned business, Hillbilly Oil Co., Jed Clampett decided to retire in 2013. The board of directors elects Jethro Bodine as Hillbilly’s President and Elly May as Vice President. Both Jethro...more

SEC Sues For-profit College Over Alleged Loan Fraud

A major for-profit education corporation is facing a lawsuit from the U.S. Securities and Exchange Commission (SEC) because of allegedly fraudulent activity by the company’s chief executive officer and chief financial...more

Ironworkers Dist. Council of Phila. & Vicinity Ret. & Pension Plan v. Andreotti, C.A. No. 9714-VCG (Del. Ch. May 8, 2015)...

In this memorandum opinion, the Court of Chancery granted a motion to dismiss Plaintiff’s derivative complaint under Court of Chancery Rule 23.1, and in doing so, confirmed that there is a heavy burden confronting derivative...more

Protecting Directors and Officers From Derivative Liability Arising From Data Breaches

With data breaches affecting companies across virtually every industry, cyber security has remained front page news. Lawsuits brought by aggrieved consumers and financial institutions against companies that have suffered data...more

Inside the Courts - An Update From Skadden Securities Litigators - May 2015 / Volume 7 / Issue 2

In This Issue: - U.S. Supreme Court: ..Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (4th Cir. Mar. 16, 2015) - Auditor Liability: ..In re Advanced Battery Techs.,...more

Court of Chancery Upholds Right To Secondary Offering

When investors bargain for the right to have their stock sold in a secondary offering after the company goes public, fiduciary duties normally do not operate to restrict that right. Hence, it is not possible to object...more

How Collateral Estoppel Can Be Your Best Friend in Stockholder Litigation

Two recent decisions from the Delaware Court of Chancery have dusted off the venerable doctrine of collateral estoppel to dismiss stockholder claims. Of course, this issue is not new in Delaware. In 2013, the Delaware Supreme...more

A Little Less Murky: The Court of Appeal Clarifies the Line Between Oppression and Derivative Actions

On May 26, 2015, the Court of Appeal for Ontario released its decision in Rea et al v Wildeboer, clarifying the distinct role of derivative actions under the Ontario Business Corporations Act. The role is so distinct that the...more

Business Litigation Reporter - May 2015

Lawsuit Dismissed Where Defendant Hulu Did Not “Knowingly” Disclose Personal Identifying Information. In In re: Hulu Privacy Litigation, 2015 WL 1503506 (N.D. Cal. March 31, 2015), the plaintiffs alleged that Hulu had...more

Northstar v. Schwab: The Ninth Circuit’s End Run Around Derivative Lawsuits in the Mutual Fund Context

It is well recognized that only investors have standing to sue a mutual fund on behalf of a class of investors and that a fiduciary duty claim accusing fund trustees of mismanagement is the property of the fund, and not of...more

Delaware Courts Continue to Clarify Creditor Standing With Respect to Insolvent Companies

On May 4, 2015, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery issued an opinion in Quadrant Structured Products Company, Ltd. v. Vertin clarifying when a creditor gains standing to pursue derivative...more

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

Doing The Math On Delaware Derivative Settlements

Last Friday, Delaware lawyer Francis G.X. Pileggi wrote about Vice Chancellor J. Travis Laster’s recent decision to award more than $72 million in attorneys fees in costs in connection with the settlement of a derivative...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

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

Here’s One Way To Recover Attorneys’ Fees Without Adopting A Fee Shifting Bylaw

With the ongoing hullabaloo concerning the legislative demise of fee shifting bylaw provisions under Delaware law, little attention has been paid to California law. More importantly, no one seems to have noticed that...more

It’s Time To Put A Stop To Fee-Shifting (But Not In the Way You Might Think)

The problem with “fee-shifting bylaws” starts with the name.  A better name might be “anti fee-shifting bylaws” because they end the fee shifting that otherwise applies.  Without fee-shifting bylaws, plaintiffs’ attorneys are...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

Court Of Chancery Explains Creditor’s Right To File Fiduciary Duty Claims

While it is generally known that creditors may only file derivative suits when the company is insolvent, there have been many open issues about what exactly that means. This decision answers many of those questions by...more

Dismissal Of Involuntary Dissolution Action Pulls The Plug On Corporate Buy Out

Sometimes, shareholders are divided on whether a corporation should live or die. In these cases, the California Corporations Code provides an option that allows for the continued existence of a corporation. In any action...more

Tenth Circuit Court of Appeals Dismisses Failed Bank Shareholder Derivative Suit under FIRREA

On April 21, the United States Court of Appeals for the Tenth Circuit upheld the dismissal of a bank shareholders’ suit against a bank holding company – and its officers and directors – for breach of fiduciary duty. Barnes v....more

Appellate Court Notes

- AC34886 - State v. Bush - AC35418 - State v. LaFleur - AC36275 - North Star Contracting Corp. v. Albright This case dealt with who is the proper party to bring a shareholder derivative action. A...more

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