Derivative Suit

News & Analysis as of

Court Of Chancery Grants Stay Of Derivative Case

A stay of derivative litigation is hard to get even when there is another case pending elsewhere. But when, as here, the other litigation may expose the company to significant liability, a stay of the derivative action...more

Court Of Chancery Outlines Discovery In Books and Records Case

First, the discovery cannot be of the very records the plaintiff seeks to obtain, for that will give him the relief he seeks before he proves his case. Second, it is often the case that the records are being sought for use in...more

California, Nevada and 38 Other States Have These, But Delaware Doesn’t

According to the National Center for State Courts, forty states, including California and Nevada, have established intermediate courts of appeal.  California’s Court of Appeal was established by a constitutional amendment...more

Former In-House Attorney Cannot Duck Trade Secrets Allegations with Anti-SLAPP Motion

On July 17, 2015, a California appellate court affirmed the denial of an intellectual property attorney’s anti-SLAPP motion against his former employer. Terrence Wyles, the defendant and former in-house counsel for medical...more

Glossary of Important Securities Regulation Terms and Definitions

This Glossary is designed to provide law students taking Securities Regulation with a tool that will assist them in learning the basic language of securities law and achieve a working knowledge of the fundamental principles...more

Mergers & Acquisitions Glossary

This Glossary contains many of the important terms and definitions used in the M&A world. The Glossary is not exhaustive, however. Like most areas of the law, M&A is a highly complex subject that involves several legal and...more

A Firewall for the Boardroom: Best Practices to Insulate Directors and Officers From Derivative Lawsuits and Related Regulatory...

Shortly after the massive 2013 Target data breach, shareholders filed four derivative lawsuits against the company’s directors and some of its officers (13 CARE 624, 3/20/15). The shareholders alleged that the defendants had...more

Court Of Chancery Denies Standing After Spin-Off

After a spin–off of a subsidiary, there is a question as to whether the subsidiary’s stockholders have standing to bring a derivative suit on behalf of the subsidiary for past wrongs against the subsidiary committed by the...more

Checking in on Target’s Derivative Litigation: 18 Months Later, Directors Remain Stuck in the Checkout Line

Everyone remembers the Target Corporation data breach, one of the worst in history. In late 2013, hackers forced their way into Target’s computer system, accessing the information of approximately 70 million customers,...more

In re General Motors Company Derivative Litig., C.A. No. 9627-VCG (Del. Ch. June 26, 2015) (Glasscock, VC)

In this memorandum opinion, the Court of Chancery dismissed a derivative complaint under Rule 23.1, finding that plaintiffs failed to show that the board of directors (the “Board”) of General Motors Company (“GM”) acted in...more

Former Derivatives Trader Convicted and Sentenced in U.K. on Libor Manipulation Charges, Also Facing Criminal Charges in U.S.

On August 3, a jury in the United Kingdom convicted former derivatives trader Tom Hayes on eight counts of fraud for his role in the manipulation of the London Interbank Offered Rate (Libor) for Japanese Yen. Hayes was...more

Know Your Limits! Section 162(m) and Excess Equity Grants

In the past few years there has been an uptick in stockholder derivative litigation related to equity compensation granted to named executive officers that exceed the plan share limits. The claims against the companies...more

Should Your Startup Become a Public Benefit Corporation?

With the increased attention paid to companies that feature public benefits or social impact as part of their mission or business plan and with the rise of social impact investors, more and more states are enacting public...more

Court of Chancery Dismisses Derivative Claims Even Though Entire Fairness Arguably Applied

Delaware’s requirements for stockholders to maintain derivative actions reflect the twin principles of director management and control and accountability. Because directors manage the business and affairs of Delaware...more

The Future of Securities Class Action Litigation

Securities litigation has a culture defined by multiple elements: the types of cases filed, the plaintiffs’ lawyers who file them, the defense counsel who defend them, the characteristics of the insurance that covers them,...more

The Ropes Recap: Mergers & Acquisitions Law News - Second Quarter 2015

News from the Courts - Delaware Chancery Court Finds That Dispute Over Accounting Methodology Is Subject to Arbitration Procedures - Post-closing purchase price and working capital adjustments are common in...more

No Calm In Delaware After Calma v. Templeton

In derivative suits, cases are essentially lost and won at the motion to dismiss stage.  Unless the defendants succeed in winning dismissal, they must confront an unhappy choice between continued litigation with all of its...more

CMS Investment Holdings, LLC v. Castle et al., C.A. No. 9468–VCP (Del. Ch. June 23, 2015) (Parsons, VC)

In this decision, the Delaware Court of Chancery largely declined to dismiss claims for breach of a limited liability company agreement, breach of the implied covenant of good faith and fair dealing, unjust enrichment, breach...more

Court Of Chancery Explains That The Existence Of A Controlling Stockholder Does Not Determine Demand Is Excused

Teamsters Union 25 Health Services & Insurance Plan v. Baiera, C.A. No. 9503-CB (July 13, 2015) - A transaction with a controlling stockholder that is the subject of a derivative complaint still requires that a...more

How Public Companies Can Prepare For The Executive Compensation Clawback Regime

Many public companies have not waited for the Securities Exchange Commission (SEC) to mandate executive compensation recovery policies, as required by the Dodd-Frank Act. Shareholder and peer pressure has resulted in the...more

Delaware Supreme Court Holds Tooley Direct vs. Derivative Rule Is No Bar to Parent Corporation’s Contract Claim

As previously reported, in NAF Holdings, LLC v. Li & Fung (Trading) Limited, 772 F.3d 740 (2d Cir. 2014), the Second Circuit certified to the Delaware Supreme Court an unusual question regarding whether the direct vs....more

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

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