Derivative Suit Fiduciary Duty

News & Analysis as of

Navigating Derivative Lawsuits Against Mutual Funds After Northstar

The Ninth Circuit Court of Appeals this spring held that mutual fund shareholders could maintain direct claims against the fund’s trustees for breach of their common law fiduciary duties. Before Northstar v. Schwab, such...more

Appellate Court Notes

Supreme Court Advance Release Opinions: SC19359 - Persels & Associates, LLC v. Banking Commissioner - Noting that it has generally been the policy of the Courts to defer to the Legislature, especially as to the...more

Delaware Chancery Court Rejects Allegations Assailing Independence Of VC Directors In Dismissing Derivative Suit

A recent Delaware Chancery Court decision dismissing derivative fiduciary duty claims has significance for public companies with board members who are associated with venture capital firms. ...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

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

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

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

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

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

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

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

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

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

Courts Continue to Dismiss Shareholder Suits Based on FCPA Violations

On March 16, 2015, Judge Paul G. Gardephe of the Southern District of New York dismissed a shareholder derivative suit filed by Sylvia Pritika against the CEO and others of Avon Products Inc. ("Avon") alleging breach of...more

Illinois Supreme Court Agrees to Decide Fiduciary Duty Claim Against Former Counsel

In a few weeks’ time over at Appellate Strategist’s sister blog, the Illinois Supreme Court Review, we’ll address the question of just how rare it is to get an unpublished decision – what we in Illinois call a Rule 23 order –...more

Applying Delaware’s Direct vs. Derivative Analysis to Contract Claims

In NAF Holdings, LLC v. Li & Fung (Trading) Limited, 2014 WL 6462825 (2d Cir. Nov. 19, 2014), the Second Circuit considered, but did not decide, whether the usual direct/derivative analysis governing minority stockholder...more

In re Sanchez Energy Deriv. Litig., C.A. No. 9132-VCG (Del. Ch. Nov. 25, 2014) (Glasscock, V.C.)

In this memorandum opinion, the Court of Chancery held that plaintiff stockholders failed to plead particularized facts sufficient to demonstrate demand futility and dismissed the plaintiffs’ fiduciary duty, aiding and...more

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