Directors Shareholder Litigation

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Insights: The Delaware Edition - October 2015

We are pleased to share with you the inaugural issue of Insights: The Delaware Edition, a periodic publication addressing significant Delaware deal litigation and corporation law developments. In This Issue: - Q&A...more

Ninth Circuit Affirms Dismissal of '40 Act Section 36(b) Excessive Fee Action Against Davis

The U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of an amended complaint asserted by a shareholder of the Davis New York Venture Fund (the “Fund”) under section 36(b) of the Investment Company...more

SEC Proposes Broadened Rules on Clawback of Incentive-Based Compensation

Proposed Rules would require increased disclosures on companies’ recovery processes and affect the majority of issuers with listed securities. Background - On July 1, 2015, the Securities and Exchange Commission...more

Are “Proxy Puts” Kaput?

“Proxy put” provisions, which have been widely used in credit agreements and indentures since the 1980s, have recently garnered the attention of shareholders and plaintiffs lawyers, calling into question their value and the...more

Delaware Governor Signs Bill Prohibiting Bylaws on Fee-Shifting

Last week, Delaware Governor Jack Markell signed Senate Bill 75, which amends the Delaware General Corporation Law to prohibit Delaware stock corporations from adopting bylaws that force shareholders to pay legal fees if they...more

Blog: Delaware Chancery Court Applies Entire Fairness Standard Of Review To Director Compensation

What is the judicial standard of review applicable to an award of compensation by directors to directors under an equity incentive compensation plan that has been approved by the shareholders? That was the question before...more

Locke Lord QuickStudy: Litigation Threat Means Public Companies Should Review Director Compensation Process

Corporate directors are permitted to, and regularly do, set their own compensation. This has not been controversial because boards have typically taken seriously their responsibility to set compensation that is reasonable and...more

Delaware House Passes Bill Prohibiting Bylaws on Fee-Shifting

On June 11th, the Delaware House of Representatives unanimously passed a bill prohibiting publicly traded corporations from adopting bylaws that force shareholders to pay legal fees if they do not prevail in lawsuits...more

Delaware Supreme Court’s In re Cornerstone Therapeutics Decision Allows Independent Directors To Utilize Section 102(b)(7) Defense...

A director’s responsibilities in serving on a corporate board are attended by substantial personal financial risks—not least of which is the specter of shareholder litigation. Exculpatory charter provisions, such as Section...more

An Exercise of Business Judgment: Chancery Court Dismisses Shareholder Derivative Demand-Refused Case

Last week, Vice Chancellor Glasscock released an important decision dismissing a case under Rule 23.1 that was brought by a DuPont shareholder who alleged that the board improperly refused a demand to sue DuPont’s officers...more

Shareholder’s Challenge to Smith & Wesson SLC’s Independence Misfires in the First Circuit

On February 4, 2015, the First Circuit affirmed the summary dismissal of a shareholder derivative suit, which brought Nevada state claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and...more

Salamone v. Gorman, C.A. No. 8845 (Del. Dec. 9, 2014)

In this en banc decision, the Delaware Supreme Court affirmed in part and reversed in part the Court of Chancery’s decision interpreting a Voting Agreement governing the designation and removal of directors by preferred...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 of Chancery Applies Business Judgment Rule to Directors Who Approve Merger Supported by Large Shareholders

In its October 24, 2014, decision in In re Crimson Exploration Inc. Stockholder Litigation, C.A. No. 8541, the Delaware Court of Chancery confirmed that the business judgment rule is applicable in evaluating claims for breach...more

Court Dismisses Shareholder Derivative Action Targeting Directors and Officers for Data Breaches

A federal district court in New Jersey has dismissed with prejudice a shareholder derivative suit, Palkon v. Holmes, No. 14-CV-01234 (SRC) (D.N.J.), that tried to blame the directors and officers at hospitality company...more

Delaware Court Denies Dismissal for Disinterested Directors When Entire Fairness Applies

The Delaware Court of Chancery recently addressed the pleading standard for claims against disinterested directors arising out of transactions involving a controlling stockholder, where the transaction has been alleged to be...more

SEC Issues Stern Reminder for Timely Filing of Beneficial Ownership Reports

After years of little enforcement action, the Securities and Exchange Commission (“SEC”) issued a press release yesterday announcing charges against 28 officers, directors, or major shareholders for violating federal...more

Julie Friedman v. Dara Khosrowshahi, et al., C.A. No. 9161-CB (Del. Ch. Jul. 16, 2014) (Bouchard, C.)

In this memorandum opinion, the Court of Chancery granted the defendants’ motion to dismiss a stockholder’s complaint, challenging the accelerated vesting of the CEO’s restricted stock units based on an alleged violation of...more

Editorial: Fla. Sets Strict Standard For Direct Shareholder Claims

Florida recently clarified the limited circumstances in which a corporate shareholder or limited liability company member has standing to bring a direct claim for damages relating to the company. On July 9, in Dinuro...more

Flaa v. Montano, C.A. No. 9146-VCG (Del. Ch. May 29, 2014) (Glasscock, V.C.)

In this post-trial decision in a proceeding pursuant to 8 Del. C. § 225, the Court of Chancery invalidated stockholder action by written consent on the ground that the proxy solicitation materials failed to disclose an...more

Biolase v. Oracle Partners, L.P., C.A. No. 9438 (Del. June 12, 2014)

In this expedited appeal from a post-trial decision of the Court of Chancery, the Delaware Supreme Court affirmed the Court of Chancery’s holding that, under 8 Del. C. § 141(b), directors may resign by verbal statements,...more

Bishop Gassis v. Corkery, C.A. No. 8868-VCG (Del. Ch. May 28, 2014) (Glasscock, V.C.)

In this post-trial decision in a proceeding pursuant to 8 Del. C. § 225, the Court of Chancery held that the board of the Sudan Relief Fund, Inc. (the “Fund”), a charitable corporation, validly removed the plaintiff as a...more

Oracle Partners, L.P., v. Biolase, Inc., C.A. No. 9438-VCN (Del. Ch. May 21, 2014) (Noble, V.C.)

In this post-trial memorandum opinion, the Court of Chancery ruled on the board composition of Defendant and Counter-Plaintiff Biolase, Inc. (“Biolase”). The Court declared that only one of two contested director...more

Delaware Court Enforces “Loser Pays” Bylaw, Opens the Door for D&O Insurers to Better Assess and Control Shareholder Litigation...

The Delaware Supreme Court held that a corporation’s fee-shifting bylaw is enforceable as long as the bylaw is not adopted for an inequitable purpose. A first of its kind, this ruling seems poised to change dramatically the...more

Delaware Supreme Court Approves Fee-Shifting Bylaw for Non-Stock Corporations - The Court’s Reasoning Suggests These Provisions...

In its May 8, 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund, No. 534, 2013, --- A.3d ----, 2014 WL 1847446 (Del. May 8, 2014), the Delaware Supreme Court may have opened the door to the adoption by Delaware...more

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