Fiduciary Duty Shareholders

News & Analysis as of

Chancery Court Denies Motion to Dismiss Fiduciary Duty Claims Where Directors Approved Merger That Extinguished Threatened...

On July 28, 2016, the Delaware Court of Chancery held that stockholders of Riverstone National, Inc. had adequately stated a breach of fiduciary duty claim against the company's directors who approved a merger that...more

U.S. Court for District of Minnesota Dismisses Target Data Breach Shareholder Derivative Suits

On July 7, 2016, the United States District Court for the District of Minnesota granted Target’s unopposed motion to dismiss the derivative actions filed by a number of shareholders against the company relating to the...more

Tenders Have the Same Cleansing Effect as Stockholder Votes in Two-Step, Section 251(h) Deals

In In re Volcano Corp. Stockholder Litig., C.A. No. 10485-VCMR (Del. Ch. June 30, 2016), the Delaware Court of Chancery held that when a fully informed, uncoerced, disinterested majority in voting power of a target’s...more

Blog: Options to Acquire: How these Creative Acquisition Strategies Differ from a Traditional Purchase

Creative acquisition strategies are offering both buyers and targets additional opportunities to grow their businesses through M&A. One strategy that we are seeing parties use is the “option to acquire” structure, which...more

Disregard of Speculative Financial Projections Was Not Bad Faith

In a stockholder challenge to a sale of the company, a plaintiff may rebut the business judgment rule by pleading facts that support a reasonable inference that at least half of the directors, who approved the sale, were not...more

How to Win After You Lost: Examing "Trados"

Perhaps the longest-running litigation in recent Delaware Court of Chancery history has been settled, after the plaintiff class lost at trial. The Jan. 20 settlement hearing in In re Trados Shareholder Litigation, Con. C.A....more

Court of Chancery Eyes Duties in Deals Involving Stockholder

To determine the applicable standard of review in a stockholder challenge to a corporate transaction, a plaintiff may rebut the business judgment rule by pleading facts that support a reasonable inference that "a controlling...more

Financial Services Quarterly Report - First Quarter 2016: Northstar Decision on Remand: U.S. District Court Holds SLUSA Precludes...

In a complete victory for Defendants, on February 23, 2016, a federal district court dismissed with prejudice the final remaining claims in Northstar Financial Advisors, Inc. v. Schwab Investments et. al., which had been...more

Is It Better To Be A LLC Member In The Minority Than A Minority Corporate Shareholder?

It is pretty common to think that limited liability company members have similar rights as shareholders in a corporation. But they don't, (although in some respects the rights afforded to LLC members may be better). The...more

Delaware Court of Chancery to Increase Scrutiny of Disclosure Settlements

The Delaware Court of Chancery has made its strongest statement yet in the ongoing conversation about shareholder “disclosure settlements,” i.e., settlements in which the sole or primary consideration received by shareholders...more

Texas Supreme Court Hears Oral Argument on Legal Malpractice Case Involving Standing of Beneficiary of Trust

On February 10, 2016, the Texas Supreme Court heard argument in a case that involves the issue of legal standing to sue when a trust is injured by the actions of a third party. In DLA Piper US, LLP v. Linegar, Chris Linegar...more

Delaware Chancery Court Applies Entire Fairness Standard to Consulting Agreement Among Affiliates of a Controlling Shareholder

In the recent decision of In re EZCORP Inc. Consulting Agreement Derivative Litigation, C.A. No. 9962-VCL (Jan. 25, 2016), the Delaware Court of Chancery clarified the standard of review when faced with shareholder challenges...more

Client Agreement and Failure to Terminate Representation Under the Terms of Client Agreement Results in Firm's Disqualification...

Brief Summary - In 2013, three shareholders sued: (1) each other for breach of fiduciary duties; and (2) their company for involuntary dissolution. The law firm that represented one of the shareholders had been retained...more

Illinois Claim for Aiding and Abetting Client's Breach of Fiduciary Duty Time-Barred

Brief Summary - The plaintiff, a shareholder of limited liability company (LLC), filed an action against a law firm and one of its lawyers, alleging they aided and abetted other shareholders in breaching their fiduciary...more

The Importance of Oversight: Recent Trends in Delaware Financial Advisor Liability

The Delaware Court of Chancery recently made a series of rulings that underscore the importance of oversight by directors in performing their fiduciary duty of care, particularly as it pertains to financial advisors and their...more

I’m Guessing That The DOL Didn’t Have in Mind Negative Weighing OF ESG Factors

In this post, I noted a recent study by Professor Tracie Woidtke at the University of Tennessee concluding that social-issue shareholder-proposal activism appears to be negatively related to firm value. I therefore raised...more

Inside M&A - October 2015

Overview of SPACs and Latest Trends - A number of recent successful business combination transactions involving special-purpose acquisition companies (SPACs) led by prominent sponsors have driven a resurgence in the SPAC...more

Delaware Court of Chancery Cautions Directors: Be Vigilant in Recognizing Advisor’s Conflict of Interests

Shareholders challenged the merger of Zale Corporation with Signet Jewelers Ltd. In a decision dated October 1, 2015, the Delaware Court of Chancery credited allegations that the board of directors of Zale breached its...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

Delaware Supreme Court Addresses Novel Controlling-Stockholder Claim and Clarifies Effect of a Fully Informed, Uncoerced...

The Delaware Supreme Court recently issued an opinion, captioned Corwin v. KKR Financial Holdings LLC, that sheds further light on when a stockholder owning less than 50% of the voting power of a company may be deemed a...more

Financial Services Quarterly Report - Third Quarter 2015: Recent Developments in U.S. “Excessive Fee” Litigation

The U.S. mutual fund industry is poised to see significant developments in the ongoing wave of Section 36(b) “excessive fee” litigation. Days apart in August, the Seventh Circuit Court of Appeals affirmed the grant of summary...more

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

In re Riverbed: The Beginning of the End for Disclosure-Only Settlements in M&A Cases?

The past decade has seen an incredible rise in M&A litigation. According to Cornerstone, in 2014, a whopping 93% of announced mergers valued over $100 million were subject to litigation, up from 44% in 2007. As Delaware...more

Delaware Court’s Finding of $148 Million Fraud by Dole CEO and General Counsel Offers Major Lessons in Take-Private Deals

The Delaware Chancery Court ordered Dole Food Co. Inc. CEO David Murdock and General Counsel Michael Carter to pay Dole shareholders $148 million for fraud in connection with the company’s 2013 take-private deal. The August...more

Good News for Compensation Committees

With executive compensation under fire from seemingly all directions these days, it’s nice to get some good news occasionally. In this case, that news comes via the Delaware Chancery Court’s recent decision in Friedman v....more

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