Even after a board rejects a plaintiff-stockholder’s demand to bring a derivative litigation, the plaintiff may proceed to bring that derivative action if the plaintiff can show the demand was “wrongful.” Having conceded...more
The issuance of additional stock in exchange for less than fair value typically is a harm falling on the company, and hence gives rise to a derivative claim. But, such a claim might be dual natured – partially direct and...more
This is an important decision because it explains when a prior dismissal of a derivative complaint does not preclude a second complaint alleging a wrong close to that alleged in the dismissed case.
It distinguishes a...more
This decision explains when a Caremark claim exists based on illegal corporate conduct. The “substantial likelihood” of liability that justifies excusing a pre-suit demand on the board must involve a knowing violation of the...more
What happens when a derivative claim is filed outside of Delaware and then is dismissed by that other court? Well even if the other complaint might have stood up in Delaware, the subsequently filed Delaware case will also be...more
Normally it is the board in place at the time the derivative suit is filed that is evaluated to determine if demand is excused....more
Delaware does hold that the dismissal of a derivative suit in another jurisdiction may preclude the prosecution of a similar derivative suit in Delaware. ...more
This is another in a series of decisions dealing with the allegation that a minority stockholder controlled a deal through its control of a majority of the board of directors....more
3/3/2016
/ Board of Directors ,
Breach of Duty ,
Consent ,
Controlling Stockholders ,
Delaware General Corporation Law ,
Derivative Suit ,
Dilution ,
Duty of Loyalty ,
Mergers ,
Minority Shareholders ,
Rescission ,
Shareholder Litigation
This is an interesting decision because it applies the demand rules in a derivative case to an odd situation — when some but not all of the board members have changed between when the challenged conduct occurred and when the...more
In general, an amended derivative complaint does not need to show that demand is excused if it was excused for the filing of the initial complaint....more
This is an important and useful decision for at least two reasons. First, the Court carefully analyzes past Delaware precedent to conclude that the entire fairness test applies not just to squeeze-out mergers, but also to...more
When, after full briefing, the plaintiff decides that he cannot meet the heightened pleading rules of the recent Cornerstone case, may he just walk away without prejudice to his right to sue again later or must the suit be...more
Smollar v. Potarazu, C.A. No. 10287-VCN (January 14, 2016)
- This decision points out the hazard in providing a separate benefit to the named plaintiff in connection with the settlement of a derivative suit....more
To meet the pleading requirements to state a Caremark claim it is necessary that you show either the board ignored signs of wrongdoing or at least took no steps to prevent such wrongdoing. This decision contains an excellent...more
Whether a claim is direct or derivative often determines if it will survive a motion to dismiss. Who would get the benefit of a recovery is one test applied to make that decision. But in the context of a partnership, that...more
Deciding if a director is sufficiently tied to a controller so as to be disqualified from passing on a transaction independently is an important decision because it may determine if a derivative suit meets the demand excuse...more
It is often said that when a majority stockholder issues more stock to himself at an unfair price that is a direct claim and not derivative. But as this decision points out, that is a little too simplistic....more
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
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
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
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
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
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
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
This is an interesting decision because it interprets the seldom-used Delaware Savings Statute [10 Del. C. Section 8118]. ...more