Insights: The Delaware Edition - May 2022

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In this issue we discuss how plaintiffs are finding creative ways to obtain books and records, and appraisal cases where Delaware courts held that fair value rose between signing and closing. Other articles describe how the state’s courts continue to reject many demand futility claims and enforce unambiguous bylaws requiring advance notice of board nominations. Finally, we analyze conflicting federal circuit court decisions involving exclusive forum bylaws that required derivative actions to be filed in Delaware courts — a split that leaves the enforceability of such bylaws in question where they involve Securities Exchange Act claims.

Gad-Zoox: Stockholders Obtain Books and Records Through Statutory Appraisal Proceeding, and Other Section 220 Developments
Recent Delaware rulings have avoided applying strict standing rules and unsealed court records containing company information, opening new avenues for stockholders trying to obtain corporate material outside of the 220 context.

Delaware Courts Continue To Enforce Unambiguous Advance Notice Bylaws, But Incumbent Director Conduct Remains Subject to Equitable Review
Recent Delaware decisions reiterate that unambiguous advance notice bylaws will be enforced, but an incumbent board’s rejection of dissidents’ nominees remains subject to equitable review.

In Appraisal Cases, Court of Chancery Increases Deal Price-based Valuation if Evidence Shows Pre-Closing Change
Delaware courts accept expert evidence to increase deal-price-less-synergies fair value determination where a change occurred between deal signing and closing.

Court of Chancery Continues to Reject Demand Futility Claims Post-Zuckerberg
The Court of Chancery continues to analyze demand futility much as it did before the Delaware Supreme Court’s 2021 Zuckerberg decision reframed the test, and has not hesitated to dismiss cases that do not sufficiently allege demand futility.

Seventh and Ninth Circuits Split Over the Scope of Exclusive Forum Provisions
The Seventh and Ninth Circuits have split over whether a Delaware exclusive forum provision can foreclose a derivative suit in federal court based on an alleged violation of Section 14(a) of the Securities Exchange Act of 1934.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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