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Breach of Duty Demand Futility

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In re Cognizant Technology: Third Circuit adopts de novo review for failure to plead demand futility

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In re Cognizant Technology Solutions Corporation Derivative Litigation, the United States Court of Appeals for the Third Circuit, sitting en banc, overruled its prior decision in Blasband v. Rales that applied an...more

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Chancery Holds Plaintiff Fails to Meet Rule 23.1 Pleading Standard, Dismisses Action Arising From T-Mobile Data Hack

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Harper v. Sievert, C.A. No. 2022-0819-SG (Del. Ch. May 31, 2024). A stockholder plaintiff brought derivative claims alleging that current and former directors of T-Mobile US, Inc. were liable for aggregating customers’...more

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Chancery Dismisses Derivative Action Based on Plaintiff’s Failure to Allege Particularized Facts Demonstrating Demand Futility

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The power to bring a claim for breach of duty causing injury to a Delaware corporation resides with the board of directors. It is part of their duty under Section 141(a) of the Delaware General Corporation Law to manage the...more

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Chancery Dismisses Caremark Action Based on Insufficient Allegations of Bad Faith

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Clem v. Skinner, et al., C.A. 2021-0240-LWW (Del. Ch. Feb. 19, 2024) - This Caremark decision involved the retail pharmacy company, Walgreens, and concerned billing practices for a particular insulin pen product that gave...more

A&O Shearman

Delaware Court Of Chancery Dismisses Derivative Claim For Breach Of Duty Of Oversight, Finding Failure To Establish Demand...

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On February 19, 2024, Vice Chancellor Lori Will of the Delaware Court of Chancery dismissed a derivative breach of fiduciary duty action against nominal defendant Walgreens Boots Alliance, Inc. (the “Company”) and its board...more

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Chancery Dismisses Double-Derivative Claims for Failure To Plead Demand Futility

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City of Hialeah Emps. Ret. Sys. v. Insight Venture Partners, C.A. No. 2022-0846-MTZ (Del. Ch. Dec. 28, 2023) - A venture capital fund invested in two different entities. One of the entities then acquired the other. In the...more

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Chancery Finds That Books and Records Incorporated by Reference in Complaint Demonstrate the Lack of a Valid Caremark Claim

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Joel Newman v. KKR Phorm Investors, L.P., et al. C.A. No. 2022-0310-NAC (Del. Ch. Aug. 31, 2023). At the motion to dismiss stage, Delaware courts will consider the facts alleged in the complaint as well as the documents...more

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Q3 2023 Quarterly Corporate / M&A decisions updates

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The Delaware courts issued a range of decisions this quarter, addressing topics from mootness fees to demand futility. Two key opinions addressed compliance with Delaware statute and court orders. In Seidman, the court...more

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Newman v. KKR: Suit dismissed by Delaware Chancery Court for failure to plead demand futility

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In Newman v. KKR, the Delaware Court of Chancery dismissed a shareholder suit against Transphorm, Inc.’s Board and KKR, the largest shareholder, for failure to plead demand futility. The plaintiff alleged that the Board...more

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Following Flawed Business Acquisition, Chancery Dismisses Derivative Complaint for Failure to Plead Demand Futility

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City of Coral Springs Police Officers' Pension Plan v. Dorsey, C.A. No. 2022-0091-KSJM (Del. Ch. May 9, 2023) - A terrible business decision does not ensure the Court of Chancery will sustain a derivative claim. A...more

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Delaware Court Of Chancery Assesses The Application Of Timeliness Principles To Caremark Red Flags Claim And Applies “Separate...

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On December 15, 2022, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery denied a motion to dismiss claims as untimely in a derivative action brought by stockholders against the officers and directors of...more

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Chancery Denies Bid to Dismiss Derivative Claims Amid Alleged “Gamesmanship” Regarding Composition of LLC’s Board of Managers

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Schoenmann v. Irvin, C.A. 2021-0326-SG (Del. Ch. Jun. 2, 2022) - After the plaintiff filed his direct and derivative claims in April 2021, the defendants – the company and its controller – circulated in June 2021 a written...more

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Chancery Dismisses Caremark Claim Against Energy Company Alleging Failure of Board Oversight Related to Fatal Pipeline Explosion

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City of Detroit Police and Fire Retirement System v. Hamrock, C.A. No. 2021-0370-KSJM (Del. Ch. June 30, 2022) - Stockholder plaintiff filed a derivative suit on behalf of an energy company alleging that certain of the...more

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Delaware Court Of Chancery Dismisses Derivative Suit For Failure To Allege Substantial Likelihood Of Liability Sufficient To...

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On June 30, 2022, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery granted a motion to dismiss derivative claims for breach of fiduciary duty brought by a stockholder of an energy company (the...more

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Chancery Rejects Challenge to Director’s Appointment and Dismisses Derivative Claims

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Simons v. Brookfield Asset Mgmt., Inc., C.A. No. 2020-0841-KSJM (Del. Ch. Jan. 21, 2022) - If a derivative plaintiff does not make a pre-suit demand on the board, then under Court of Chancery Rule 23.1, the plaintiff must...more

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Chancery Dismisses Derivative Action Arising from $1.2 Billion Stock Sale Based on Plaintiffs’ Failure to Plead Demand Futility

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In re Kraft Heinz Co. Deriv. Litig., Cons. C.A. No. 2019-0587-LWW (Del. Ch. Dec. 15, 2021) - The Court of Chancery dismissed an insider-trading action on the grounds that plaintiffs failed to plead that a majority of a...more

Goodwin

Delaware Chancery Court Dismisses Derivative Claim for Failure to Show Demand Futility

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Delaware Chancery Court Dismisses Derivative Claim for Failure to Show Demand Futility; Federal Illegality of Marijuana Industry Bars Relief for Numerous Investor Claims; LIBOR Convictions of Former Deutsche Bank Traders...more

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In re Kraft Heinz Company Derivative Litigation: Plaintiffs fail to plead demand futility - Quarterly Corporate / M&A Decisions...

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In re Kraft Heinz Company Derivative Litigation addresses demand futility in a case involving an insider stock sale. 3G Capital, Inc., a 24.2 percent shareholder in Kraft Heinz, sold 7 percent of its stake in August 2018...more

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Delaware Corporate and Commercial Case Law Year in Review

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Our 2021 Top 10 list summarizes decisions from the Delaware courts likely to affect business transactions and business litigation going forward. Our criteria for selection are that the decision either meaningfully changed...more

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Chancery Holds Plaintiffs Adequately Pled Wrongful Refusal Where Board Did Not Correct Unauthorized Charter Amendments

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Drachman v. Cukier, C.A. No. 2019-0728-LWW (Del. Ch. Oct. 29, 2021) - To survive a motion to dismiss in the demand refusal context, the plaintiff must allege facts that create a reasonable doubt that the board’s decision...more

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Delaware Court of Chancery Dismisses Caremark Claim Arising From Marriott Cybersecurity Breach

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Fire Ret. Sys. of St. Louis v. Sorenson, et al., 2021 WL 4593777 (Del. Ch. Oct. 5, 2021). The Delaware Court of Chancery dismissed pursuant to Rule 23.1 derivative claims arising from the hack of roughly 500 million...more

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Chancery Dismisses Derivative Claims That Private Equity Sponsors Comprised A Control Group

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Patel v. Duncan, C.A. No. 2020-0418-MTZ (Del. Ch. Sept. 30, 2021) - For stockholders to comprise a control group, the alleged group members must be connected in some “legally significant way – such as by contract, common...more

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Chancery Examines Cornerstone Standard for Establishing Non-Exculpated Fiduciary Duty Claims

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In Re BGC Partners, Inc. Derivative Litigation, Consol. C.A. No. 2018-0722-LWW (Del. Ch. Sep. 20, 2021) - A director protected by an exculpatory provision is entitled to dismissal in a breach of fiduciary duty action...more

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Chancery Dismisses Derivative Claims Alleging Insider Trading and Misleading Disclosures for Failure to Plead Demand Futility

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In re Zimmer Biomet Hldgs., Inc. Deriv. Litig., C.A. No. 2019-0455-LWW (Del. Ch. Aug. 25, 2021) - Under Court of Chancery Rule 23.1, a stockholder-plaintiff may only bring a derivative suit on behalf of a company if the...more

Troutman Pepper

Delaware Supreme Court Adopts New Three-Part Test for Demand Futility

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There is a new demand futility test in Delaware, adopted on September 23 by the Delaware Supreme Court in affirming dismissal of a stockholder derivative action against Facebook, Inc. (Facebook) founder, Mark Zuckerberg, and...more

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