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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
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 other transactions where a controller obtains non-ratable benefits, such as contracts with an entity owned by a controller of the company. This is important because prior case law was inconsistent on the test it applied to such contracts.
Second, the opinion has an exhaustive review of Delaware law on how to determine if a director is interested for purposes of the demand futility standard to bring a derivative suit.
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 dismissed with prejudice not just to him but to all stockholders? More ›
Court Of Chancery Explores The Effect Of Federal Settlements On A Delaware Action And Applies Unocal To Bylaw Amendments
This is an interesting decision for two reasons. More ›
This decision points out the hazard in providing a separate benefit to the named plaintiff in connection with the settlement of a derivative suit. In short, that is a bad idea and, as in this case, may cause the Court to reject even an otherwise good settlement because of concerns over the conflict of interest when the plaintiff may have agreed to a deal for his own benefit.
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 review of when a court will attribute knowledge of wrongdoing to a board of directors in the absence of direct proof the board was aware of those bad acts.
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 test has some weaknesses considering the wrongdoer will benefit from the recovery as a partner if the claim is cast as derivative. 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 test. 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 against the directors is easier to win in order to avoid the problems of simultaneously litigating both proceedings.
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 parent’s directors. More ›
Court Of Chancery Explains That The Existence Of A Controlling Stockholder Does Not Determine Demand Is Excused
A transaction with a controlling stockholder that is the subject of a derivative complaint still requires that a majority of the directors be interested before demand is excused. More ›
This decision involves the currently hot topic of the extent of a board of directors’ duty to properly assess corporate risks and act to prevent loss. More ›
This is an interesting decision because it explains what direct claims are available to investors in an LLC. 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. More ›
This decision will be remembered for the very large fee it awarded to some very entrepreneurial lawyers who risked their all to win a big case. More ›