Showing 8 posts from April 2013.
This decision affirms the long held law that Delaware does not recognize the "abuse of minority stockholders" theory whereby there is a duty to treat minority stockholders in such a way as to give them benefits that are not provided by contract or the law, such as dividends.Share
The rules governing when a demand on a board to file suit is excused are well known. Less well known is what happens when a demand is made and nothing happens. This decision explains that the failure to even respond is itself evidence that the board cannot be trusted to fairly evaluate the need to sue. While each such case turns on its own facts, this decision is an excellent summary of Delaware law on when a Caremark claim is well pled to excuse demand.Share
Most defendants in corporate fiduciary duty litigation want to say, "My lawyer said it was all right." They usually avoid making that point for fear of waiving the attorney-client privilege. A recent Court of Chancery decision suggests that it is possible to say your lawyer advised you without opening the door to disclosure of exactly what the lawyer said. Doing so involves walking a tightrope. One slip and you're waiving your privilege. Yet, the benefits may be worth the risk. More ›Share
This decision explains the rare case when a litigant may gain access to the opposing party's litigation reserves. That information is usually subject to attorney-client privilege.Share
The corporate defense bar is excited over the Delaware Supreme Court's April 14 decision in Pyott v. Louisiana Municipal Police Employees' Retirement System, No. 380, 2012 (more often referred to as the "Allergan case"). The Supreme Court reversed a Court of Chancery decision that had refused to dismiss a Delaware derivative complaint notwithstanding that a California federal court had previously dismissed virtually the same complaint. The Court of Chancery ruled that it was not bound under principles of collateral estoppel to follow the federal court ruling. It further held that even if it would normally follow the prior court's decision, it would not in the Allergan case because the California plaintiff had not adequately represented the Allergan stockholders before the California federal court.
The Court of Chancery's Allergan decision had been widely criticized by counsel for corporate defendants. They pointed to the abuse presented when multiple complaints are filed in multiple jurisdictions over a single transaction. That forces defendants to wage a multistate defense. Thus, if the Allergan case decision in the Court of Chancery had been upheld, defendants feared that even if they won one battle, the war against them would continue on another front. The defendants' concern led to several amicus briefs filed in the Delaware Supreme Court urging reversal of the Court of Chancery's Allergan decision. More ›Share
When may most of a Board of Directors deny another director access to the advice of counsel the majority received? This decision answers that interesting question and concludes "not very often." There are exceptions to that general rule, such as when there is a board committee involved whose counsel has not also been counsel to the excluded director, when the excluded director wants the information for a proven improper purpose, etc.Share
When does the mere assertion that your client had "advice of counsel" waive the attorney-client privilege? This question comes up more often than you might think. This decision makes clear that in some instances, merely asserting that you sought an attorney's advice is not a waiver of the privilege. The 2 keys to retaining the privilege are not injecting the advice of counsel issue into the litigation yourself and not actually saying what the attorney told you. But, if you follow the guidance in this decision, the privilege will be preserved.Share
In a major decision, the Delaware Supreme Court dismissed a derivative suit on the basis that a prior dismissal of essentially the same suit by a different stockholder barred the Delaware litigation. This reverses the Court of Chancery that held the suit might proceed despite the dismissal of the other litigation by a Federal Court in California.
Pyott may have major implications for derivative litigation, at least when multi-state cases are filed. Defendants may be expected to race to file motions to dismiss in what they see as the most favorable jurisdiction or in those cases where they see less formidable opponents.
It is also noteworthy that the Supreme Court rejected any presumption that a "fast filer" is an inadequate plaintiff.Share