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Showing 10 posts in Disclosure Claims.

Chancery Dismisses Claims Alleging Directors Approved Spring-Loaded Stock Options Before Press Releases on COVID-19 Vaccine Efforts

Posted In Breach of Fiduciary Duty, Chancery, Disclosure Claims


In re Vaxart, Inc. S’holder Litig., Consol. C.A. No. 2020-0767-PAF (Del. Ch. June 3, 2022)
A small biotechnology company issued a press release that connected the company to the federal government’s Operation Warp Speed program and its efforts to develop a COVID-19 vaccine. The body of the press release provided more clarity than the headline—namely, that the company had been selected to participate in a primate research study, not selected as a final recipient of funds for vaccine development. Stockholders filed suit, alleging that the company’s selection was material information that should have been disclosed in advance of the stockholders’ vote on an amendment to the company’s equity incentive plan that enabled officers to issue themselves spring-loaded stock options prior to the press release. The defendants moved to dismiss. More ›

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Delaware Supreme Court Explains Appraisal Rights and Finds Disclosure Violation Relating to Pre-Closing Dividend Contingent on a Merger

Posted In Appraisal, Delaware Supreme Court, Disclosure Claims, M&A


In re GGP, Inc. Stockholder Litig., C.A. No. 2018-0267 (Del. July 19, 2022)
Here, the defendants organized a merger so that a large majority of the total value of the merger would be granted as a pre-closing dividend to stockholders and that the remaining amount would be granted in return for the stockholder’s shares. In the resulting litigation, stockholders argued that the defendants’ structuring of the merger unlawfully denied or diluted the stockholders’ right to seek appraisal and that the defendants’ disclosures regarding the structuring were deficient. The defendants prevailed on a motion to dismiss before the Court of Chancery. On appeal, the Delaware Supreme Court found that the dividend conditioned on the merger’s consummation was part of the merger consideration for appraisal purposes under Delaware law, that receipt of the dividend did not disqualify stockholders from seeking appraisal, and that plaintiff’s claim regarding the structure, therefore, was properly dismissed. But the Supreme Court reversed the trial court’s dismissal of the related disclosure claim. The plaintiffs alleged that the director defendants, aided and abetted by the acquirer, had deprived stockholders of their appraisal rights by improperly describing what would be subject to appraisal. The Supreme Court agreed and held that the disclosures were confusing and materially misleading. The proxy stated that stockholders were entitled only to the amount that remained after the pre-closing dividend. But this was incorrect as a matter of Delaware law, as the stockholders were also entitled to appraisal for the pre-closing dividend. Two justices dissented from the majority’s holding regarding the disclosure claim.

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On Motion To Dismiss, Court of Chancery Holds That Alleged Disclosure Violations Were Insufficient To Rebut Corwin Protections Of A Fully Informed Stockholder Vote

Posted In Chancery, Corwin Doctrine, Disclosure Claims


Teamster Members Ret. Plan v. Randall S. Dearth et al., C.A. No. 2020-0807-MTZ (Del. Ch. May 31, 2022)
Under the Supreme Court’s decision in Corwin and its progeny, a transaction approved by a fully informed, uncoerced stockholder vote, not involving a controlling stockholder, receives business judgment rule protection. However, one sufficiently alleged disclosure deficiency is enough to put into question whether a stockholder vote is fully informed and, thus, to defeat a motion to dismiss. More ›

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Chancery Dismisses All Claims in Stockholder Challenge to Cash-Out Merger Transaction

Posted In Chancery, Controlling Stockholder, Corwin Doctrine, Disclosure Claims


Harcum v. Lovoi, C.A. No. 2020-0398-PAF (Del. Ch. Jan. 3, 2022)
In Harcum, the Delaware Court of Chancery dismissed all claims brought in a stockholder suit alleging fiduciary breaches in connection with the $1 billion dollar acquisition of Roan Resources Inc. by Citizen Energy Operating, LLC. The Court found that the transaction was “cleansed” pursuant to Corwin v. KKR Financial Holdings LLC, 125 A.3d 304, 312 (Del. 2015), because the plaintiff failed to adequately plead that any alleged controllers were conflicted or that the transaction was not approved by an uncoerced, fully informed stockholder vote.  More ›

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Chancery Denies Motion to Dismiss in Part Because Certain Discussions Between CEO and Acquirer Were not Disclosed in Proxy When Other Similar Communications Were

Posted In Chancery, Disclosure Claims, Fiduciary Duty, M&A


Teamsters Local 237 Additional Security Benefit Fund v. Caruso, C.A. No. 2020-0620-PAF (Del. Ch. Aug. 31, 2021)
Under Revlon, a director must focus on obtaining a transaction that provides the maximum value for stockholders in a sale of control. In addition, when directors solicit stockholder approval, they must disclose fairly and fully all material information. More ›

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

Posted In Chancery, Demand Futility, Derivative Claims, Disclosure Claims


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 plaintiff (i) first makes a demand on the board to bring suit and is wrongfully refused, or (ii) adequately pleads that a demand would have been futile because the directors were incapable of impartially considering it. Here, the court granted the defendants’ motion to dismiss, because the stockholder-plaintiff failed to allege facts that a majority of the board of directors – who concededly were otherwise disinterested and independent – faced a substantial risk of personal liability. More ›

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Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims

Posted In Caremark, Demand Futility, Derivative Claims, Disclosure Claims


Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021)

Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized” pleading standard. This pleading challenge is compounded when a plaintiff attempts to bring a Caremark failure of oversight claim – “possibly the most difficult theory in corporate law.” Similarly, a plaintiff alleging false or misleading disclosures not made in connection with soliciting shareholder action faces the additional pleading challenge of demonstrating that those disclosures were knowing or deliberate. More ›

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Chancery Dismisses Stockholder’s Claim that Directors Provided Materially-Deficient Notice of their Intent to Use Equity Bonus Plan to Reward Past Performance

Posted In Chancery, Disclosure Claims, Fiduciary Duty

Pascal v. Czerwinski, C.A. No. 2020-0320-SG (Del. Ch. Dec. 16, 2020)

This decision concerned a motion to dismiss a stockholder’s direct claim that Director-Defendants breached their duties by providing a materially-deficient proxy statement advocating adoption of an equity incentive plan (“EIP”) that ultimately allowed Defendants to award themselves bonuses. As a result of the alleged deficiencies, Plaintiffs sought invalidation of the entire EIP. More ›

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Chancery Upholds Claim that CEO Breached Her Duty of Care Relating to a Misleading Proxy Statement

Posted In Chancery, Disclosure Claims, M&A

City of Warren General Employees’ Retirement System v. Roche, C.A. No. 2019-0740-PAF (Del. Ch. Nov. 30, 2020)

This case illustrates that an officer’s support for a sale of the corporation does not trigger the “entire fairness” standard where a majority of the members of the board of directors are not alleged to have been interested or lacked independence, and the plaintiff’s allegations otherwise do not support that the officer deceived the board. As also illustrated here, however, materially incomplete or inaccurate disclosures in a proxy statement may state a non-exculpated claim against officers for a breach of the duty of care. More ›

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Delaware Court of Chancery Grants Motion to Dismiss Disclosure Claims Because Hedge Fund had Sufficient Information to Consider Corporation’s Self-Tender Offer

Posted In Disclosure Claims, Fiduciary Duty

Chatham Asset Mgmt., LLC v. Papanier, C.A. No. 2017-0088-AGB (Del. Ch. Jan. 13, 2020).

The directors of a Delaware corporation that makes a self-tender offer must disclose all material facts. A fact is material if there is a substantial likelihood that a reasonable stockholder would consider it important in deciding whether to tender. More ›

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