About This Blog
Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Subscribe to Blog
JDSupra RSS
Join us on LinkedIn
Follow us on TwitterTopics
Top Posts
Top News
- February 19, 2021
- October 30, 2020
- April 1, 2024
Archives
Morris James Blogs
Showing 156 posts in Derivative Claims.
Court Of Chancery Rejects Settlement Because Of Named Plaintiff Conflict
Smollar v. Potarazu, C.A. No. 10287-VCN (January 14, 2016)
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.
ShareDistrict Court Explains Caremark Proof Requirements In Pleading
In Re Chemed Corporation Shareholder Derivative Litigation, No. 13-1854-LPS-CJB (December 23, 2015)
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.
ShareDistrict Court Explains When Suit Is Direct Or Derivative In The Alternative Entity Context
Gimaex Holding Inc. v. Spartan Motors USA Inc., No. 15-CV-00515-RGA (December 22, 2015)
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 ›
ShareDelaware Supreme Court Explains How To Do The Director Interest Test
Delaware Country Employees Retirement Fund v. Sanchez, No. 702, 2014 (October 2, 2015)
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 ›
ShareCourt Of Chancery Explains When A Dilution Claim Is Direct
Caspian Select Credit Master Fund Ltd. v. Gohl, C.A. 10244-VCN (September 28, 2015)
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 ›
ShareCourt Of Chancery Grants Stay Of Derivative Case
In Re Duke Energy Corporation Coal Ash Derivative Litigation, C.A. 9682- VCN (August 31, 2015)
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.
ShareCourt Of Chancery Denies Standing After Spin-Off
In re Abbvie Inc. Stockholder Derivative Litigation, C.A. No. 9983-VCG (July 21, 2015)
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 ›
ShareCourt Of Chancery Explains That The Existence Of A Controlling Stockholder Does Not Determine Demand Is Excused
Teamsters Union 25 Health Services & Insurance Plan v. Baiera, C.A. No. 9503-CB (July 13, 2015)
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 ›
ShareCourt Of Chancery Explores Risk Management Duties
In re General Motors Company Derivative Litigation, C.A. 9627-VCG (June 26, 2015)
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 ›
ShareCourt Of Chancery Explains Claims Available To LLC Members
CMS Investment Holdings LLC v. Castle, C.A. No. 9468-VCP (June 23, 2015)
This is an interesting decision because it explains what direct claims are available to investors in an LLC. More ›
ShareCourt of Chancery Upholds Right To Secondary Offering
In Re Molycorp Inc. Shareholder Derivative Litigation, C.A. 7282-VCN (May 27, 2015)
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 ›
ShareCourt Of Chancery Awards Major Fee
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 ›
ShareDistrict Court Considers Status Of Disclosure Claims
In re Caterpillar Inc. Derivative Litigation, No. 12-1076-LPS-CJB (June 10, 2014)
This comprehensive decision is particularly interesting because it considers whether a disclosure claim is subject to the normal Rule 23.1 demand rules. Normally, disclosure claims are thought of as direct claims based on the violation of the stockholder's right to cast an informed vote. But when, as here, the plaintiff chooses to assert a derivative claim for an alleged disclosure claim, he must also meet the normal demand rules. The plaintiff argued that there was no business judgment involved in making the disclosures at issue and, hence, the demand rules should not apply. The federal court rejected that argument, relying largely on non-Delaware cases.
ShareCourt Of Chancery Lifts Stay
In re Molycorp Inc. Shareholder Derivative Litigation, C.A. 7282-VCN (May 12, 2014)
This decision clearly explains when a derivative suit should be stayed in favor of securities litigation elsewhere. The general rule is that when the derivative suit depends on the outcome of the securities litigation because it seeks recovery of the damages to be paid for a securities law violation, the derivative suit should be stayed. Of course, when the derivative suit is not dependent on the securities litigation outcome, the stay should be lifted.
ShareDistrict Court Dismissed Derivative Suits Under Delaware Law
New Jersey Building laborers Pension Fund v. Ball, D. Del. No. 11-1153-LPS-SRF (March 13, 2014) and Freedman v Mulva, D.Del., No. 11-686-LPS-SRF (March12, 2014)
In these 2 decisions, the U.S. Magistrate shows a sound understanding of Delaware corporate law. She recommends the dismissal of these 2 derivative suits under Rule 23.1 because the complaints do not show the directors were disqualified from considering a demand they sue. The directors' interest in a compensation plan that was only currently applicable to employees did not make them interested under Delaware law.
Share
