Last month, in an oral ruling likely to bring great joy to the Delaware defense bar, Vice Chancellor Zurn issued an atypical “Statement of the Court” in Garfield v. Getaround that swiftly rejected an $850,000 fee request in a derivative action. Plaintiff sought the fee for its efforts in prompting Defendant Getaround Inc. to make changes to its voting structure. Calling attention to the slew of similar actions by stockholders following Garfield v. Boxed, Vice Chancellor Zurn said the “game is over” for attorneys’ “making a literal fortune off of a minuscule number of hours of work.”
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jon Muenzhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJon Muenz2024-03-27 11:02:042024-03-27 11:02:04Delaware Court of Chancery Says It’s Game Over on Massive Fees for “Miniscule” Work
When companies settle proxy contests with activist stockholders, the activists generally give up stockholder-level influence in exchange for board-level influence. In a typical agreement in this setting, activists gain board seats in exchange for a commitment to vote their shares with the board’s recommendation on proposals put to stockholders. Activists also agree to standstill periods in which they refrain from taking actions opposed to the board, and from increasing their holdings above a specified cap.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Robin E. Wechkinhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRobin E. Wechkin2024-03-21 09:04:112024-03-21 09:37:37Voting Commitments Matter and Will Be Enforced: Delaware Supreme Court Affirms Chancery Decision Holding Activist Stockholders to Their Bargain
Last November, Vice Chancellor J. Travis Laster issued an Opinion in Sunder Energy, LLC v. Jackson denying a company’s application for a preliminary injunction against a former employee based on restrictive covenants embedded in that employee’s Incentive Units. The Court held that the company could not enforce the covenants because the company’s Managers breached their fiduciary duties in the creation of those covenants, and because the covenants themselves are “overly broad” and “unreasonable.” The Court noted, for example, that covenants in this residential solar panel sales company’s Incentive Units could theoretically have indefinitely prevented the former employee’s daughter from door-to-door sales of Girl Scout cookies. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00James Heyworthhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJames Heyworth2024-03-19 09:00:352024-03-19 09:10:41On the Efficacy of Litigating Post-Employment Disputes in Delaware (Reciprocity Is a Two-Way Street)
On February 29, 2024, the Delaware Court of Chancery issued an opinion in Sjunde AP-Fonden v. Activision Blizzard questioning a number of common practices for target companies in a merger, including the process for obtaining board approval of a merger agreement and the contents of the notice of the stockholders’ meeting to approve the merger agreement, and allowing a challenge to the validity of the subject merger to proceed. It is an important read for all involved in M&A and will undoubtedly have an impact on market practice.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jim Ducayethttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJim Ducayet2024-03-06 10:19:482024-03-19 17:50:45Delaware Court of Chancery’s Chilly Response to Activision Blizzard Casts Doubt on Common M&A Practices
On February 23, 2024, the Delaware Court of Chancery issued an opinion in West Palm Beach Firefighters’ Pension Fund v. Moelis & Co. invalidating certain stockholder agreement provisions that gave a significant stockholder broad pre-approval rights over corporate actions. The opinion serves as a reminder of the contours of board authority under DGCL Section 141(a) and how contractual agreements may “improperly constrain a board’s authority.” It remains to be seen if the decision will be appealed, but at present, it should be evaluated by parties considering contractual provisions that may directly or indirectly limit director decision-making.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Paul L. Choihttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngPaul L. Choi2024-02-29 10:07:072024-02-29 10:10:33A Reminder of Board Primacy: Delaware Court of Chancery Invalidates Stockholder Agreement Provisions Encroaching on Board-Level Decisions
Plaintiffs’ bid for a US$5 million mootness fee in In re Oracle Corp. Derivative Litigation, C.A. No. 2017-0337-SG was denied by Vice Chancellor Glasscock, who noted that “not even great counsel can wring significant stockholder value from litigation over an essentially loyal and careful sales process.”
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/05/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_32.jpg606833Jaime A. Bartletthttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJaime A. Bartlett2024-02-14 12:23:332024-02-28 10:41:57“A Bad Bull”: Chancery Court Rejects Plaintiffs’ Fee Application in Oracle Derivative Litigation
In Segway, Inc. v. Cai, the Delaware Court of Chancery dismissed one of the increasingly common breach of fiduciary duty cases brought against corporate officers after last year’s seminal McDonald’s decision, which clarified that officers owe a duty of oversight just as directors do. No doubt reassuringly for those officers, Vice Chancellor Will corrected the “misimpression that an oversight claim pursued against an officer is easier to plead than one against a director.” The opinion definitively confirms that “bad faith remains a necessary predicate to any Caremark claim.”
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Ross O. Kloeber IVhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRoss O. Kloeber IV2024-02-07 13:01:202024-02-29 10:11:32“Bad Things Can Happen to Corporations” – But Officers Cannot Be Liable Absent Bad Faith
Delaware Court of Chancery Says It’s Game Over on Massive Fees for “Miniscule” Work
Last month, in an oral ruling likely to bring great joy to the Delaware defense bar, Vice Chancellor Zurn issued an atypical “Statement of the Court” in Garfield v. Getaround that swiftly rejected an $850,000 fee request in a derivative action. Plaintiff sought the fee for its efforts in prompting Defendant Getaround Inc. to make changes to its voting structure. Calling attention to the slew of similar actions by stockholders following Garfield v. Boxed, Vice Chancellor Zurn said the “game is over” for attorneys’ “making a literal fortune off of a minuscule number of hours of work.”
(more…)
Jon Muenz
New York
jmuenz@sidley.com
Maya S. Shair
Associate
mshair@sidley.com
Voting Commitments Matter and Will Be Enforced: Delaware Supreme Court Affirms Chancery Decision Holding Activist Stockholders to Their Bargain
When companies settle proxy contests with activist stockholders, the activists generally give up stockholder-level influence in exchange for board-level influence. In a typical agreement in this setting, activists gain board seats in exchange for a commitment to vote their shares with the board’s recommendation on proposals put to stockholders. Activists also agree to standstill periods in which they refrain from taking actions opposed to the board, and from increasing their holdings above a specified cap.
(more…)
Robin E. Wechkin
Seattle
rwechkin@sidley.com
On the Efficacy of Litigating Post-Employment Disputes in Delaware (Reciprocity Is a Two-Way Street)
Last November, Vice Chancellor J. Travis Laster issued an Opinion in Sunder Energy, LLC v. Jackson denying a company’s application for a preliminary injunction against a former employee based on restrictive covenants embedded in that employee’s Incentive Units. The Court held that the company could not enforce the covenants because the company’s Managers breached their fiduciary duties in the creation of those covenants, and because the covenants themselves are “overly broad” and “unreasonable.” The Court noted, for example, that covenants in this residential solar panel sales company’s Incentive Units could theoretically have indefinitely prevented the former employee’s daughter from door-to-door sales of Girl Scout cookies. (more…)
James Heyworth
New York
jheyworth@sidley.com
Andrew A. Kunsak
akunsak@sidley.com
Delaware Court of Chancery’s Chilly Response to Activision Blizzard Casts Doubt on Common M&A Practices
On February 29, 2024, the Delaware Court of Chancery issued an opinion in Sjunde AP-Fonden v. Activision Blizzard questioning a number of common practices for target companies in a merger, including the process for obtaining board approval of a merger agreement and the contents of the notice of the stockholders’ meeting to approve the merger agreement, and allowing a challenge to the validity of the subject merger to proceed. It is an important read for all involved in M&A and will undoubtedly have an impact on market practice.
(more…)
Jim Ducayet
Chicago
jducayet@sidley.com
Charlotte K. Newell
New York
cnewell@sidley.com
Jessica Wood
New York
jessica.wood@sidley.com
Loren Braswell
Houston
lbraswell@sidley.com
A Reminder of Board Primacy: Delaware Court of Chancery Invalidates Stockholder Agreement Provisions Encroaching on Board-Level Decisions
On February 23, 2024, the Delaware Court of Chancery issued an opinion in West Palm Beach Firefighters’ Pension Fund v. Moelis & Co. invalidating certain stockholder agreement provisions that gave a significant stockholder broad pre-approval rights over corporate actions. The opinion serves as a reminder of the contours of board authority under DGCL Section 141(a) and how contractual agreements may “improperly constrain a board’s authority.” It remains to be seen if the decision will be appealed, but at present, it should be evaluated by parties considering contractual provisions that may directly or indirectly limit director decision-making.
(more…)
Paul L. Choi
Chicago
pchoi@sidley.com
Jim Ducayet
Chicago
jducayet@sidley.com
Charlotte K. Newell
New York
cnewell@sidley.com
Andrew W. Stern
New York
astern@sidley.com
Arthur E. Adler
aadler@sidley.com
“A Bad Bull”: Chancery Court Rejects Plaintiffs’ Fee Application in Oracle Derivative Litigation
Plaintiffs’ bid for a US$5 million mootness fee in In re Oracle Corp. Derivative Litigation, C.A. No. 2017-0337-SG was denied by Vice Chancellor Glasscock, who noted that “not even great counsel can wring significant stockholder value from litigation over an essentially loyal and careful sales process.”
(more…)
Jaime A. Bartlett
San Francisco
jbartlett@sidley.com
Chaddy Georges
San Francisco
cgeorges@sidley.com
“Bad Things Can Happen to Corporations” – But Officers Cannot Be Liable Absent Bad Faith
In Segway, Inc. v. Cai, the Delaware Court of Chancery dismissed one of the increasingly common breach of fiduciary duty cases brought against corporate officers after last year’s seminal McDonald’s decision, which clarified that officers owe a duty of oversight just as directors do. No doubt reassuringly for those officers, Vice Chancellor Will corrected the “misimpression that an oversight claim pursued against an officer is easier to plead than one against a director.” The opinion definitively confirms that “bad faith remains a necessary predicate to any Caremark claim.”
(more…)
Ross O. Kloeber IV
Chicago
rkloeber@sidley.com
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Andrew W. Stern
astern@sidley.com
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James Heyworth
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Alex J. Kaplan
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Ian M. Ross
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Robert S. Velevis
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