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.”
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.”
On January 24, 2024, the U.S. Securities and Exchange Commission (SEC) adopted final rules relating to special purpose acquisition companies (SPACs) and de-SPAC transactions. While the final rules substantially track the rules originally proposed in March 2022, the SEC elected not to adopt two provisions that had received significant attention and changed market behavior. The final rules also modified the SEC’s guidance and requirements for the inclusion of projections in all SEC filings by both SPAC and non-SPAC issuers.
I. Overview of Enforceability of Forum Selection Clauses
The Delaware Court of Chancery has promoted the use of forum selection clauses in corporate charters since its 2010 opinion In re Revlon Inc. Shareholders Litigation. Three years later, in Boilermakers v. Chevron, the Delaware Court of Chancery ruled that forum selection clauses in corporate bylaws are facially valid for types of shareholder litigation, including derivative claims, fiduciary claims, statutory claims under the Delaware General Corporation Law, and claims regarding internal affairs. In light of these decisions, Delaware forum selection clauses contained in corporate charters or bylaws of the type found facially valid in Boilermakers have been enforced by state courts in many states. But a recent decision from a California appellate court suggests that some California courts may be resistant to such provisions based on California public policy in favor of the right to a jury trial.
The Delaware Court of Chancery rang in the new year with a decision calling into question certain provisions in a company’s advance notice bylaws, which had been adopted in the face of an upcoming proxy fight. On the whole, the Kellner v. AIM Immunotech Inc. decision is yet another reminder of the critical importance of advance notice bylaws and that they are often enforced by Delaware courts. But companies should work with counsel to consider the impact of this decision on their own bylaws, bearing in mind that considerations may change based on the outcome of a now-pending appeal in Kellner.
Last month, Vice Chancellor Glasscock dismissed shareholder claims in Teamsters Local 443 Health Services & Insurance Plan v. John C. Chou (Del. Ch. Nov. 17, 2023) (“Teamsters II”) after finding that a single-member special litigation committee (“SLC”) had sufficiently investigated the stockholder’s allegations before recommending dismissal. Vice Chancellor Glasscock’s decision is not the first time that the Court of Chancery approved a single-member SLC’s motion to dismiss a derivative suit. For example, in April 2023, Vice Chancellor Lori W. Will granted a single-member SLC’s motion to terminate a shareholder action In re Baker Hughes Derivative Litig., 2023 WL 2967780 (Del. Ch. Apr. 17, 2023).
When an M&A deal closes, is it done? Not always. More and more disputes are arising after closing, which results in lost time and expense for both buyers and sellers as they realize they don’t actually have a done deal. Not all disputes after closing can be avoided, but their effects can be minimized with the right due diligence, transparency in the process, and knowing the mechanisms for resolving them efficiently.