No Participation Trophy: Court of Chancery Shifts Fees For Failure To Allow Indemnifying Seller to Participate In Defense

Chancellor McCormick, of the Delaware Court of Chancery, recently was presented with the following question: If an indemnification provision in a purchase agreement clearly requires that the indemnifying party be permitted to participate in the defense of third party claims, is it a breach not to allow that participation?  It turns out that, despite a bit of creative contractual interpretation, the answer is “yes.”


Future-Proofing the Board of Directors

To help navigate increasingly complex corporate governance challenges, a recent report by the National Association of Corporate Directors (NACD) Commission on The Future of the American Board highlights areas of focus for boards in 2023 and beyond.


Chancery Cancels Corwin for Post-Close Claims for Injunctive Relief

Earlier this month, Vice Chancellor Morgan T. Zurn of the Delaware Court of Chancery issued a decision regarding an unsettled question of Delaware corporate law: whether an uncoerced and fully informed vote of disinterested stockholders may ratify and defeat a post-close claim seeking to enjoin certain governance measures and alleged entrenchment devices negotiated by a company’s board as part of a transaction.  The court concluded that such a vote, known commonly as “Corwin cleansing,” does not apply to post-close claims for injunctive relief under Unocal Corp. v. Mesa Petroleum Co.  The court’s decision, at least for now, will have immediate significance for company boards and their advisors when negotiating transactions or stockholder agreements that include measures that may be characterized as defensive or entrenching existing management or directors.


Potential Control Does Not Equal Actual Control: Business Judgment Rule Protects Oracle-Netsuite Transaction

In a May 12, 2023 opinion following trial and post-trial argument, the Delaware Court of Chancery found for defendants Oracle founder Larry Ellison and CEO Safra Catz in In re Oracle Derivative Litigation, 2017-0337-SG, a shareholder derivative litigation case arising out of Oracle’s US$9.3 billion acquisition of NetSuite.  The 10-day bench trial took place in July and August 2022 before Vice Chancellor Glasscock, and included two days of testimony by Catz and one day of testimony by Ellison, among other witnesses.  The Court’s decision comes several months after plaintiffs’ voluntary dismissal, following the post-trial argument, of then-defendant Renée James, the Chair of a Special Committee of the Oracle Board overseeing the acquisition.


Securities Litigation Against Life Sciences Companies: Eleven Takeaways from 2022

Securities class actions against life sciences companies are generally second-order problems.  The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, is followed by a stock price drop.  Following the decline, plaintiffs’ class action attorneys search the company’s previous public statements for inconsistencies between past positive comments and the current negative development.  In most cases, plaintiffs’ attorneys then seek to show that any arguable inconsistency amounts to fraud—that is, they will claim that the earlier statement was knowingly or recklessly false or misleading.  When a company makes the challenged statement in a public offering document (that is, a registration statement or prospectus), plaintiffs need to show that the statement was materially false or misleading, but not that it was made with scienter, i.e., the requisite state of mind.


Good Fences Make Good Neighbors and Preserve Attorney-Client Privilege in the Boardroom: A Word of Caution for Boards Navigating Potential Disputes Among Directors or With Funds They Manage

The boardroom frequently presents attorney-client privilege and work product protection issues. The Delaware Court of Chancery’s recent decision in Hyde Park Venture Partners Fund III, LP v. FairXchange, LLC, C.A. No. 2022-0344-JTL (Del. Ch. March 9, 2023), provides a reminder of the importance of vigilance in considering when and how to limit a director’s access to privileged materials in circumstances where directors’ interests may diverge – particularly where directors manage, or are affiliated with, investment funds owning stock of the Company.


Plaintiffs Try Their Luck Against SPAC Financial Advisor

This blog frequently has covered SPAC-related litigation (recently, here, here, and here), and the potential consequences of the Delaware Court of Chancery’s rulings in the MultiPlan and Gig3 cases.  As discussed previously, the decisions in Multiplan and Gig3, among others, may portend increased litigation surrounding de-SPAC transactions, and particular focus by the plaintiffs’ bar on any actual or perceived conflicts of interest.  A relatively recent complaint filed in the Court of Chancery targeting the SPAC deal may represent plaintiffs’ attorneys further widening the net of liability: the case targets not only the SPAC fiduciaries themselves but also the independent financial advisor that purportedly conducted due diligence in connection with the de-SPAC transaction.  Financial advisors often are intimately involved in the SPAC process: they help screen which companies are attractive targets for a SPAC merger and, once a target is chosen, conduct diligence to determine that the target is a genuinely good merger partner.  The complaint focuses on the financial advisors’ due diligence and on an allegedly conflict-prone compensation structure for those advisors, and alleges liability against an additional (and often deep-pocketed) class of defendant.




Meet the Team

<a target=‘_blank’ href="">Andrew W. Stern</a>

Andrew W. Stern

New York
<a target=‘_blank’ href="">Charlotte K. Newell</a>

Charlotte K. Newell

New York
<a target=‘_blank’ href="">Elizabeth Y. Austin</a>

Elizabeth Y. Austin

<a target=‘_blank’ href="">Jaime A. Bartlett</a>

Jaime A. Bartlett

San Francisco
<a target=‘_blank’ href="">Matthew J. Dolan</a>

Matthew J. Dolan

Palo Alto
<a target=‘_blank’ href="">Jim Ducayet</a>

Jim Ducayet

<a target=‘_blank’ href="">Yolanda C. Garcia</a>

Yolanda C. Garcia

<a target=‘_blank’ href="">James Heyworth</a>

James Heyworth

New York
<a target=‘_blank’ href="">Alex J. Kaplan</a>

Alex J. Kaplan

New York
<a target=‘_blank’ href="">Jon Muenz</a>

Jon Muenz

New York
<a target=‘_blank’ href="">Ian M. Ross</a>

Ian M. Ross


<a target=‘_blank’ href="">Hille R. Sheppard</a>

Hille R. Sheppard

<a target=‘_blank’ href="">Heather Benzmiller Sultanian</a>

Heather Benzmiller Sultanian

<a target=‘_blank’ href="">Robert S. Velevis</a>

Robert S. Velevis



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