Buyers faced increased financial risk when doing deals with earnouts after the 2024 Delaware Court of Chancery decision in Johnson & Johnson v. Fortis Advisors LLC. However, the Delaware Supreme Court partially reversed that decision and limited the application of the implied covenant of good faith and fair dealing—this has de-risked earnouts for buyers.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2024/10/MN-24015-Enhanced-Scrutiny-Blog-Imagery-Refresh.jpg606833Sharon Flanaganhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngSharon Flanagan2026-02-05 09:03:062026-02-03 17:47:39Delaware Supreme Court Makes Earnouts Less Risky for Buyers Earnout Decision Partially Reversed Because Buyer Did Not Have to Pursue an Alternative Regulatory Pathway
On November 26, 2025, the Eleventh Circuit reversed Judge Aileen Cannon’s dismissal in Jastram v. NextEra Energy, Inc. in a decision that appears to significantly broaden the Circuit’s loss causation standard at the motion-to-dismiss stage.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Ian M. Rosshttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngIan M. Ross2026-02-03 10:05:392026-02-03 10:08:27Eleventh Circuit Loosens Loss Causation in High-Profile Election-Interference Securities Suit
In many ways, 2025 was a turbulent yet transformative year, and the area of shareholder activism was no exception. As we reflect on the events of the past year, we highlight key takeaways to help companies prepare for a 2026 that is shaping up to be even more lively.
A recent decision by the Delaware Court of Chancery in Giuliano v. Grenfell-Gardner, et al. involves a notable twist on the familiar Caremark line of oversight liability cases. After the subject company went into bankruptcy, a bankruptcy trustee gained access to the company’s documents and elected to take over derivative claims against directors and officers. In doing so, the trustee pointed to information supporting certain Caremark claims — namely that the board had not imposed adequate reporting systems, and certain officers did not sufficiently inform the board. Beyond the bankruptcy trustee’s unique access to all company documents, the opinion also serves as a useful reminder for corporate directors and officers that the best defense against Caremark claims remains proactive, well-documented, and robust governance practices.
The Delaware Court of Chancery recently provided a powerful reminder of the Court’s equitable purpose, and how it will not countenance bad faith or duplicity. In Ghatty v. Mudili et. al., three board members of a five-member board voted at a special board meeting to remove the remaining two directors from their officer positions, and later sued under 8 Del. C. § 225 to seek confirmation that the two directors had been validly removed from their officer roles. The Defendants challenged their removal on a number of grounds. The Court of Chancery considered one argument dispositive: that the meeting notice was inherently deficient because the meeting agenda omitted the removal action effectuated at the meeting, and indeed misleadingly suggested that one Defendant’s officer role would be expanded. The Court condemned the notice as “duplicity,” voided the vote, and held that the Defendants remained officers of the Company.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2025/05/MN-24015-Enhanced-Scrutiny-Blog-Imagery-Refresh_4.jpg606833Hille R. Sheppardhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngHille R. Sheppard2026-01-15 09:03:312026-01-14 14:15:39Chancery to Directors: Don’t Play Dirty
Throughout 2025, Enhanced Scrutiny provided insightful analysis of notable M&A and corporate governance developments from the Delaware courts and other jurisdictions. Below, we highlight some of the most popular posts from the past year. We look forward to continuing our coverage in 2026.
This past spring, the California Court of Appeal affirmed the enforceability of federal forum provisions (“FFPs”) in corporate charters. Bullock v. Rivian Auto., Inc., No. G063033, 2025 WL 1177303 (Cal. Ct. App. Apr. 23, 2025). FFPs, which require stockholders to bring claims for violations of the Securities Act of 1933 (the “‘33 Act”) in federal court instead of state court, were deemed facially valid in Delaware in Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020). Underscoring the importance of the forum for suits based on securities offerings, the plaintiffs in Bullock sought review of the California court’s decision. On August 13, 2025, the Supreme Court of California declined the plaintiffs’ petition for review. Petition for review & publication request(s) denied, Bullock v. Rivian Auto., Inc., No. S290922 (Cal. Aug. 13, 2025). The plaintiffs have now indicated an intent to seek certiorari from the United States Supreme Court. See Application to Extend the Time to File a Petition for a Writ of Certiorari, Bullock v. Rivian Auto., Inc., No. 25A506 (U.S. filed Oct. 31, 2025), application granted (Nov. 4, 2025).
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2024/11/MN-24015-Enhanced-Scrutiny-Blog-Imagery-Refresh_2.jpg606833Sara B. Brodyhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngSara B. Brody2025-12-17 09:03:332025-12-16 16:09:57California Appellate Court Affirms Enforceability of Federal Forum Provisions in Securities Act Litigation
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Delaware Supreme Court Makes Earnouts Less Risky for Buyers
Earnout Decision Partially Reversed Because Buyer Did Not Have to Pursue an Alternative Regulatory Pathway
Buyers faced increased financial risk when doing deals with earnouts after the 2024 Delaware Court of Chancery decision in Johnson & Johnson v. Fortis Advisors LLC. However, the Delaware Supreme Court partially reversed that decision and limited the application of the implied covenant of good faith and fair dealing—this has de-risked earnouts for buyers.
(more…)
Sharon Flanagan
San Francisco, Palo Alto
sflanagan@sidley.com
Sally Wagner Partin
San Francisco, Palo Alto
swagnerpartin@sidley.com
Sacha Jamal
Knowledge Management Lawyer
sjamal@sidley.com
Earnout Decision Partially Reversed Because Buyer Did Not Have to Pursue an Alternative Regulatory Pathway
Eleventh Circuit Loosens Loss Causation in High-Profile Election-Interference Securities Suit
On November 26, 2025, the Eleventh Circuit reversed Judge Aileen Cannon’s dismissal in Jastram v. NextEra Energy, Inc. in a decision that appears to significantly broaden the Circuit’s loss causation standard at the motion-to-dismiss stage.
(more…)
Ian M. Ross
Miami
iross@sidley.com
How Shareholder Activism Fared in 2025
In many ways, 2025 was a turbulent yet transformative year, and the area of shareholder activism was no exception. As we reflect on the events of the past year, we highlight key takeaways to help companies prepare for a 2026 that is shaping up to be even more lively.
(more…)
Kai H.E. Liekefett
New York
kliekefett@sidley.com
Derek Zaba
Palo Alto, New York
dzaba@sidley.com
A Unique Caremark Twist Amidst Bankruptcy
A recent decision by the Delaware Court of Chancery in Giuliano v. Grenfell-Gardner, et al. involves a notable twist on the familiar Caremark line of oversight liability cases. After the subject company went into bankruptcy, a bankruptcy trustee gained access to the company’s documents and elected to take over derivative claims against directors and officers. In doing so, the trustee pointed to information supporting certain Caremark claims — namely that the board had not imposed adequate reporting systems, and certain officers did not sufficiently inform the board. Beyond the bankruptcy trustee’s unique access to all company documents, the opinion also serves as a useful reminder for corporate directors and officers that the best defense against Caremark claims remains proactive, well-documented, and robust governance practices.
(more…)
Alex J. Kaplan
New York
akaplan@sidley.com
Chancery to Directors: Don’t Play Dirty
The Delaware Court of Chancery recently provided a powerful reminder of the Court’s equitable purpose, and how it will not countenance bad faith or duplicity. In Ghatty v. Mudili et. al., three board members of a five-member board voted at a special board meeting to remove the remaining two directors from their officer positions, and later sued under 8 Del. C. § 225 to seek confirmation that the two directors had been validly removed from their officer roles. The Defendants challenged their removal on a number of grounds. The Court of Chancery considered one argument dispositive: that the meeting notice was inherently deficient because the meeting agenda omitted the removal action effectuated at the meeting, and indeed misleadingly suggested that one Defendant’s officer role would be expanded. The Court condemned the notice as “duplicity,” voided the vote, and held that the Defendants remained officers of the Company.
(more…)
Hille R. Sheppard
Chicago
hsheppard@sidley.com
Natalie A. Piazza
Dallas
npiazza@sidley.com
Top Posts of 2025
Throughout 2025, Enhanced Scrutiny provided insightful analysis of notable M&A and corporate governance developments from the Delaware courts and other jurisdictions. Below, we highlight some of the most popular posts from the past year. We look forward to continuing our coverage in 2026.
(more…)
Enhanced Scrutiny Contributors
delawarelit@sidley.com
California Appellate Court Affirms Enforceability of Federal Forum Provisions in Securities Act Litigation
This past spring, the California Court of Appeal affirmed the enforceability of federal forum provisions (“FFPs”) in corporate charters. Bullock v. Rivian Auto., Inc., No. G063033, 2025 WL 1177303 (Cal. Ct. App. Apr. 23, 2025). FFPs, which require stockholders to bring claims for violations of the Securities Act of 1933 (the “‘33 Act”) in federal court instead of state court, were deemed facially valid in Delaware in Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020). Underscoring the importance of the forum for suits based on securities offerings, the plaintiffs in Bullock sought review of the California court’s decision. On August 13, 2025, the Supreme Court of California declined the plaintiffs’ petition for review. Petition for review & publication request(s) denied, Bullock v. Rivian Auto., Inc., No. S290922 (Cal. Aug. 13, 2025). The plaintiffs have now indicated an intent to seek certiorari from the United States Supreme Court. See Application to Extend the Time to File a Petition for a Writ of Certiorari, Bullock v. Rivian Auto., Inc., No. 25A506 (U.S. filed Oct. 31, 2025), application granted (Nov. 4, 2025).
(more…)
Sara B. Brody
San Francisco, Palo Alto
sbrody@sidley.com
Madison J. Ferraro
San Francisco
madison.ferraro@sidley.com
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