Special Committee Chair Dismissed in Post-Trial Win
On December 27, 2022, after a 10-day bench trial in July and August 2022 and post-trial argument, the Court granted Plaintiffs’ stipulation to voluntarily dismiss Renée James, the Chair of a Special Committee of the Oracle Board 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. This case is one of the rare post-Cornerstone director independence cases to proceed to trial, following an investigation and decision by a special litigation committee to return the case to the shareholder Plaintiffs to pursue. The case was also procedurally unique as Plaintiffs opted to dismiss James following the 10-day trial and post-trial argument, rather than wait for an opinion from the Court.
The original complaint in this matter was filed in 2017 against Oracle founder Larry Ellison, CEO Safra Catz, James, and the other 2016 members of Oracle’s Board. The Court found demand futility adequately pled as to the claims against Ellison and Catz. In re Oracle Corp. Derivative Litig., 2018 WL 1381331 (Del. Ch. Mar. 19, 2018). Plaintiff dismissed James and the other director defendants and, subsequently, Oracle formed a Special Litigation Committee to investigate the claims against Ellison and Catz. Following an investigation taking over a year, the Special Litigation Committee returned the case to Plaintiffs to pursue. Over the course of multiple amended complaints, Plaintiffs added back James and the other director defendants and brought claims against certain NetSuite executives. Prior to trial, Plaintiffs voluntarily dismissed the other outside directors of the Oracle Board (including the other Special Committee members—former Director of the CIA and Secretary of Defense, Leon Panetta and former CEO of Akamai, George Conrades). The Court also granted motions to dismiss Vice Chairman Jeff Henley and the estate of CEO Mark Hurd and the NetSuite executives. See In re Oracle Corp. Derivative Litig., 2021 WL 2530961 (Del. Ch. June 21, 2021); In re Oracle Corp. Derivative Litig., 2020 WL 3410746 (Del. Ch. June 22, 2020).
James remained in the case in connection with her service as chair of the Special Committee formed to independently evaluate acquisition of NetSuite, because of Larry Ellison’s substantial investment in the company. Plaintiffs asserted a claim that James violated her fiduciary duties to Oracle by allegedly conspiring with Larry Ellison and Safra Catz to run an acquisition process that Plaintiffs claimed led to Oracle overpaying for NetSuite. Plaintiffs further claimed that James was willing to engage in these alleged practices in exchange for Ellison allegedly using his influence in the technology industry to help her secure a future CEO position.
While the claims against James were baseless, Plaintiffs continuously pursued their case, surviving a motion to dismiss and motion for summary judgment in light of what Vice Chancellor Glasscock described as “plaintiff-friendly” standards for those motions. In re Oracle Corp. Derivative Litig., 2022 WL 3136601 (Del. Ch. May 20, 2022); In re Oracle Corp. Derivative Litig., 2021 WL 2530961 (Del. Ch. June 21, 2021). In order to achieve vindication and put an end to attacks on her character, James proceeded to trial. Under the framework set forth in In re Cornerstone Stockholder Litig., 115 A.3d 1173 (Del. 2015) to evaluate non-exculpated claims of the duty of loyalty for directors, Plaintiffs were required to show – and failed to show – that James was beholden to Ellison and Catz because of her alleged career aspirations, and that she acted to advance Ellison’s interests over those of Oracle’s.
Evidence at trial, including two days of trial testimony by James, established that James was both independent and ran a thorough process for evaluating and approving the transaction in coordination with the other members of the Special Committee. This process included 15 Special Committee meetings, in which the Committee undertook an in-depth evaluation of both the strategic rationale for the transaction and price negotiation strategy in consultation with independent financial and legal advisors. Evaluating the evidence, Vice Chancellor Glasscock, at post-trial oral argument on November 18, 2022, stated that the evidence at trial did not support any finding of liability against James and that there was no evidence that James was beholden to either Ellison or Catz. Following oral argument and in light of the Court’s statements, Plaintiffs voluntarily dismissed James from the case, rather than await a ruling from the Court.
Sidley represented James and other directors of the Oracle Board in this matter. The Sidley litigation team included lead lawyers Sara Brody, Jaime Bartlett, Matthew Dolan, Stephen Chang, Jennifer Lee and Chaddy Georges.