“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.”
In 2017, Plaintiffs brought this action alleging that defendants breached their fiduciary duties to Oracle in relation to Oracle’s 2016 acquisition of NetSuite, a company in which Oracle founder and major stockholder Larry Ellison also held significant shares. After protracted pre-trial litigation involving five amended complaints naming various permutations of defendants and seven opinions by the court, three defendants proceeded to trial in the summer of 2022. The defendants who remained by the time of trial were Ellison, Oracle CEO Safra Catz, and director Renée James, chair of the Oracle Board’s Special Committee that evaluated and negotiated the transaction. Following the trial, Plaintiffs voluntarily dismissed James from the case with prejudice. And in May 2023, the court issued its post-trial opinion in favor of Defendants, finding that Ellison insulated himself from the transaction, that the business judgment rule applied, and that neither Ellison nor Catz breached their fiduciary duties to Oracle.
Notwithstanding the trial loss, Plaintiffs moved for a mootness fee on the following theory: During the pendency of this litigation and following the court’s denial of a motion to dismiss, Oracle appointed two new independent directors, who went on to serve on the three-director Special Litigation Committee which determined the litigation should proceed under Plaintiffs. Plaintiffs argued that Oracle’s appointment of two new independent directors was a result of the litigation, and therefore was on its own a corporate benefit entitling Plaintiffs to a mootness fee. The fact that Plaintiffs’ claims were defeated post-trial is, they asserted, of no relevance.
The court rejected Plaintiffs’ theory. Assuming without deciding that there was a causal relationship between the timing of the new directors’ appointment and the litigation, the court engaged in a two-part analysis to determine whether a mootness fee was warranted: 1) whether the appointment conferred a corporate benefit on Oracle, and 2) whether that corporate benefit was sufficiently similar to the benefit Plaintiffs sought through the litigation.
Analyzing those questions within the context of the litigation, the court found that the appointment of the new directors was too disconnected from the purpose of the litigation to warrant a mootness fee. The court noted that Oracle’s existing directors did not breach their fiduciary duties in the NetSuite transaction. Meaning, the addition of two new independent directors did not supplement the already-loyal Board in a way that created a benefit to Oracle with respect to the events at issue in the litigation. The court’s reasoning was bolstered by the fact that aside from allegations about director independence at the demand futility stage, Plaintiffs’ focus in the litigation was never about the perceived independence of the board, and Plaintiffs never sought appointment of new independent directors at any time during the litigation. So even if there were a benefit conferred, it would have been unrelated to Plaintiffs’ aims in the litigation.
Evoking the comparison of plaintiffs’ counsel in a derivative litigation to a rodeo bull-rider, the Vice Chancellor concluded that Plaintiffs in this case had a “bad bull.” Their case was not a winner in light of Oracle’s careful process around the NetSuite transaction. And although the Vice Chancellor thought that Plaintiffs’ ride was long and skillfully done, “not even a great rider can wring a high score from a bad bull.” Put another way, “not even great counsel can wring significant stockholder value from litigation over an essentially loyal and careful sales process.”
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