Category

Best Practices

21 October 2021

Sidley Secures Trial Win; Court of Chancery Enforces Advance Notice Bylaw Where Stockholders Failed To Supply Required Information

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On October 13, 2021, Vice Chancellor Joseph R. Slights III issued a post-trial decision affirming the CytoDyn Inc. board of directors’ decision to reject a stockholder nomination of directors for failure to supply information required by the company’s advance notice bylaw. This is the first decision from a Delaware court addressing informational deficiencies in such a nomination notice, and provides important guidance for the many public companies with similar bylaws. (more…)

30 August 2021

A Delaware Corporate and M&A Checklist: 11 Cases That Every Practitioner Should Know

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As regular readers know, this blog typically covers the latest developments and trends emerging from the Delaware Court of Chancery. For this post, however, we revisit first principles and remind our readers of the bedrock decisions of modern Delaware M&A practice, and highlight 11 key decisions with which every practitioner should be familiar. (more…)

24 August 2021

Vice Chancellor Zurn’s First Post-Trial Opinion Provides a Cautionary Tale Regarding Private Ordering Under the LLC Act

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In her first true Opinion for the Court, In re Coinmint, LLC, Vice Chancellor Zurn delved deeply into the tortured relationship between the two founders (and sole members) of Coinmint, LLC, a bitcoin mining firm, and ultimately held that Delaware’s strong preference for private ordering is not unlimited where the parties fail entirely to follow the formalities set out in the founding documents to which they collectively agreed.

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29 June 2021

Sometimes the Best Defense Is Just … a Defense

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On June 16, 2021, the Delaware Court of Chancery denied the plaintiffs’ motion for partial judgment on the pleadings regarding portions of their declaratory judgment claim filed in Dr. Thomas Markusic, Dr. Maxym Polyakov, et al. v. Michael Blum, Patrick Joseph King, et al.  Plaintiffs filed the declaratory judgment action in an attempt to preempt their adversary’s potential claims, and Chancellor McCormick’s rejection of the requested declaratory relief offers a key lesson for litigants contemplating a similar preemptive action.

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22 June 2021

The Court of Chancery Breaks New Ground in Allowing “Reverse” Veil Piercing

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In a matter of first impression, Vice Chancellor Joseph R. Slights III recently concluded in Manichaean Capital, LLC v. Exela Technologies, Inc. that Delaware law permits a claim for “reverse” veil-piercing — that is, going after the assets of a subsidiary as opposed to a parent corporation. The decision provides a limited yet potentially powerful tool for those seeking to enforce judgments in the context of complex corporate structures, particularly where a corporate family has taken steps to limit assets flowing through the subsidiary that is liable. It also provides occasion to remind business entities of the attendant risks of failing to respect corporate separateness and form.

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13 May 2021

Court of Chancery Provides Reminder That Privilege Is Not Absolute

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Last week, Vice Chancellor Joseph R. Slights III issued a ruling in Tornetta v. Musk that serves as a reminder that the corporate attorney-client privilege is not absolute. Deciding a discovery motion in a stockholder derivative suit challenging the 2018 compensation deal for Tesla CEO Elon Musk, the Court ordered the defendants to produce a limited set of documents that reflected communications between Musk and in-house counsel, though it rejected the plaintiff’s request for additional communications between in-house counsel, the Board’s Compensation Committee, and outside advisors. The decision serves as a reminder to company counsel, both internal and external, that their communications may not always be protected from stockholder plaintiffs in shareholder derivative actions.

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26 April 2021

Section 220 Is Not a Blank Check

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The Delaware Court of Chancery recently issued another decision regarding the statutory right to inspection of corporate books and records under Delaware General Corporation Law Section 220. In Melvin Gross v. Biogen Inc., the plaintiff-stockholder was permitted to obtain certain books and records, but the court limited inspection in key respects, and offered words of caution regarding confidentiality agreements. Companies facing Section 220 demands should review this decision and consider its lessons regarding the appropriate scope of inspection.

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15 April 2021

A Reminder of the Obvious: Lawsuit Built on “Bold-Faced Lie” Does not End Well for Plaintiff

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In the course of affirming a Court of Chancery decision in a seemingly routine dispute relating to a stockholder’s ability to nominate a slate of directors, the Delaware Supreme Court underscored the importance of parties’ (and counsel’s) candor with the Court and the potential consequences should the Court conclude it has been misled. (more…)

25 March 2021

Back to the Future: New Lines Drawn for Poison Pills

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In a tale of what is old is new again, the Delaware Court of Chancery reviewed the propriety of a poison pill — a bulwark of the 1980s takeover era — but in the context of shareholder activism against the backdrop of the COVID-19 pandemic. Vice Chancellor Kathaleen McCormick’s detailed review of the pertinent case law and fact-specific decision to permanently enjoin The Williams Companies, Inc.’s extraordinary 5% poison pill offers a number of lessons for directors considering the adoption or renewal of a similar device. The Williams Cos. S’holder Litig. (Del. Ch. Feb. 26, 2021).

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