The Disclosure Process Defense to Securities Fraud Claims, Part I: Key Steps for Litigation Preparedness

One of the most effective—but underutilized—defenses against claim a of securities fraud is a disclosure process defense: that the defendants reasonably relied on a robust process for drafting, reviewing, and approving the public disclosures at issue.

It will come as no surprise to corporate counsel that public companies should be prepared to face allegations of securities fraud. Private securities class actions are filed after nearly any sharp stock-price decline, and government enforcement actions are on the rise and are increasingly aggressive. One of the most effective—but underutilized—defenses against such claims is a disclosure process defense: that the defendants reasonably relied on a robust process for drafting, reviewing, and approving the public disclosures at issue. (more…)

Seventh Circuit Says Delaware Companies May Not Bar The Door To Federal Court For Federal Proxy Fraud Derivative Claims

I.        Introduction

The Seventh Circuit recently issued an important decision holding that an exclusive forum provision in a company’s bylaws requiring that all derivative actions be brought in Delaware Chancery Court is unenforceable as applied to derivative cases brought under the federal proxy laws. On its face, Seafarers Pension Plan v. Bradway seems to foreclose the use of exclusive forum provisions for claims for which there is exclusive federal jurisdiction. As the Seventh Circuit notes, that would seem to be consistent with both federal proxy fraud law, which forbids contractual waivers of compliance with the law, as well as Delaware state law. But as discussed below, there is reason to believe that the decision may not be the last word on the topic, and, indeed, that it could end up before the U.S. Supreme Court. (more…)

Board Oversight: Key Focus Areas for 2022

In her regular column on corporate governance issues, Holly Gregory explores issues that are likely to require board attention in 2022 in an environment of heightened scrutiny of the board’s oversight role. (more…)

Sidley Perspectives on M&A and Corporate Governance

Sidley is pleased to share the December 2021 issue of Sidley Perspectives on M&A and Corporate Governance, a quarterly newsletter designed to keep you current on what we consider to be the most important legal developments involving M&A and corporate governance matters. (more…)

Court of Chancery Awards $700M In Opinion Highlighting Opinion Of Counsel Risks And Power Of Contra Proferentem Doctrine

Once in a while, a court decision provides not just guidance for participants in corporate transactions but also can serve as a wakeup call for the players’ legal advisors.  Such is the case with the post-trial decision in Bandera Master Fund LP et al v. Boardwalk Pipeline Partners LP, in which Vice Chancellor Laster resolved various disputes regarding a transaction through which Boardwalk Pipeline Partners, LP (“Boardwalk”) was taken private by its controller, Loews Corporation (“Loews”).  The resulting $700 million damages award, and sharp criticism of the legal opinions provided in support of the transaction, has garnered headlines, but the decision is also notable for its review of several long-standing principles of Delaware law that provide guidance for contract negotiations and litigation alike. (more…)

Increased Scrutiny Has Boards of Directors in the Hot Seat

Life is getting harder for boards of directors of public companies. Increased scrutiny of companies — particularly in heavily regulated industries — has led to greater risk of criminal and civil liability. And recent Delaware cases have ratcheted up the pressure, allowing lawsuits to proceed against boards for failure of oversight. What should directors know about their oversight responsibilities? And what can boards do to mitigate their risk? Our latest episode of The Sidley Podcast grapples with those questions and many others. Join host and Sidley partner, Sam Gandhi, as he speaks with two of the firm’s thought leaders on the subject — Holly Gregory and Dr. Paul Kalb.

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Delaware Supreme Court Confirms Appraisal Rights May Be Waived Contractually — Query What Else May Be

On September 13, 2021, over a rare dissent, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a petition for appraisal filed by minority stockholders (the “Petitioners”) of Delaware corporation Authentix Acquisition Company, Inc. (“Authentix”). The high court agreed that the Petitioners could waive the statutory right to an appraisal through provisions in a stockholder agreement (the “Stockholders Agreement”). Significantly, this ruling may open the door for corporations to contractually waive other permissions portions of the Delaware General Corporation Law (“DGCL”). (more…)

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

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…)

Boeing Case Highlights Risk For Health, Life Sciences Boards

On Sept. 7, the Delaware Chancery Court allowed In re: The Boeing Co. Derivative Litigation to proceed, surviving a motion to dismiss.[1]

The action alleges that directors breached their fiduciary duties with respect to their oversight of safety issues and arises out of two crashes of the company’s 737 MAX aircraft. (more…)

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

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…)