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…)
The Court of Chancery’s March 30 decision in LendingClub is another example of the significant difficulty plaintiffs face in adequately alleging demand futility in the context of a derivative corporate oversight claim governed by Caremark, especially so in the face of an applicable exculpatory provision contained in a corporate charter.
The Court of Chancery provided its latest guidance on so-called Caremark claims in a New Year’s Eve opinion issued by Vice Chancellor Glasscock in Richardson v. Clark, an action brought derivatively by a stockholder of Moneygram International, Inc. The opinion dismissing the claims, in which the Court had some fun with film titles from Tom Cruise’s career, provides an important level-setting because some have questioned whether Delaware’s courts are lowering the bar for claims alleging that a board of directors failed in its oversight duties. Richardson should provide some comfort to directors that the standards have not changed: absent particularized allegations of bad-faith action (or inaction) by a board, such claims should not survive a motion to dismiss.
On August 24, 2020, Vice Chancellor Sam Glasscock III issued a rare denial of a motion to dismiss so-called Caremark claims in a case against directors of AmerisourceBergen Corporation (the Company). Although the decision reiterates the significant pleading burden that such oversight claims must meet, and exemplifies that only extraordinary facts typically permit a plaintiff’s claims to proceed to discovery, it is also a useful reminder that board-level best practices can, among other things, help address and limit any such liability.
The Delaware Chancery Court recently denied a motion to dismiss a shareholder derivative suit against directors and officers of Kandi Technologies Group, Inc., a publicly traded Delaware corporation based in China. Hughes v. Hu (Del. Ch. Apr. 27, 2020). The company had persistent problems with financial reporting and internal controls, encountering particular difficulties with related-party transactions dating back to 2010. In March 2014, the company disclosed material weaknesses in financial reporting and oversight, including a lack of audit committee oversight and a lack of internal controls for related-party transactions. The company pledged to remediate these problems. However, in March 2017, the company disclosed that its preceding three years of financial statements needed to be restated and that it continued to lack sufficient expertise and/or controls relating to accounting and SEC reporting.