Controller’s Ability to Appoint and Remove Directors at Will Insufficient to Establish Demand Futility

In Harrison Metal Capital, an investment fund with an 18% stake in a privately held company called MixMax, Inc. believed the CEO was committing financial improprieties, but found no legal recourse for its complaint.  Although certain features of the case are unusual as a factual matter, the Court of Chancery’s analysis of demand futility in a company with a controlling stockholder will be applicable in more conventional derivative actions as well.


Carvana SLC Drives Away Derivative Case

On March 27, 2024, Chancellor McCormick granted the Carvana Special Litigation Committee’s motion to dismiss after finding no wrongdoing by the Company’s controlling stockholders in connection with its March 2020 direct offering and the controlling stockholders’ subsequent sale of Company stock for over US$1 billion. See


Delaware Court of Chancery Says It’s Game Over on Massive Fees for “Miniscule” Work

Last month, in an oral ruling likely to bring great joy to the Delaware defense bar, Vice Chancellor Zurn issued an atypical “Statement of the Court” in Garfield v. Getaround that swiftly rejected an $850,000 fee request in a derivative action.  Plaintiff sought the fee for its  efforts in prompting Defendant Getaround Inc. to make changes to its voting structure.  Calling attention to the slew of similar actions by stockholders following Garfield v. Boxed, Vice Chancellor Zurn said the “game is over” for attorneys’ “making a literal fortune off of a minuscule number of hours of work.”


“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.”


Protecting Its “Unwaivable Right to a Jury Trial,” California Waves Goodbye to a Delaware Forum Selection Clause

I. Overview of Enforceability of Forum Selection Clauses

The Delaware Court of Chancery has promoted the use of forum selection clauses in corporate charters since its 2010 opinion In re Revlon Inc. Shareholders Litigation. Three years later, in Boilermakers v. Chevron, the Delaware Court of Chancery ruled that forum selection clauses in corporate bylaws are facially valid for types of shareholder litigation, including derivative claims, fiduciary claims, statutory claims under the Delaware General Corporation Law, and claims regarding internal affairs. In light of these decisions, Delaware forum selection clauses contained in corporate charters or bylaws of the type found facially valid in Boilermakers have been enforced by state courts in many states. But a recent decision from a California appellate court suggests that some California courts may be resistant to such provisions based on California public policy in favor of the right to a jury trial.


A Judicial Notice That Judicial Notice Has Its Limits

In a significant decision the week before the Christmas holiday, the Delaware Supreme Court, sitting en banc, reversed the Delaware Court of Chancery’s dismissal of Lebanon County Employees’ Retirement Fund v. Collis et al. (“Lebanon”), reinstating stockholder derivative claims against the directors of AmerisourceBergen Corporation arising out of the Company’s wholesale distribution of prescription opioids in the United States.  Interested readers can view our blog’s prior discussion of the Court of Chancery’s dismissal here.


Special Committees Require Special Attention: Lessons from GoDaddy

Previously this blog has discussed the importance of procedural compliance with various transaction structures when the transaction involves controlling or interested parties (see an example here).  For instance, in Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”), the Delaware Supreme Court held that compliance with certain process elements enables deferential business judgment review of decisions regarding interested transactions with controlling parties (see here for a helpful discussion about MFW protections).  Delaware courts have since expanded the role of MFW-like process protections in various contexts, thus demonstrating that adequate decisionmaking procedures are a central prerequisite to business judgment deference when controllers or interested parties are involved in contemplated transactions.


Five Essential D&O Insurance Questions

Recent cases highlight the increased risk of personal liability for directors. Is your company doing enough to protect the board?

Potential Control Does Not Equal Actual Control: Business Judgment Rule Protects Oracle-Netsuite Transaction

In a May 12, 2023 opinion following trial and post-trial argument, the Delaware Court of Chancery found for defendants Oracle founder Larry Ellison and CEO Safra Catz 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.  The 10-day bench trial took place in July and August 2022 before Vice Chancellor Glasscock, and included two days of testimony by Catz and one day of testimony by Ellison, among other witnesses.  The Court’s decision comes several months after plaintiffs’ voluntary dismissal, following the post-trial argument, of then-defendant Renée James, the Chair of a Special Committee of the Oracle Board overseeing the acquisition.


Securities Litigation Against Life Sciences Companies: Eleven Takeaways from 2022

Securities class actions against life sciences companies are generally second-order problems.  The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, is followed by a stock price drop.  Following the decline, plaintiffs’ class action attorneys search the company’s previous public statements for inconsistencies between past positive comments and the current negative development.  In most cases, plaintiffs’ attorneys then seek to show that any arguable inconsistency amounts to fraud—that is, they will claim that the earlier statement was knowingly or recklessly false or misleading.  When a company makes the challenged statement in a public offering document (that is, a registration statement or prospectus), plaintiffs need to show that the statement was materially false or misleading, but not that it was made with scienter, i.e., the requisite state of mind.