Stockholder Suits Are Fewer—and Smaller—in 1H 2021

According to Cornerstone’s midyear report on federal and state securities class actions, new securities case filings have continued a substantial downward trend in the first half of 2021.

Plaintiffs filed 112 class action securities cases in the first half of 2021, down 25% from 150 in the second half of 2020 and 38% compared to the 182 cases filed in the first half of 2020, following a marked trend that has emerged since 2019.  That trend continues to be animated in large part by significant declines in M&A-related federal filings, which fell to just 12 during the period, a 66% reduction (or 83% relative to the semiannual average of 70 during the last five years). (more…)

What’s Cooking When It Comes to Enforcing Business Conduct Clauses in Earnouts: Shareholder Representative Services LLC v. Albertsons Cos.

In Shareholder Representative Services LLC v. Albertsons Cos., the Delaware Court of Chancery denied a motion to dismiss claims that a buyer intentionally avoided an earnout payment by misleading the seller about its plans to operate the acquired business after closing.  The case provides additional guidance in the ever-growing body of case-law addressing “business conduct” clauses in earnout agreements.

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

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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Delaware Court of Chancery Will Evaluate Third-Party Sales of Controlled Companies Under the Enhanced Scrutiny Standard of Review

The Delaware Court of Chancery recently held that a stockholder plaintiff pleaded facts sufficient to support a reasonable inference that a target company’s board of directors could have achieved a higher deal price had the company’s financial advisor not, unbeknownst to the board, tipped the buyer about the price of another bid during the sale process.

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