Sidley Highly Ranked in Securities Litigation by Chambers USA 2026
We’re honored to share that Sidley’s Securities and Shareholder Litigation team has been recognized in Chambers USA 2026, earning five practice area rankings and more than 20 lawyer rankings across Sidley’s national platform. (more…)
When “The Devil Made Me Do It” Is Not a Defense: Lessons in AI Governance and Organizational Oversight from an SDNY Decision
As companies increasingly integrate generative and agentic AI into core business functions, a May 7, 2026 decision from the United States District Court for the Southern District of New York1 highlights several fundamental guardrails for corporate legal and compliance departments to consider. Although the case arose in the context of government decision-making, the opinion carries broader implications for any entity that embeds generative AI in its processes.
Securities Litigation Against Life Sciences Companies: 2025
Securities class actions against life sciences companies are mostly second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class action attorneys search the company’s previous public statements and seek to identify 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 the challenged statement appears in a public offering document (that is, a registration statement or prospectus), plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter or caused their losses.
Winding Back the Clock: Delaware Supreme Court Clarifies When Fraudulent Concealment Resets a Contractual Limitations Period
The Delaware Supreme Court recently clarified the circumstances when a fraudulent concealment claim will toll a contractual limitations period. In LGM Holdings, LLC v. Gideon Schurder, et al., the sellers of a pharmaceutical business moved to dismiss the buyers’ claims for breaches of the representations and warranties in the parties’ purchase agreement, arguing they were time-barred by a five-year survival period in the agreement’s indemnification provision. The buyers argued that this five-year period should be tolled under the fraudulent concealment doctrine, but the trial court disagreed, dismissing the claim after finding that fraudulent concealment did not toll the survival period because the buyers had learned of the potential claim within that five-year period. The Delaware Supreme Court reversed the dismissal, and in doing so, offered useful guidance for the pleadings requirements for a fraudulent concealment claim and when fraudulent concealment will apply to a contractual limitations period.
Texas Seeks to “Seize the Moment” by Enacting Major Changes to Business Organizations Code
On May 14, Texas Governor Greg Abbott signed Senate Bill 29 (“S.B. 29”), which amends the Texas Business Organizations Code (“TBOC”) as part of the Texas legislature’s broader initiative to modernize the state’s corporate laws and attract businesses to the state. This follows, and in many ways complements, legislation in 2023 establishing the Texas Business Court to focus on, and accelerate the development of, Texas business law. S.B. 29 codifies the business judgment rule; provides a framework for navigating transactions involving a controlling shareholder; allows corporations to prospectively waive jury trials for internal entity claims and set ownership thresholds for shareholder actions; and allows alternative entities to eliminate fiduciary duties in their governing documents. While the amendments impact both public and private entities, the legislature was particularly focused on publicly traded corporations organized under Texas law (and those that are considering reincorporating in the state). The following provides a brief overview of noteworthy changes.
Controller’s Breach of Fiduciary Duties Leads To Novel Remedy
Vice Chancellor Laster’s opinion in In re Dura Medic Holdings, Inc. is a helpful reminder of potentially bespoke equitable remedies available for breaches of fiduciary duties. The case involved claims brought by a co-founder of Dura Medic, Inc. (“Dura Medic” or “Company”) against affiliates of Comvest, a private equity backer that acquired Dura Medic in 2018 through subsidiary affiliates. The claims focused in particular on Comvest’s subsequent extension of debt and equity financing to the Company without approval by disinterested and independent decisionmakers. Ultimately, the Delaware Court of Chancery held that these controller-interested transactions implicated the entire fairness standard, that Comvest failed to satisfy it (and therefore breached fiduciary duties as a controlling stockholder). This led the Court to hold that Comvest’s financings were equitably subordinated to the Seller Note. (more…)
“Clear Day” Corporate Travel Gets Green Light From Delaware Supreme Court
The Delaware Supreme Court’s February 4, 2024 decision in Maffei (TripAdvisor) v. Palkon has substantially reduced procedural friction for Delaware corporations considering reincorporation in other states. It reversed the Court of Chancery’s ruling that denied TripAdvisor’s motion to dismiss and comes nearly a year after TripAdvisor’s interlocutory appeal was accepted. As Sidley’s Jim Ducayet and Deepa Chari wrote last May, the appeal’s acceptance despite the Court of Chancery’s refusal to certify its ruling for interlocutory appeal demonstrated the Delaware Supreme Court’s “willingness to step in … to ensure the coherence and predictability of corporate governance.” This month’s decision affirms Delaware’s commitment to predictability and underscores that a clear day decision to reincorporate elsewhere should be protected by the business judgment rule.
Watch What You Say: Disparaging Comments May Trigger Contractual Repurchase Rights Even If Shielded From A Defamation Claim
A recent Delaware decision has demonstrated the limits of the absolute litigation privilege, holding that it did not protect an LLC member from claims that his defamatory statements triggered contractual repurchase rights of his membership interests. Absolute litigation privilege, in Delaware and many other jurisdictions, protects parties from actions for allegedly defamatory statements made during a judicial proceeding that are relevant to the case. While Judge Paul R. Wallace found absolute litigation privilege served an important interest in allowing parties to speak freely once in litigation, those public policy concerns do not always apply when a party is seeking to enforce private contractual rights resulting from the alleged breach of a non-disparagement claim. In so holding, the court demonstrated that Delaware courts will continue to show caution before allowing public policy interests to obviate the obligations in sophisticated parties’ private contracts.
Sidley Perspectives on M&A and Corporate Governance
Sidley is pleased to share the June 2024 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.
Don’t Go It Alone? Or Do. Delaware Chancery Court Rules That A Single-Member Special Litigation Committee’s Recommendation Passes Muster
Last month, Vice Chancellor Glasscock dismissed shareholder claims in Teamsters Local 443 Health Services & Insurance Plan v. John C. Chou (Del. Ch. Nov. 17, 2023) (“Teamsters II”) after finding that a single-member special litigation committee (“SLC”) had sufficiently investigated the stockholder’s allegations before recommending dismissal. Vice Chancellor Glasscock’s decision is not the first time that the Court of Chancery approved a single-member SLC’s motion to dismiss a derivative suit. For example, in April 2023, Vice Chancellor Lori W. Will granted a single-member SLC’s motion to terminate a shareholder action In re Baker Hughes Derivative Litig., 2023 WL 2967780 (Del. Ch. Apr. 17, 2023).
