In a January 25, 2023 opinion (In re McDonald’s Corp. Stockholder Derivative Litig., C.A. No. 2021-0324-JTL), the Delaware Court of Chancery clarified that corporate officers’ fiduciary duties encompass a duty of oversight. As with directors, the duty of oversight requires that officers: (1) make a good faith effort to put in place reasonable information systems to generate the information necessary to address risks and report upward to higher level officers or the board; and (2) not consciously ignore red flags indicating that the company may suffer harm. The Court of Chancery also clarified that officers will not be held liable for violations of the duty of oversight unless they are shown to have acted in bad faith, as opposed to mere gross negligence.
The Delaware Court of Chancery recently issued an opinion that reminds controlling stockholders they can successfully implement a going private merger even when a competing bidder makes an offer that is substantially higher than that offered by the controlling stockholder. The court dismissed a lawsuit brought by former Eidos Therapeutics, Inc. stockholders against Bridgebio Pharma, Inc. and three of its directors over a merger in which Bridgebio, as Eidos’s controlling stockholder, acquired the remaining minority shares of Eidos stock. Smart Loc. Unions & Councils Pension Fund v. BridgeBio Pharma, Inc., No. 2021-1030-PAF, 2022 WL 17986515 (Del. Ch. Dec. 29, 2022).
On December 27, 2022, after a 10-day bench trial in July and August 2022 and post-trial argument, the Court granted Plaintiffs’ stipulation to voluntarily dismiss Renée James, the Chair of a Special Committee of the Oracle Board 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. This case is one of the rare post-Cornerstone director independence cases to proceed to trial, following an investigation and decision by a special litigation committee to return the case to the shareholder Plaintiffs to pursue. The case was also procedurally unique as Plaintiffs opted to dismiss James following the 10-day trial and post-trial argument, rather than wait for an opinion from the Court.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jaime A. Bartletthttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJaime A. Bartlett2023-01-30 10:07:392023-09-08 10:31:45Special Committee Chair Dismissed in Post-Trial Win
On January 6, 2023, Vice Chancellor Laster issued an opinion in Fairstead Capital Management LLC v. Blodgett concerning a “dispute-resolution collision” between two applicable forum-selection clauses. The collision arises from the termination of a principal of an investment fund, whose partners fired him for allegedly breaching his employment agreement and also cancelled his member interests in two LLCs that owned rights to the profits generated by the fund. Unhappy with his ouster, the former principal wanted to litigate against his former partners and the LLCs. But that raised the question at the core of this Vice Chancellor Laster’s opinion: where to litigate?
The Delaware Court of Chancery recently held that BuzzFeed was not required to arbitrate stock conversion claims brought by its former employees following Buzzfeed’s 2021 SPAC merger. Vice Chancellor Zurn granted BuzzFeed and its officers and directors an anti-arbitration injunction and rejected Plaintiffs’ argument that the Court of Chancery lacked subject matter jurisdiction over the claims. In doing so, the court offered a thoughtful application of contract law and law on arbitrability to a post-SPAC transaction dispute.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/01/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_32.jpg606833Ian M. Rosshttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngIan M. Ross2023-01-18 09:03:282023-09-08 10:34:32Court Takes Buzzsaw To Bid To Arbitrate Claims Against Buzzfeed
Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis & Co. (Glass Lewis) have updated their proxy voting policies for shareholder meetings held on or after February 1, 2023 (ISS) or January 1, 2023 (Glass Lewis). This Sidley Update summarizes the changes in proxy voting policies that apply to U.S. companies and provides some practical considerations.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Enhanced Scrutiny Contributorshttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngEnhanced Scrutiny Contributors2023-01-11 09:07:182023-09-08 10:35:02ISS and Glass Lewis Proxy Voting Policy Updates for the 2023 Proxy Season
Last month, Delaware’s Court of Chancery issued two significant decisions in a stockholder litigation involving AmerisourceBergen Corporation (the “Company”) and its wholesale distribution of prescription opioids in the United States. Together, the decisions provide companies and their directors and officers with further guidance regarding the viability of so-called Caremark claims alleging breaches of fiduciary duties.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/01/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_25.jpg606833Andrew W. Sternhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAndrew W. Stern2023-01-09 09:07:522023-09-08 10:35:32Trial Judgment “Knocks The Stuffing” Out Of Putative Derivative Suit Relating To Opioid Distribution
Delaware Court of Chancery Addresses Officer Oversight Obligations
In a January 25, 2023 opinion (In re McDonald’s Corp. Stockholder Derivative Litig., C.A. No. 2021-0324-JTL), the Delaware Court of Chancery clarified that corporate officers’ fiduciary duties encompass a duty of oversight. As with directors, the duty of oversight requires that officers: (1) make a good faith effort to put in place reasonable information systems to generate the information necessary to address risks and report upward to higher level officers or the board; and (2) not consciously ignore red flags indicating that the company may suffer harm. The Court of Chancery also clarified that officers will not be held liable for violations of the duty of oversight unless they are shown to have acted in bad faith, as opposed to mere gross negligence.
(more…)
Nilofer Umar
Chicago
numar@sidley.com
Jarrett H. Gross
Chicago
jarrett.gross@sidley.com
Sudeep S. Dhanoa
Chicago
sdhanoa@sidley.com
Procedure Prevails When Applying MFW Framework to Interested Merger
The Delaware Court of Chancery recently issued an opinion that reminds controlling stockholders they can successfully implement a going private merger even when a competing bidder makes an offer that is substantially higher than that offered by the controlling stockholder. The court dismissed a lawsuit brought by former Eidos Therapeutics, Inc. stockholders against Bridgebio Pharma, Inc. and three of its directors over a merger in which Bridgebio, as Eidos’s controlling stockholder, acquired the remaining minority shares of Eidos stock. Smart Loc. Unions & Councils Pension Fund v. BridgeBio Pharma, Inc., No. 2021-1030-PAF, 2022 WL 17986515 (Del. Ch. Dec. 29, 2022).
(more…)
Fiona Collins
Elizabeth Y. Austin
Chicago
laustin@sidley.com
Special Committee Chair Dismissed in Post-Trial Win
On December 27, 2022, after a 10-day bench trial in July and August 2022 and post-trial argument, the Court granted Plaintiffs’ stipulation to voluntarily dismiss Renée James, the Chair of a Special Committee of the Oracle Board 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. This case is one of the rare post-Cornerstone director independence cases to proceed to trial, following an investigation and decision by a special litigation committee to return the case to the shareholder Plaintiffs to pursue. The case was also procedurally unique as Plaintiffs opted to dismiss James following the 10-day trial and post-trial argument, rather than wait for an opinion from the Court.
(more…)
Jaime A. Bartlett
San Francisco
jbartlett@sidley.com
Stephen Chang
San Francisco
stephen.chang@sidley.com
Collision Course: The Consequences of Conflicting Forum-Selection Provisions
On January 6, 2023, Vice Chancellor Laster issued an opinion in Fairstead Capital Management LLC v. Blodgett concerning a “dispute-resolution collision” between two applicable forum-selection clauses. The collision arises from the termination of a principal of an investment fund, whose partners fired him for allegedly breaching his employment agreement and also cancelled his member interests in two LLCs that owned rights to the profits generated by the fund. Unhappy with his ouster, the former principal wanted to litigate against his former partners and the LLCs. But that raised the question at the core of this Vice Chancellor Laster’s opinion: where to litigate?
(more…)
Heather Benzmiller Sultanian
Chicago
hsultanian@sidley.com
Rebecca B. Shafer
Chicago
rshafer@sidley.com
Court Takes Buzzsaw To Bid To Arbitrate Claims Against Buzzfeed
The Delaware Court of Chancery recently held that BuzzFeed was not required to arbitrate stock conversion claims brought by its former employees following Buzzfeed’s 2021 SPAC merger. Vice Chancellor Zurn granted BuzzFeed and its officers and directors an anti-arbitration injunction and rejected Plaintiffs’ argument that the Court of Chancery lacked subject matter jurisdiction over the claims. In doing so, the court offered a thoughtful application of contract law and law on arbitrability to a post-SPAC transaction dispute.
(more…)
Ian M. Ross
Miami
iross@sidley.com
Stephanie Peral
Miami
speral@sidley.com
ISS and Glass Lewis Proxy Voting Policy Updates for the 2023 Proxy Season
Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis & Co. (Glass Lewis) have updated their proxy voting policies for shareholder meetings held on or after February 1, 2023 (ISS) or January 1, 2023 (Glass Lewis). This Sidley Update summarizes the changes in proxy voting policies that apply to U.S. companies and provides some practical considerations.
Enhanced Scrutiny Contributors
delawarelit@sidley.com
Trial Judgment “Knocks The Stuffing” Out Of Putative Derivative Suit Relating To Opioid Distribution
Last month, Delaware’s Court of Chancery issued two significant decisions in a stockholder litigation involving AmerisourceBergen Corporation (the “Company”) and its wholesale distribution of prescription opioids in the United States. Together, the decisions provide companies and their directors and officers with further guidance regarding the viability of so-called Caremark claims alleging breaches of fiduciary duties.
(more…)
Andrew W. Stern
New York
astern@sidley.com
Hille R. Sheppard
Chicago
hsheppard@sidley.com
Vincent J. Margiotta
New York
vmargiotta@sidley.com
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Jim Ducayet
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Alex J. Kaplan
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Jodi E. Lopez
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Jon Muenz
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Ian M. Ross
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Hille R. Sheppard
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Heather Benzmiller Sultanian
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Robert S. Velevis
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