On September 13, 2021, over a rare dissent, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a petition for appraisal filed by minority stockholders (the “Petitioners”) of Delaware corporation Authentix Acquisition Company, Inc. (“Authentix”). The high court agreed that the Petitioners could waive the statutory right to an appraisal through provisions in a stockholder agreement (the “Stockholders Agreement”). Significantly, this ruling may open the door for corporations to contractually waive other permissions portions of the Delaware General Corporation Law (“DGCL”). (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Robert S. Velevishttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRobert S. Velevis2021-10-26 10:20:072023-09-08 11:39:45Delaware Supreme Court Confirms Appraisal Rights May Be Waived Contractually — Query What Else May Be
On October 13, 2021, Vice Chancellor Joseph R. Slights III issued a post-trial decision affirming the CytoDyn Inc. board of directors’ decision to reject a stockholder nomination of directors for failure to supply information required by the company’s advance notice bylaw. This is the first decision from a Delaware court addressing informational deficiencies in such a nomination notice, and provides important guidance for the many public companies with similar bylaws. (more…)
Two years ago the Delaware Supreme Court, in Marchand v. Barnhill, allowed Caremark claims to proceed against a group of directors in connection with a listeria outbreak at their company’s ice cream manufacturing plants. Applying Caremark — often quoted as “possibly the most difficult theory in corporat[e] law” — the court determined the board failed to implement reasonable oversight and monitoring on “mission critical issues.” There, food safety was “mission critical.” Since Marchand¸ courts have applied these principles to, among other cases, a biopharmaceutical company’s failure to comply with FDA regulations and an auto parts company’s failure to properly monitor its financial reporting. Now, the Delaware Chancery Court has provided another guidepost, this time in the aerospace industry, finding that certain of Boeing’s stockholders adequately pled Caremark claims against Boeing’s Board. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jim Ducayethttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJim Ducayet2021-10-13 10:00:282023-09-08 11:42:18Delaware Chancery Court Affirms Importance of Director Oversight in Wake of Boeing Crashes
On Sept. 7, the Delaware Chancery Court allowed In re: The Boeing Co. Derivative Litigation to proceed, surviving a motion to dismiss.[1]
The action alleges that directors breached their fiduciary duties with respect to their oversight of safety issues and arises out of two crashes of the company’s 737 MAX aircraft. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Paul E. Kalb, M.D.https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngPaul E. Kalb, M.D.2021-10-08 11:57:222024-02-21 11:28:52Boeing Case Highlights Risk For Health, Life Sciences Boards
A pair of opinions released by the Delaware Supreme Court in a single week have revisited longstanding precedent governing shareholder suits that claim corporate wrongdoing. As discussed in a companion post on this blog, the first of those opinions, Brookfield Asset Management Inc. v. Rosson, restricted the ability of shareholders to bring direct claims under certain circumstances, instead forcing them to pursue more procedurally challenging derivative suits. In the second case, United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, the Delaware Supreme Court adopted a new three-part demand-futility test that clarifies the standard shareholders must meet to file such derivative suits, without first taking their complaints to the company’s board of directors. (more…)
Every once in a while, a court admits it made a mistake. And, in even rarer circumstances, that admission comes from a court as prominent as the Supreme Court of Delaware. But that’s exactly what happened last week in Brookfield Asset Management, Inc. v. Rosson, in which Delaware’s highest court overruled its own 2006 holding in Gentile v. Rosette that certain claims of corporate dilution are “dual-natured” and may be pursued both as derivative claims and as direct claims by stockholders. The Court’s decision to revisit a much-criticized decision is likely to restore some predictability and analytic consistency to the resolution of an important and threshold question frequently presented in stockholder litigation: whether a claim is properly characterized as direct (on behalf of one or a class of a company’s stockholders) or derivative (on behalf of the company itself). (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Andrew W. Sternhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAndrew W. Stern2021-10-01 07:53:582023-09-08 11:46:59“Upon Further Review…”: Delaware Supreme Court Admits Mistake and Clears Up Question of Direct vs. Derivative Standing
In M&A litigation, plaintiffs’ lawyers see actual or perceived conflicts of interest as gold. Conflict allegations can take many forms and arise in a variety of contexts: for example, a board member of a target company who is offered employment by the would-be acquirer, or a controlling stockholder who sits on both sides of a transaction. Another common example, and the focus of this post, is a board member or stockholder whose financial interests are alleged to diverge from other stockholders because of a need or desire to quickly liquidate holdings (referred to as a “liquidity-based conflict”). (more…)
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.Ok
Delaware Supreme Court Confirms Appraisal Rights May Be Waived Contractually — Query What Else May Be
On September 13, 2021, over a rare dissent, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a petition for appraisal filed by minority stockholders (the “Petitioners”) of Delaware corporation Authentix Acquisition Company, Inc. (“Authentix”). The high court agreed that the Petitioners could waive the statutory right to an appraisal through provisions in a stockholder agreement (the “Stockholders Agreement”). Significantly, this ruling may open the door for corporations to contractually waive other permissions portions of the Delaware General Corporation Law (“DGCL”). (more…)
Robert S. Velevis
Dallas
rvelevis@sidley.com
Benjamin N. Kelton
Dallas
bkelton@sidley.com
Sidley Secures Trial Win; Court of Chancery Enforces Advance Notice Bylaw Where Stockholders Failed To Supply Required Information
On October 13, 2021, Vice Chancellor Joseph R. Slights III issued a post-trial decision affirming the CytoDyn Inc. board of directors’ decision to reject a stockholder nomination of directors for failure to supply information required by the company’s advance notice bylaw. This is the first decision from a Delaware court addressing informational deficiencies in such a nomination notice, and provides important guidance for the many public companies with similar bylaws. (more…)
Enhanced Scrutiny Contributors
delawarelit@sidley.com
Delaware Chancery Court Affirms Importance of Director Oversight in Wake of Boeing Crashes
Two years ago the Delaware Supreme Court, in Marchand v. Barnhill, allowed Caremark claims to proceed against a group of directors in connection with a listeria outbreak at their company’s ice cream manufacturing plants. Applying Caremark — often quoted as “possibly the most difficult theory in corporat[e] law” — the court determined the board failed to implement reasonable oversight and monitoring on “mission critical issues.” There, food safety was “mission critical.” Since Marchand¸ courts have applied these principles to, among other cases, a biopharmaceutical company’s failure to comply with FDA regulations and an auto parts company’s failure to properly monitor its financial reporting. Now, the Delaware Chancery Court has provided another guidepost, this time in the aerospace industry, finding that certain of Boeing’s stockholders adequately pled Caremark claims against Boeing’s Board. (more…)
Jim Ducayet
Chicago
jducayet@sidley.com
Robert M. Garsson
New York
rgarsson@sidley.com
Alex J. Kaplan
New York
akaplan@sidley.com
Boeing Case Highlights Risk For Health, Life Sciences Boards
On Sept. 7, the Delaware Chancery Court allowed In re: The Boeing Co. Derivative Litigation to proceed, surviving a motion to dismiss.[1]
The action alleges that directors breached their fiduciary duties with respect to their oversight of safety issues and arises out of two crashes of the company’s 737 MAX aircraft. (more…)
Paul E. Kalb, M.D.
Holly J. Gregory
New York
holly.gregory@sidley.com
Delaware Supreme Court Clarifies the Standards for Demand Futility
A pair of opinions released by the Delaware Supreme Court in a single week have revisited longstanding precedent governing shareholder suits that claim corporate wrongdoing. As discussed in a companion post on this blog, the first of those opinions, Brookfield Asset Management Inc. v. Rosson, restricted the ability of shareholders to bring direct claims under certain circumstances, instead forcing them to pursue more procedurally challenging derivative suits. In the second case, United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, the Delaware Supreme Court adopted a new three-part demand-futility test that clarifies the standard shareholders must meet to file such derivative suits, without first taking their complaints to the company’s board of directors. (more…)
Heather Benzmiller Sultanian
Chicago
hsultanian@sidley.com
“Upon Further Review…”: Delaware Supreme Court Admits Mistake and Clears Up Question of Direct vs. Derivative Standing
Every once in a while, a court admits it made a mistake. And, in even rarer circumstances, that admission comes from a court as prominent as the Supreme Court of Delaware. But that’s exactly what happened last week in Brookfield Asset Management, Inc. v. Rosson, in which Delaware’s highest court overruled its own 2006 holding in Gentile v. Rosette that certain claims of corporate dilution are “dual-natured” and may be pursued both as derivative claims and as direct claims by stockholders. The Court’s decision to revisit a much-criticized decision is likely to restore some predictability and analytic consistency to the resolution of an important and threshold question frequently presented in stockholder litigation: whether a claim is properly characterized as direct (on behalf of one or a class of a company’s stockholders) or derivative (on behalf of the company itself). (more…)
Andrew W. Stern
New York
astern@sidley.com
Bear Market For Plaintiffs’ Liquidity-Based Conflict Allegations
In M&A litigation, plaintiffs’ lawyers see actual or perceived conflicts of interest as gold. Conflict allegations can take many forms and arise in a variety of contexts: for example, a board member of a target company who is offered employment by the would-be acquirer, or a controlling stockholder who sits on both sides of a transaction. Another common example, and the focus of this post, is a board member or stockholder whose financial interests are alleged to diverge from other stockholders because of a need or desire to quickly liquidate holdings (referred to as a “liquidity-based conflict”). (more…)
Jon Muenz
New York
jmuenz@sidley.com
Categories
Archives
Meet the Team
Andrew W. Stern
astern@sidley.com
Charlotte K. Newell
cnewell@sidley.com
Elizabeth Y. Austin
laustin@sidley.com
Jaime A. Bartlett
jbartlett@sidley.com
Jim Ducayet
jducayet@sidley.com
Yolanda C. Garcia
ygarcia@sidley.com
James Heyworth
jheyworth@sidley.com
Alex J. Kaplan
ajkaplan@sidley.com
Jodi E. Lopez
jlopez@sidley.com
Jon Muenz
jmuenz@sidley.com
Ian M. Ross
iross@sidley.com
Hille R. Sheppard
hsheppard@sidley.com
Heather Benzmiller Sultanian
hsultanian@sidley.com
Robert S. Velevis
rvelevis@sidley.com
Robin E. Wechkin
rwechkin@sidley.com