Delaware Court of Chancery

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The Delaware Court of Chancery rejected a lawsuit by a Walt Disney Company stockholder to compel inspection of Disney’s books and records relating to the company’s opposition to Florida’s “don’t say gay” law – a stance that allegedly caused the Governor and legislature to retaliate against Disney.  The decision in Simeone v. The Walt Disney Company (Del. Ch. June 27, 2023) holds that inspection of corporate books and records is not available under Delaware law unless the requesting stockholder – not his or her attorneys, who might have their own agenda – has stated a proper purpose for making such a demand.  It also emphasizes the role that a corporation’s board of directors must play in making business decisions about controversial social and political issues.  In addition, the ruling confirms that a board may exercise its business judgment to consider the interests of “corporate stakeholders” – such as “the workforce that drives a company’s profits” – when making decisions related to building the enterprise’s long-term value.

The en banc Court of Appeals for the Ninth Circuit affirmed the dismissal of a shareholder derivative action in light of an exclusive-forum bylaw requiring assertion of derivative claims in the Delaware Court of Chancery, even though the plaintiff had pled a federal claim that was subject to exclusive federal jurisdiction and could not have been litigated in the Delaware court. The June 1, 2023 ruling in Lee ex rel. The Gap, Inc. v. Fisher could further encourage the adoption of similar forum-selection provisions and could discourage shareholders’ efforts to circumvent state-forum provisions by filing derivative actions alleging federal-law proxy claims in federal court.

The Delaware Court of Chancery yesterday denied a motion to dismiss a class action alleging that the directors and sponsor of a special-purpose acquisition company (a “SPAC”) breached their fiduciary duties by disloyally depriving the SPAC’s public stockholders of information material to their decision whether to redeem their stock before…

In 2020, SolarWinds Corp., a company that provided information technology software to private and government entities, was the victim of a cybersecurity breach.  Russian hackers are believed to have slipped malicious code into a SolarWinds software product called Orion, which was then used to infect, and in certain cases, compromise…

The Delaware Supreme Court recently affirmed a Court of Chancery ruling granting a Special Litigation Committee’s motion to terminate a shareholder derivative action that had survived a motion to dismiss. The split decision in El Pollo Loco (June 28, 2022) highlights whether a director can be considered independent – especially as a member of a Special Litigation Committee (“SLC”) – if he or she had known about and had approved or not objected to the prior motion to dismiss, which had asserted that the claims at issue in the subsequent SLC investigation lacked merit.

The Court of Appeals for the Ninth Circuit affirmed the dismissal of a shareholder derivative action in light of an exclusive-forum bylaw requiring assertion of derivative claims in the Delaware Court of Chancery, even though the case included a federal claim that was subject to exclusive federal jurisdiction and could…

Corporate boards are subject to a duty of oversight, as part of their duty of loyalty to their company. As outlined by Delaware’s famously stringent Caremark standard, pleading a violation of that duty is often difficult. However, the Delaware Court of Chancery has issued several recent opinions addressing duty of…

On July 30, 2021, L Brands, the parent company behind Victoria’s Secret and Bath & Body Works, settled a rash of derivatives actions which had alleged “toxic” workplace conditions and “a culture of misogyny” at the company.  We previously detailed the allegations in this space as part of our ongoing review of shareholder attempts to hold companies liable for perceived diversity failures and workplace discrimination.  As we noted, a New York Times report detailing specific allegations of a former Chief Marketing Officer led to the filing of shareholder actions across the country, including in Ohio, Oregon, and Delaware.