Corporate Defense and Disputes

Important developments in U.S. securities law, white collar criminal defense, regulatory enforcement and other emerging issues impacting financial services institutions, publicly traded companies and private investment funds

Tag Archives: Delaware

N.Y. Court of Appeals Adopts Business Judgment Rule, with Conditions, for Going-Private Mergers

The New York Court of Appeals has followed Delaware in holding that the business-judgment rule applies to going-private mergers as long as certain shareholder-protective measures are met. The court’s May 5, 2016 decision in In the Matter of Kenneth Cole Productions, Inc. Shareholder Litigation, Case No. 54, adopts the standard set forth by the Delaware Supreme … Continue Reading

Delaware Court of Chancery Rejects Another Disclosure-Only M&A Settlement and Warns of “Increasingly Vigilant” Scrutiny

The Delaware Court of Chancery last week dealt another blow to disclosure-only settlements of merger litigation and refused to approve a proposed class-action settlement arising from Zillow, Inc.’s acquisition of Trulia, Inc. The court’s decision held that the supplemental disclosures that formed the basis of the settlement were not “material or even helpful to Trulia’s … Continue Reading

Delaware Supreme Court Holds Tooley Direct vs. Derivative Rule Is No Bar to Parent Corporation’s Contract Claim

As previously reported, in NAF Holdings, LLC v. Li & Fung (Trading) Limited, 772 F.3d 740 (2d Cir. 2014), the Second Circuit certified to the Delaware Supreme Court an unusual question regarding whether the direct vs. derivative test for stockholder claims would bar a direct breach of contract claim by a parent corporation whose subsidiary … Continue Reading

Delaware Governor Signs Bill Prohibiting Bylaws on Fee-Shifting

Last week, Delaware Governor Jack Markell signed Senate Bill 75, which amends the Delaware General Corporation Law to prohibit Delaware stock corporations from adopting bylaws that force shareholders to pay legal fees if they do not prevail in lawsuits asserting internal corporate claims against Delaware corporations.  The legislation also allows Delaware corporations to designate Delaware … Continue Reading

Delaware House Passes Bill Prohibiting Bylaws on Fee-Shifting

Yesterday, the Delaware House of Representatives unanimously passed a bill prohibiting publicly traded corporations from adopting bylaws that force shareholders to pay legal fees if they do not prevail in lawsuits asserting internal corporate claims against Delaware corporations.  The bill would also allow Delaware corporations to designate Delaware – but not any other state – … Continue Reading

Delaware Senate Passes Bill Prohibiting Bylaws on Fee Shifting

Yesterday, the Delaware Senate passed legislation prohibiting publicly-traded corporations from adopting bylaws that force shareholders to pay legal fees if they bring internal corporate claims against the company in court and do not win. The legislation also allows Delaware corporations to designate Delaware – but not any other state – as the exclusive forum for … Continue Reading

Delaware Legislature to Consider New Fee-Shifting Legislation

On April 29, 2015, Senator Bryan Townsend introduced legislation that would amend the Delaware General Corporation Law (DGCL) to ban fee-shifting bylaws for Delaware stock corporations (non-stock corporations would continue to be able to adopt fee-shifting bylaws). The bill, Senate Bill No. 75, would also confirm the Court of Chancery’s decision in Boilermakers Local 154 … Continue Reading

State Bar Council Proposes New Legislation for Delaware Fee-Shifting Ban and Delaware Court of Chancery Considers Fee-Shifting Bylaw

In December, we reported on the Delaware Court of Chancery’s continued validation of board-adopted forum-selection bylaws in City of Providence v. First Citizens BancShares, Inc., 99 A.3d 229, 234 (Del. Ch. 2014), and the proposed amendment to the Delaware General Corporation Law (DGCL) that would eliminate the ability of Delaware stock corporations to impose liability for … Continue Reading

Delaware Independent Director Liability in Control Buyout Cases

The Delaware Supreme Court will address the standard for pleading that an independent director has breached fiduciary duties in connection with a controlling shareholder buyout. The issue was certified for interlocutory appeal in a pair of recent Delaware Chancery Court cases. In re Cornerstone Therapeutics Stockholder Litigation, No. CIV.A. 8922-VCG (Del. Ch. Sept. 10, 2014) … Continue Reading

Delaware Legislature to Resume Debate in January on Bylaws Imposing Liability on Shareholders

The D&O Diary featured a version of this post, entitled “New Debate in January on Delaware Bylaws re Shareholder Liability,” as a guest blog post. Many thanks to Kevin LaCroix of The D&O Diary for publishing our post. The ability of corporations to impose liability on shareholders through bylaws and charter provisions has been the subject of … Continue Reading

Applying Delaware’s Direct vs. Derivative Analysis to Contract Claims

In NAF Holdings, LLC v. Li & Fung (Trading) Limited, 2014 WL 6462825 (2d Cir. Nov. 19, 2014), the Second Circuit considered, but did not decide, whether the usual direct/derivative analysis governing minority stockholder claims against corporate fiduciaries should also apply to bar a contract claim against an unaffiliated outsider.  Finding itself unable to resolve this issue … Continue Reading

Business-Judgment Rule Applied in NY to Going-Private Transaction Where Procedural Protections Exist

Originally published as a Proskauer Client Alert. The New York Appellate Division, First Department, ruled yesterday that the business-judgment rule – not the entire-fairness standard of review – can apply to a going-private transaction with the majority shareholder where the majority shareholder did not participate in the board’s vote on the merger, the remaining directors … Continue Reading

Demand Futility in Delaware Derivative Actions

Introduction written by Tanya Dmitronow and Julia Pizzi. Full analysis written by Sarah Gold and Richard Spinogatti. Although they often involve overlapping issues, shareholder derivative lawsuits are fundamentally different from securities class actions. While the object of a securities class action is to hold the company (and, perhaps, its directors and officers) liable for harming investors and … Continue Reading

Of Wolf Packs, Plans and Pills: Making Puppies Out of Predators

Remember corporate raiders, green-mailers, and sharks? They have all moved up town and been embraced by ISS and its institutional investor clients as shareholder activists committed to corporate ‘‘reform.’’ Cheap capital and the expanded use of derivatives to accumulate enormous equity positions both quickly and quietly have fueled a binge that has more than tripled … Continue Reading

Fiduciary Exception to Privilege in Books and Records Case

The attorney-client privilege is the oldest privilege recognized by Anglo-American jurisprudence, and its origins can be traced to ancient Rome. It is critical to encouraging frank and full communications between clients and their attorneys, thereby promoting the public interest in legal compliance and the proper administration of justice. The attorney-client privilege is, however, an exception … Continue Reading

Kahn v. M&F Worldwide Corp.: Delaware Supreme Court Affirms Court of Chancery Ruling that Business Judgment Review Can Apply to Squeeze-Out Mergers

In Kahn v. M&F Worldwide Corp., the Delaware Supreme Court unanimously affirmed the Court of Chancery’s decision that the business judgment standard, rather than the entire fairness standard of review, applies to controller freeze-out mergers where the controller’s proposal is conditioned at the outset on both Special Committee approval and a favorable majority of the … Continue Reading
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