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
derivative action
Seventh Circuit Reverses Dismissal of Derivative Action Based on Forum Clause as Applied to Federal Claim
By Jonathan Richman & Joseph Hartunian on
A recent Seventh Circuit decision in Seafarers Pension Plan v. Bradway may complicate defendants’ ability to use forum-selection bylaws as a basis for dismissal of derivative suits pleading claims under the Securities Exchange Act of 1934.
A New Strain of COVID-19 Shareholder Suit
By Erica T. Jones on
While we are growing accustomed to pandemic-based shareholder actions relating to improper health and safety disclosures or misrepresentations relating to COVID-19 treatments and tests, this month brings a novel variant of the COVID-19 lawsuit. A Universal Health Services Inc. investor has filed a derivative suit against company officers and directors, claiming they took advantage of a pandemic-related drop in the company’s stock price to grant and receive certain stock options that were unfair to the company and its stockholders. The plaintiff investor claims that “company insiders took advantage of the temporary drop in the company’s stock price to grant and receive options to buy the company’s stock at rock bottom prices, thereby showering themselves in excessive compensation.” The complaint alleges that the drop in stock price was “not caused by any changes in the company’s fundamentals or business prospects,” but instead was entirely attributable to the effect of the pandemic on the markets writ large.
Another Diversity Suit Tossed on Forum Selection Grounds
By Joseph Hartunian on
This week, another shareholder derivative suit was dismissed based on a forum selection clause contained in the company’s bylaws. In November 2020, a shareholder filed a derivative action alleging that directors and officers of The Gap, Inc., an apparel company, had failed to create meaningful diversity on the Board of Directors on within the company’s leadership roles. The plaintiff also alleged that Gap made false statements about the diversity of the company’s workforce, as well as its efforts to increase diversity among its employees.