Delaware Supreme Court holds separate class vote not required for officer exculpation amendment
In re Fox Corporation/Snap Inc. Section 242 Litigation, the Delaware Supreme Court ruled that corporations do not need to seek votes from each separate stockholder class to approve charter amendments exculpating corporate officers. The court reasoned that although the amendments reduce stockholders’ power to sue officers for breach of the duty of care, they do not “alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely” within the meaning of Section 242(b)(2) of the Delaware General Corporation Law because the power to sue is a right incidental to stock ownership rather than a special characteristic of a particular share class.
Please click HERE for a more detailed discussion of this case.
Goldstein v. Denner: Delaware Court of Chancery imposes sanctions for spoliation of evidence
In Goldstein v. Denner, the Delaware Court of Chancery imposed sanctions pursuant to Court of Chancery Rule 37(e) in light of the defendants’ failure to preserve text messages. The court found that the defendants acted at least recklessly, as no reasonable preservation efforts were made until after the defendant’s motion to stay discovery was denied, despite three prior litigation holds instructing the defendants to preserve their text messages. This decision provides guidance to litigants on the standards for document preservation and for spoliation sanctions under the rules of the Court of Chancery.
Please click HERE for a more detailed discussion of this case.
Clem v. Skinner: Court dismisses Caremark claims and warns of claims “doing more harm than good”
In Clem et al. v. Skinner, the Delaware Court of Chancery granted a motion Caremark claims against the directors of Walgreens Boots Alliance, Inc.’s for failure to plead demand futility. The court found that demand was not futile because the plaintiffs did not sufficiently allege that a majority of the demand board received a material benefit from the alleged misconduct, faced substantial likelihood of liability, or lacked independence from another who received a material benefit. In finding no substantial likelihood of liability, the court found that the allegations did not suggest that the board lacked a system to oversee legal and regulatory compliance or ignored red flags. In dismissing the case, the court cautioned that the pursuit of deficient Caremark claims that “do more harm than good” by weakening the business judgment rule and draining corporate resources.
Please click HERE for a more detailed discussion of this case.
Palkon v. Maffei: Court permits suit challenging conversion to Nevada corporation
In Palkon v. Maffei, the Delaware Court of Chancery permitted stockholders to pursue claims that the board of directors of TripAdvisor breached their fiduciary duties in converting TripAdvisor from a Delaware corporation to a Nevada corporation. The court applied the entire fairness standard and found that the plaintiffs alleged facts making it reasonably conceivable that the transaction was not entirely fair to stockholders substantively or procedurally. Substantively, the court found that the plaintiffs’ sufficiently alleged that the reincorporation benefitted directors and officers while depriving stockholders of litigation rights. The court also found that the transaction was procedurally unfair because the company failed to implement safeguards, such as a majority-of-the-minority stockholder vote. The court permitted plaintiffs’ claims for money damages to proceed but rejected the plaintiffs’ attempt to enjoin the transaction given that monetary relief was available.
Please click HERE for a more detailed discussion of this case.
Delaware Supreme Court clarifies entire fairness standard for controlling stockholder transactions
In In re Match Group Deriv. Litig., the Delaware Supreme Court affirmed in part and reversed in part the lower court’s decision on the appropriate standard of review and the application of Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) to the reverse spinoff that separated IAC/InterActiveCorp from its subsidiary, Match Group, Inc. The Court held that entire fairness, not the business judgment rule, is the “presumptive standard of review” in any transaction where a controlling shareholder stands on both sides of the transaction and receives a non-ratable benefit. The Court also held that both requirements of M & F Worldwide Corp. (MFW) – the establishment of a special committee and approval by a majority of the minority – must be met to obtain business judgment review of a transaction involving a controlling stockholder.
Please click HERE for a more detailed discussion of this case.
Authored by Allison M. Wuertz, David Michaeli, Jordan Teti, Sean MacDonald, Molly Balan, Raman Kulkarni, Mickaela Fouad, and William C. Winter.
