Tyler O'Connell on Breach of Duty

Chancery Dismisses Derivative Action Based On Alleged Liability Under DGCL § 174 For Stock Repurchases and Dividends

In re The Chemours Co. Deriv. Litig., C.A. 2020-0786-SG (Del. Ch. Nov. 1, 2021) - Broadly speaking, Sections 160 and 173 of the DGCL prohibit a corporation from repurchasing stock or issuing dividends if doing so would...more

2/24/2022 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Finds Former Directors Bringing Wrongful Termination Claims Were Not Entitled to all Privileged Communications During...

SerVaas v. Ford Smart Mobility LLC, C.A. No. 2020-0909-LWW (Del. Ch. Nov. 9, 2021) - With limited exceptions, directors normally have “unfettered” access to corporate information. This decision indicates, however, that the...more

2/22/2022 / Board of Directors , Breach of Contract , Breach of Duty , Discovery , Fiduciary Duty , Privileged Communication

Chancery Holds Plaintiffs Adequately Pled Wrongful Refusal Where Board Did Not Correct Unauthorized Charter Amendments

Drachman v. Cukier, C.A. No. 2019-0728-LWW (Del. Ch. Oct. 29, 2021) - To survive a motion to dismiss in the demand refusal context, the plaintiff must allege facts that create a reasonable doubt that the board’s decision...more

1/11/2022 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Dismisses Implied Covenant Claim For Former Stockholders’ Alleged Improper Demands That Company Take Actions To Achieve...

Pacira Biosciences, Inc. v. Fortis Advisors LLC, C.A. No. 2020-0694-PAF (Del. Ch. Oct. 25, 2021) - There generally cannot be a claim under the implied covenant of good faith and fair dealing for conduct that is addressed...more

1/7/2022 / Breach of Contract , Breach of Duty , Fiduciary Duty , Merger Agreements , Mergers , Shareholders

Delaware Court of Chancery Dismisses Caremark Claim Arising From Marriott Cybersecurity Breach

Fire Ret. Sys. of St. Louis v. Sorenson, et al., 2021 WL 4593777 (Del. Ch. Oct. 5, 2021). The Delaware Court of Chancery dismissed pursuant to Rule 23.1 derivative claims arising from the hack of roughly 500 million...more

12/28/2021 / Board of Directors , Breach of Duty , Caremark claim , Demand Futility , Derivative Suit , Fiduciary Duty

Chancery Dismisses Derivative Claims That Private Equity Sponsors Comprised A Control Group

Patel v. Duncan, C.A. No. 2020-0418-MTZ (Del. Ch. Sept. 30, 2021) - For stockholders to comprise a control group, the alleged group members must be connected in some “legally significant way – such as by contract, common...more

11/18/2021 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Denies Motion to Dismiss in Part Because Certain Discussions Between CEO and Acquirer Were not Disclosed in Proxy When...

Teamsters Local 237 Additional Security Benefit Fund v. Caruso, C.A. No. 2020-0620-PAF (Del. Ch. Aug. 31, 2021) - Under Revlon, a director must focus on obtaining a transaction that provides the maximum value for...more

11/4/2021 / Board of Directors , Breach of Duty , Fiduciary Duty , Mergers , Shareholders

Delaware Superior Court Holds That Claim For Gross Negligence Against Corporate Managers Is An Equitable Claim For Breach Of...

Techview Investments Ltd., v. Amstar Poland Property Fund I, L.P., C.A. No. N20C-11-229 EMD CCLD (Del. Super. Ct. Aug. 31, 2021) - The court's ability to hear actions is limited by their jurisdiction – both jurisdiction...more

11/4/2021 / Breach of Duty , Fiduciary Duty , Gross Negligence , Limited Partnership Agreements , Subject Matter Jurisdiction

Chancery Dismisses Derivative Claims Alleging Insider Trading and Misleading Disclosures for Failure to Plead Demand Futility

In re Zimmer Biomet Hldgs., Inc. Deriv. Litig., C.A. No. 2019-0455-LWW (Del. Ch. Aug. 25, 2021) - Under Court of Chancery Rule 23.1, a stockholder-plaintiff may only bring a derivative suit on behalf of a company if the...more

10/20/2021 / Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Insider Trading

Chancery Sustains Founders’ Implied Covenant Claim For “Bad Faith” Termination To Deprive Them Of Contingent Compensation,...

Servaas v. Ford Smart Mobility LLC, C.A. No. 2020-0909-LWW (Del. Ch. Aug. 25, 2021) - Delaware common law requires that contracts be read on their own terms. Accordingly, contracts cannot be “combined” to supply missing...more

10/12/2021 / Acquisitions , Breach of Contract , Breach of Duty , Breach of Implied Contract , Covenant of Good Faith and Fair Dealing , Fiduciary Duty

Chancery Grants Anti-Suit Injunction, Holds Non-Signatory Subsidiary is Bound by Stock Purchase Agreement’s Forum Selection Clause

Fla. Chem. Co., LLC v. Flotek Indus., Inc., C.A. No. 2021-0288-JTL (Del. Ch. Aug. 17, 2021). Under Delaware law, a forum selection clause may be enforceable against a non-signatory if the non-signatory has a significantly...more

10/8/2021 / Anti-Suit Injunctions , Breach of Duty , Fiduciary Duty , Forum Selection , Purchase Agreement

Chancery Grants Special Litigation Committee’s Zapata Motion, Finds Committee Was Sufficiently Independent and Reasonable

Diep v. Sather, C.A. No. 12760-CM (Del. Ch. July 30, 2021) - Under Zapata, when analyzing a motion to dismiss by a special litigation committee, the court evaluates whether the committee was independent, acted in good...more

9/21/2021 / Board of Directors , Breach of Duty , Derivatives , Fiduciary Duty , Motion to Dismiss

Chancery Confirms Operation of Savings Statute and Tortious Interference Framework in Dispute Involving Fiduciaries with Competing...

Skye Mineral Invs., LLC v. DXS Capital (U.S.) Ltd., C.A. No. 2018-0059-JRS (Del. Ch. July 28, 2021) - Delaware’s savings statute—10 Del. C. § 8118(a)—protects claims from being time-barred where they were timely brought in...more

9/10/2021 / Board of Directors , Breach of Duty , Fiduciary Duty , Statute of Limitations

Chancery Awards Attorneys’ Fees for Monetary and Therapeutic Benefits from Goldman Sachs Director Compensation Settlement and...

Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. Jul. 12, 2021) - This decision concerns fee applications under the “corporate benefit” doctrine for benefits achieved in derivative litigation....more

9/8/2021 / Attorney's Fees , Board of Directors , Breach of Duty , Fiduciary Duty , Goldman Sachs

Chancery Explains Pleading Standard and Sustains Unjust Enrichment Claim Related to Plaintiff’s Forfeiture of LLC Acquisition...

Angel v. Warrior Met Coal, Inc., C.A. No. 2019-0235-SG (Del. Ch. Jun. 30, 2021) - Under Delaware’s notice pleading standard, a plaintiff’s claim will survive a motion to dismiss if it is “reasonably conceivable” that the...more

8/20/2021 / Breach of Contract , Breach of Duty , Fiduciary Duty , Limited Liability Company (LLC) , Pleading Standards , Unjust Enrichment

Chancery Dismisses Conclusory Allegations of Gross Negligence and Disloyalty Against Oracle Officers and Directors Related to...

In re Oracle Corp. Derv. Litig., C.A. No. 2017-0337-SG (Del. Ch. June 21, 2021) - While Delaware maintains a notice pleading standard, this decision reflects that conclusory allegations of breach of fiduciary duty leveled...more

8/17/2021 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Motion to Dismiss

Chancery Finds Breach of Fiduciary Duty Where Defendant Resorted to Extra-Contractual Self-Help

Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Post-trial Memorandum Opinion) Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS (Del. Ch. Jun. 23, 2021) (Letter...more

8/17/2021 / Board of Directors , Breach of Duty , Bylaws , Fiduciary Duty , Shareholders

Section 225 Action Filed Eight Months After Removal Barred by Laches

Simple Global, Inc. v. Banasik, C.A. No. 2018-0809-PAF (Del. Ch. June 24, 2021) - Under Delaware law, a director or officer who disputes her removal as such may be subject to equitable defenses if she does not proceed...more

8/17/2021 / Board of Directors , Breach of Duty , Fiduciary Duty , Shareholders

Chancery Reasons That Board’s Decision To Address Alleged “Red Flags” Related To Pending Litigation, After Litigation Is Resolved,...

Pettry v. Smith et al., C.A. No. 2019-0796-JRS (Del. Ch. June 28, 2021) - As discussed in Caremark and its progeny, fiduciary duties require directors to monitor the business and affairs of a corporation. Here, the Court...more

7/13/2021 / Board of Directors , Breach of Duty , Caremark claim , Demand Futility , Derivative Suit , Fiduciary Duty

Chancery Rejects Plaintiff’s Attempt to Recharacterize Pre-Suit Demands

The Raj & Sonal Abhyanker Fam. Tr. v. Blake, C.A. No. 2020-0521-KSJM (June 17, 2021) - Court of Chancery Rule 23.1 presents a would-be derivative plaintiff with two exclusive options: make a pre-suit demand on the board to...more

7/13/2021 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Finds No Transaction-Specific Control Where Plaintiffs Failed to Allege that a Majority of the Members of a Special...

In re GGP Inc. Stockholder Litig., C.A. No. 2018-0267-JRS (Del. Ch. May 25, 2021). Under MFW and its progeny, if there is a conflicted controlling stockholder, then in order to receive the benefits of the business...more

6/29/2021 / Breach of Duty , Controlling Stockholders , Fiduciary Duty , Independent Director

Stockholders Lack Derivative Standing to Challenge Transactions Whose Terms Were Set Before They Became Stockholders

In re SmileDirectClub, Inc., 2021 WL 2182827 (Del. Ch. May 28, 2021) - Under the “contemporaneous ownership rule,” to have standing to bring derivative claims, stockholders in a Delaware corporation must own stock at the...more

6/23/2021 / Board of Directors , Breach of Duty , Derivative Suit , Fiduciary Duty , Shareholder Litigation , Shareholders

Delaware Court of Chancery Applies Direct/Derivative Distinction In Voting Context

Clifford Paper, Inc. v. WPP Investors, LLC, 2021 WL 2211694 (Del. Ch. Jun. 1, 2021) - The disenfranchisement of an investor with voting or consent rights often is considered to be a direct harm, thus permitting the...more

6/23/2021 / Breach of Contract , Breach of Duty , Duty of Loyalty , Fiduciary Duty , Investors

Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims

Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021) - Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized”...more

4/27/2021 / Board of Directors , Breach of Duty , Caremark claim , Demand Futility , Derivative Suit , Fiduciary Duty , Shareholders

Chancery Holds Prior Rulings in Appraisal and Securities Litigation Do Not Bar New Columbia Pipeline Fiduciary Duty Action

In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (Del. Ch. Mar. 1, 2021) Certain judicial doctrines, including collateral estoppel and stare decisis, promote efficiency and finality by barring...more

4/6/2021 / Appraisal , Breach of Duty , Collateral Estoppel , Fiduciary Duty , Mergers

Tyler O'Connell

Morris James LLP

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