Tyler O'Connell on Controlling Stockholders

Chancery Grants Motion to Dismiss Breach of Fiduciary Duty Claims Against Officers in Controlling Stockholder Transaction Subject...

Kormos v. Playtika Hldg. UK II Ltd., C.A. 2023-0396-SG (Del. Ch. May 3, 2024) - In this decision involving breach of fiduciary duty claims against two officers, the Court granted the individual defendants’ motions to...more

8/16/2024 / Board of Directors , Breach of Duty , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers

Chancery Finds SPAC’s Sponsor and Board Potentially Violated Fiduciary Duties by Depriving Public Stockholders of the Information...

Delman v. GigAcquisitions3 LLC, C.A. No. 2021-0679-LWW (Del. Ch. January 4, 2023) - Delaware law establishes that fiduciaries of a corporation cannot be exempted from "their loyalty obligation and the attendant equitable...more

4/25/2023 / Breach of Duty , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers , Share Price , Special Purpose Acquisition Companies (SPACs) , Stock Redemption

The Parable of the Tesla and SolarCity Deal

The Delaware Court of Chancery’s April 27 Tesla Motors opinion likens some decisions to “parables”—stories that illustrate important lessons. In the words of presiding Vice Chancellor Joseph R. Slights III, the story of Tesla...more

7/21/2022 / Acquisitions , Controlling Stockholders , Elon Musk , Entire Fairness Standard , Shareholders , Tesla

Chancery Dismisses All Claims in Stockholder Challenge to Cash-Out Merger Transaction

Harcum v. Lovoi, C.A. No. 2020-0398-PAF (Del. Ch. Jan. 3, 2022) - In Harcum, the Delaware Court of Chancery dismissed all claims brought in a stockholder suit alleging fiduciary breaches in connection with the $1 billion...more

4/29/2022 / Board of Directors , Breach of Duty , Controlling Stockholders , Duty of Loyalty , Fiduciary Duty , Mergers

Chancery Sustains Claims for Controlling Stockholders’ Breach of Fiduciary Duties, But Dismisses Claim to Void Transaction under...

Knott Partners L.P. v. Telepathy Labs, Inc., C.A. No. 2021-0583-SG (Del. Ch. Nov. 23, 2021) - To seek corporate records under section 220 of the DGCL, the plaintiff must demonstrate that it is a stockholder. Generally, a...more

2/25/2022 / Breach of Duty , Controlling Stockholders , Delaware General Corporation Law , Fiduciary Duty

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

Chancery Upholds Class Claims Alleging Breaches of Fiduciary Duty in Alleged Controlling Stockholder’s Tender Offer

In re Coty Inc. Stockholder Litigation, C.A. No. 2019-0336-AGB (Del. Ch. Aug. 17, 2020) - JAB Holding Company S.à.r.l. and its affiliates (together “JAB”) completed a partial tender offer (the “Tender Offer”) for shares...more

10/12/2020 / Breach of Contract , Breach of Duty , Controlling Stockholders , Fiduciary Duty

Chancery Holds That Management Does Not Have Unilateral Authority to Preclude a Director From Obtaining the Company’s Privileged...

In Re WeWork Litig., Consol. C.A. No. 2020-0258-AGB (Del. Ch. Aug. 21, 2020) - In October 2019, The We Company’s (the “Company”) board of directors established a special committee (the “Special Committee”) to evaluate a...more

9/28/2020 / Board of Directors , Breach of Contract , Breach of Duty , Controlling Stockholders , Discovery , Fiduciary Duty , Privileged Communication

Entire Fairness Standard Applies Where Controller Has Substantive Discussions with Minority Stockholders before Agreeing to MFW...

In re HomeFed Corporation Stockholder Litigation, C.A. 2019-0592-AGB (Del. Ch. July 13, 2020) - This case illustrates that the Court of Chancery will apply the entire fairness standard to review a squeeze-out merger by a...more

8/26/2020 / Breach of Duty , Business Judgment Rule , Controlling Stockholders , Entire Fairness Standard , Fiduciary Duty , Mergers , Standard of Review

In New Dell Decision, Special Committee’s Narrow Mandate, Company’s Decision to Bypass Committee and Impermissible “Coercion”...

The Delaware Supreme Court’s MFW decision provides a safe harbor for controlling stockholder buyouts that are conditioned upon approval of a special committee of independent directors and a majority-of-the-minority vote,...more

6/18/2020 / Buyouts , Controlling Stockholders , DE Supreme Court , Dell

Chancery Dismisses Claims that Minority Stockholders who Rolled Over Equity in a Controlling Stockholder Merger Joined a “Control...

Gilbert v. Perlman, C.A. No. 2018-0453-SG (Del. Ch. Apr. 29, 2020) - Delaware law imposes fiduciary duties upon controlling stockholders who use their power to control the corporate machinery. For that reason, determining...more

6/2/2020 / Breach of Duty , Controlling Stockholders , Fiduciary Duty , Mergers , Minority Shareholders

Surveying the Law, Chancery Declines to Dismiss a Claim that a 35% Holder was the Controlling Stockholder of the Acquirer (as Well...

Voigt v Metcalf, C.A. No. 2018-0828-JTL (Del. Ch. Feb. 10, 2020). This decision contains an instructive review of the factors the Court of Chancery will examine to determine whether a minority stockholder may in fact be a...more

4/7/2020 / Breach of Duty , Controlling Stockholders , Fiduciary Duty , Mergers

Chancery Denies Motions for Summary Judgment in Tesla Litigation, Questions Remain as to Whether Musk is a Controlling Stockholder

In re Tesla Motors, Inc. S’holder Litig., C.A. No. 12711-VCS (Del. Ch. Feb. 4, 2020). The Delaware Court of Chancery denied plaintiffs’ and defendants’ (including Elon Musk’s) motions for summary judgment on the grounds that...more

3/11/2020 / Acquisitions , Board of Directors , Breach of Duty , Controlling Stockholders , Elon Musk , Fiduciary Duty , Shareholders , Tesla

Chancery Declines to Apply Corwin Where a Stockholder-Plaintiff Adequately Alleged the Existence of a “Control Group”

Garfield v. BlackRock Mortgage Ventures, LLC, C.A. No. 2018-0917-KSJM (Del. Ch. Dec. 20, 2019). Under Delaware law, when a controlling stockholder benefits personally from the transaction in a manner not shared by minority...more

2/4/2020 / Breach of Duty , Controlling Stockholders , Corwin Doctrine , Fiduciary Duty , Shareholder Litigation

Chancery Dismisses Stockholder Claims that a Minority Owner was a Controlling Stockholder or that a Majority of the Board was...

In re: Essendant, Inc. Stockholder Litigation, C.A. No. 2018-0789-JRS (Del. Ch. Dec. 30, 2019). When as here a Delaware corporation’s charter contains an exculpation provision under Section 102(b)(7) of the Delaware...more

1/29/2020 / Board of Directors , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Merger Agreements , Mergers , Shareholder Litigation

Delaware Supreme Court Provides Additional Guidance on Pleading Direct Claims Against Controllers and Control Groups

Sheldon v. Pinto Technology Ventures, L.P., No. 81, 2019 (Del. Oct. 4, 2019). The Delaware Supreme Court affirmed the Court of Chancery’s dismissal of an alleged direct claim for dilution of the voting and economic...more

11/22/2019 / Board of Directors , Controlling Stockholders , Derivative Suit , Shareholder Litigation

Chancery Denies Motion to Dismiss Claim for Breach of Earn-Out When Unable to “Divine any Meaning” From Provision

Western Standard, LLC v. SourceHOV Holdings, Inc., C.A. No. 2018-0280-JRS (Del. Ch. July 24, 2019). Defendant Pangea acquired BancTec through a merger agreement that provided for an earn-out to former BancTec stockholders...more

8/24/2019 / Breach of Contract , Controlling Stockholders , Earn-Outs , Merger Agreements , Mergers , Motion to Dismiss , Shareholder Litigation

Delaware Supreme Court Rejects MFW Defense Because of Delay in Safeguards

Olenik v. Lodzinksi, No. 392, 2018 (Del. Apr. 5, 2019). Under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014), deferential business judgment review governs mergers between a controlling stockholder and the controlled...more

4/11/2019 / Appeals , Board of Directors , Breach of Duty , Business Judgment Rule , Controlling Stockholders , DE Supreme Court , Entire Fairness Standard , Fiduciary Duty , Mergers , Standard of Review

Chancery Finds Controlling Stockholder Impliedly Consented to Jurisdiction Through Board’s Adoption of Delaware Forum-Selection...

In re Pilgrim’s Pride Corp. Derivative Litigation, Consol. C.A. No. 2018-0058-JTL (Del. Ch. Mar. 15, 2019). Stockholders that control Delaware corporations find themselves subject to fiduciary duties. According to this...more

3/20/2019 / Board of Directors , Breach of Duty , Controlling Stockholders , Fiduciary Duty , Minority Shareholders , Shareholder Litigation , Shareholders , Subsidiaries

Tyler O'Connell

Morris James LLP

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