Delaware Business Litigation Report

Delaware Business Litigation Report

Category Archives: Directors

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Court Of Chancery Explains Pleading Standard For Claims Against Disinterested Directors

Posted in Case Summaries, Directors
In Re Cornerstone Therapeutics Inc. Stockholder Litigation, C.A. 8922-VCG (September 10, 2014)  This is a great decision to read to understand the pleading standard that applies to a complaint that alleges a controlling stockholder transaction. Even in such a transaction, the disinterested directors are not liable absent proof of a breach of a non-exculpated breach … Continue Reading

Court Of Chancery Explains When Directors May Shield Other Directors

Posted in Directors
Kalisman v. Friedman, C.A. 8447-VCL (April 17, 2013) When may most of a Board of Directors deny another director access to the advice of counsel the majority received?  This decision answers that interesting question and concludes "not very often."  There are exceptions to that general rule, such as when there is a board committee involved whose … Continue Reading

Unliquidated Derivative Claims Continue to Have Little Value

Posted in Case Summaries, Derivative Claims, Directors, M&A, News
This article was original published in The Delaware Business Court Insider | 2011-07-06 On May 31, Vice Chancellor Leo E. Strine Jr. issued an opinion denying a motion for preliminary injunction to halt a merger between Massey Energy Company and an affiliate of Alpha Natural Resources Inc. One of the critical issues in the opinion … Continue Reading

Lewis Lazarus Authors Article on Plaintiffs’ Pleading Burden in the Court of Chancery

Posted in Case Summaries, Controlling Stockholder, Directors, Fiduciary Duty, M&A, News
Lewis H. Lazarus This article was originally published in the Delaware Business Court Insider | June 15, 2011 A plaintiff who pleads successfully that a transaction under attack is governed by the entire fairness standard of review instead of business judgment generally stands a good chance of defeating the defendant’s motion to dismiss.  That is … Continue Reading

Chancery Decisions Highlight Importance of Independent and Disinterested Directors in Company Sale Transactions

Posted in Directors, News
Lewis H. Lazarus This article was originally published in the Delaware Business Court Insider | May 25, 2011   Two recent decisions from the Court of Chancery — In re Orchid Cellmark Inc. Shareholders Litigation and In re Answers Corp. Shareholders Litigation — illustrate how parties may reduce deal risk by ensuring that the directors … Continue Reading

Directors Designated By Investors Owe Fiduciary Duties to the Company as a Whole and Not to the Designating Investor

Posted in Directors
Investors who make substantial investments often demand a seat on their company's board of directors. That is a reasonable request as it permits the investor to have a representative on the board of directors with a voice in management of the company. It is well-settled that directors elected by stockholders of a Delaware corporation owe fiduciary duties to the company and all its stockholders once they serve on the board. Thus, they may make decisions in the exercise of their fiduciary duty that are different than what is in the best interest of designating investor. The Court of Chancery's recent decision in Air Products and Chemicals, Inc. v. Airgas, Inc., 2011 WL 519735 (Del. Ch. Feb. 15, 2011) reflects this issue… Continue Reading

Court Of Chancery Holds Directors Subject to Contribution Claims

Posted in Directors
Hampshire Group Limited v. Kuttner, C.A. 3607-VCS (July 12, 2010) This decision holds that the Unifrom Contribution Among Joint Tortfeasors Act applies to claims against directors. While at least 1 other court agreed with this point, this is the first Delaware decision on this issue. This is important becaue it has serious implications to settlements with some … Continue Reading

Court of Chancery Rejects Attack on Board Discretion to Retain Directors

Posted in Directors
City of Westland Police & Fire Retirement System v. Axcelis Technologies, Inc., C.A. 4473-VCN (September 28, 2009). This is the first Delaware decision to deal with the so-called Pfizer policy on when directors may be retained despite a shareholder vote on dissatisfaction. Axcelis had a bylaw that any director up for re-election who did not get a … Continue Reading

Court of Chancery Interprets Confusing Indemnification Provision

Posted in Attorney Fees, Directors, LP Agreements
David A. Stockman v. Heartland Industrial Partners, LP, C.A. 4227-VCS (July 14, 2009) This is possibly the best decision to read to understand how to interpret the often confusing advancement and indemnification rights contained in limited partnership agreements. The discussion of the history of those rights under Delaware law is very useful as well. There … Continue Reading

Court of Chancery Explains how To Infer Scienter

Posted in Case Summaries, Derivative Claims, Directors
American International Group Consolidated Derivative Litigation, C.A. 769 (Del. Ch. Feb. 10, 2009)   The Court of Chancery is often faced with the difficult task of deciding when a complaint has enough factual allegations to survive a motion to dismiss, particularly when there is no self dealing by directors and the business judgment rule is … Continue Reading

Court of Chancery Explains “Validly In Litigation”

Posted in Case Summaries, Derivative Claims, Directors
In re: Affiliated Computer Services, Inc. Shareholders Litigation, C.A. 2821-VCL (Del. Ch. Feb. 6, 2009)   Determining when a derivative complaint should be dismissed becomes complicated when the composition of the board of directors changes. What board do you look to to determine if a demand must be made on the board before suit may … Continue Reading

Supreme Court Clarifies Stockholder Ratification Law

Posted in Case Summaries, Directors, Fiduciary Duty
Gantler v. Stephens, C.A. 132,2008 (Del. Jan. 27, 2009)   This is an important decision because it limits when stockholder approval of a transaction has the effect of ratifying director action. Moreover, it limits the effect of stockholder ratification by holding that the business judgment level of review still applies to the directors’ action, rather … Continue Reading

Court of Chancery Approves Option Back Dating Case Settlement

Posted in Attorney Fees, Case Summaries, Directors
Ryan v. Gifford, C.A. 2213-CC (Del. Ch. Jan. 2, 2009)   In this decision the Court approves the settlement of a stock option back dating case. The opinion carefully goes through all the analysis of when to approve a settlement, particularly when the recovery is adequate under the circumstances.   The attorney fee award of … Continue Reading