In In Re Coty Inc. Stockholder Litigation, C.A. No. 2019-0336-AGB (Del. Ch. Aug. 17, 2020), the Delaware Court of Chancery (the “Court”) denied a Rule 12(b)(6) motion to dismiss claims brought by stockholders (the “Plaintiffs”) of Coty Inc. (“Coty”) against its directors and de facto controlling stockholder, JAB Holding Company S.à.r.l. and its affiliates (“JAB”), over JAB’s 2019 partial tender offer, whereby it increased its ownership stake in Coty from 40% to 60%. The Plaintiffs alleged that JAB opportunistically timed and priced the tender offer so that it undervalued Coty and structured the tender offer in a coercive manner.Read More
In Jacob Hasher Hindlin v. Lukasz Gottwald et al., C.A. No. 2019-0586-JRS (Del. Ch. July 22, 2020), the Delaware Court of Chancery (the “Court”) dismissed Plaintiff’s claims against three former members of the board of managers of Core Nutrition, LLC (“Core” or the “Company”) for breach of fiduciary duty and the implied contractual covenant of good faith and fair dealing.Read More
In William Hughes, Jr. v. Xiaoming Hu, et al., C.A. No. 2019-0112-JTL (Del. Ch. April 27, 2020), the Delaware Court of Chancery (the “Court”) held that stockholder plaintiff’s failure to make a demand on the board of directors (the “Board”) was excused and therefore denied defendants’ motions to dismiss under Court of Chancery Rules 23.1 and 12(b)(6) derivative claims brought by plaintiff on behalf of Kandi Technologies Group, Inc., a public Delaware corporation based in China (the “Company”). The derivative claims alleged that the Board, acting through its Audit Committee (the “Committee”), breached fiduciary duties by failing to implement effective oversight of the Company’s disclosure and financial information reporting controls and procedures and that as a result Company officers were unjustly enriched.Read More
In Shabbouei v. Potdevin, C.A. No. 2018-0847-JRS (Del. Ch. Apr. 2, 2020), the Delaware Court of Chancery dismissed a derivative suit against the board of directors (the “Board”) of lululemon athletica inc. (the “Company”) by a Company stockholder (“Plaintiff”) for failing to plead demand futility. The Court held that Plaintiff did not plead with the requisite particularity that the Board was self-interested in a Separation Agreement with the Company’s CEO Laurent Potdevin (“Potdevin”) negotiated by the Board and that the Board’s decision to settle with, instead of firing, Potdevin for cause was outside the bounds of proper business judgment.Read More
In Wenske v. Blue Bell Creameries, Inc., C.A. No. 2017-0699-JRS (Del. Ch. August 28, 2019), the Court of Chancery held that Blue Bell Creameries, Inc., the sole general partner (the “General Partner”) of Blue Bell Creameries, LP (the “Partnership”), was not a disinterested entity such that it could delegate its otherwise valid power to manage derivative litigation. The Court also held that it was not appropriate to undertake a conflict analysis with respect to the individual members of the board of directors of the General Partner (the “GP Board”), because such analysis would disregard the established policy of respecting the legal fiction of the business entity.Read More
In Urdan v. WR Capital Partners, LLC, C.A. No. 2018-0343-JTL (Del. Ch. 2019), the Delaware Court of Chancery (the “Court”) held that Urban and Woodward (the “Plaintiffs”) lost the ability to assert their derivative and direct claims by failing to properly preserve their claims in the stock repurchase agreements and settlement agreement among the Plaintiffs, Energy Efficient Equity, Inc. (the “Company”), and the private equity group that essentially pushed the Plaintiffs out of the Company, WR Capital Partners, LLC, et al., (the “PE Firm”). The Court dismissed the Plaintiffs’ remaining claims for fraud, as the Plaintiffs could not reasonably rely on puffery, and unjust enrichment, as this is more properly a derivative claim dismissed with the direct and derivative claims above.Read More
In Morris v. Spectra Energy Partners (DE) GP, LP, the Court of Chancery held that the plaintiff, who previously lost standing to maintain a derivative action after it ceased to be a unit holder of a limited partnership, also lacked standing to directly challenge the fairness of the transaction that extinguished its right to pursue the derivative action.Read More
In In re BGC Partners, Inc. Derivative Litigation, Civil Action No. 2018-0722-AGB (Del. Ch. Sep. 30, 2019), the Delaware Court of Chancery denied motions to dismiss for (i) failure to establish demand futility and (ii) failure to state a claim for relief (the “Motions”) filed by nominal defendant BGC Partners, Inc. (“BGC”), its affiliates CF Group Management, Inc. (“CF”) and Cantor Fitzgerald L.P. (“Cantor”), Howard Lutnick, the CEO, Chairman of the Board, and controlling stockholder of BGC (“Lutnick”), and four “independent” members of the Board of Directors of BGC (the “Special Committee Defendants” and all of which, together, are the “Defendants”). In denying the Motions in this stockholder derivative litigation, the court primarily discussed and applied recent guidance from the Delaware Supreme Court on the Aronson test for demand futility. In re BGC Partners, Inc. puts controlling stockholders on notice that their professional and personal ties to board members may undermine the purported independence of those board members.Read More
In the consolidated stockholder derivative litigation, In re Fitbit, Inc., CA No. 2017-0402-JRS (Del. Ch. Dec. 14, 2018), the Delaware Court of Chancery denied the Defendants’ motion to dismiss Plaintiffs’ insider trading and breach of fiduciary duty claims. The claims stem from alleged insider knowledge of members of Fitbit’s Board of Directors (the Board) and chief financial officer that Fitbit’s PurePulse™ technology was not as accurate as the company claimed. Plaintiffs alleged that members of the Board structured the company’s Initial Public Offering (IPO) and Secondary Offering (together, “the Offerings”) to benefit Fitbit insiders and voted to waive employee lock-up agreements, thereby allowing those insiders, to prematurely sell stock in the Secondary Offering. As a result of their sales, the alleged insiders sold about 6.2 million shares for over $115 million in the IPO and about 9.62 million shares for over $270 million in the Secondary Offering.Read More
In Sheldon v. Pinto Technology Ventures, C.A. No. 2017-0838-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery in a Memorandum Opinion granted a motion to dismiss breach of fiduciary duty claims and other allegations brought by the founder and an early stockholder (“Plaintiffs”) of non-party IDEV Technologies, Inc., a Delaware corporation (“IDEV”). The Court found that Plaintiffs’ primary claims were derivative, rejecting Plaintiffs’ assertion that Defendants were judicially estopped by a Texas state court ruling from arguing for that characterization of the claims, and dismissed the complaint for failure to comply with Chancery Court Rule 23.1’s derivative claims demand or demand futility pleading requirements.Read More
In Jack L. Marchand II v. John W. Barnhill, Jr., et al, the Delaware Chancery Court dismissed Plaintiff’s complaint under Court of Chancery Rule 23.1, finding that Plaintiff failed to plead particularized facts that an appeal for board action on the complaint would have been futile or that a majority of the company’s board lacked the independence needed to respond.
In Sciabacucchi v. Liberty Broadband Corp., et al., C.A. No. 11418-VCG (Del. Ch. July 26, 2018), the Delaware Court of Chancery denied in part a motion to dismiss brought by defendants Liberty Broadband Corporation (“Liberty”), Liberty’s largest stockholder, and the board of directors of Charter Communications, Inc. (“Charter,” and collectively “Defendants”), for failure to plead demand futility. The Court ruled that the Plaintiff, a stockholder of Charter, pleaded sufficient facts to support a reasonable inference that the influence of Liberty’s largest stockholder would prevent the Charter board of directors from exercising independent and disinterested business judgment when considering a demand to bring a lawsuit on behalf of the corporation.