Topic: Duty of Disclosure

Transparency is the Best Policy: Teetering on the Edge of Misleading

By Lisa Stark and Rashida Stevens

In Chatham Asset Management, LLC v. Papanier, C.A. No. 2017-008-AGB (Del. Ch. Dec. 22, 2017), the Delaware Court of Chancery found that the plaintiffs, Chatham Asset Management, LLC, Chatham Fund, LP, and Chatham Asset High Yield Master Fund, Ltd. (collectively, “Chatham”), pleaded sufficient facts to avoid dismissal of a claim that the director defendants of Twin River Worldwide Holdings, Inc. (“Twin River”) breached their fiduciary duties by making materially false and misleading statements in tender offer materials. Read More

Court of Chancery Applies Corwin Ratification to Merger Involving Private Equity Firm Favored by Company’s Founder

By: Nicholas I. Froio and Taylor B. Bartholomew

In Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. Sept. 28, 2017), the Delaware Court of Chancery held on a motion to dismiss that plaintiff failed to plead facts from which it was reasonably conceivable that a tender of nearly eighty percent of the shares of The Fresh Market (the “Company”) was uninformed or coerced for purposes of surviving ratification under applicable caselaw in connection with the Company’s acquisition by private equity firm Apollo Management, L.P. (“Apollo”).

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Court of Chancery Holds That A Credible Basis to Infer Wrongdoing by One Director is Sufficient to Satisfy Burden of Proof Under Section 220

By: Remsen Kinne and Tami Mack

In Rodgers v. Cypress Semiconductor Corporation, C.A. No. 2017-0070-AGB (Del. Ch. April 17, 2017), the Court of Chancery held that shareholder plaintiff T.J. Rodgers (“Rodgers”) had established several proper purposes for his demand to inspect certain books and records of Cypress Semiconductor Corporation (the “Company”), along with a credible basis to infer wrongdoing by at least one of the Company’s directors.  The Court granted Rodgers’ Section 220 action and directed the parties to meet and submit an order for production of all responsive documents.

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Chancery Court Holds That Stockholder Vote on Merger Was Neither Fully-Informed nor Uncoerced

By: Lisa R. Stark and Taylor B. Bartholomew

In In re Saba Software, Inc. Stockholder Litigation, C.A. No. 10697-VCS (Del. Ch. Mar. 31, 2017, revised Apr. 11, 2017), the Delaware Court of Chancery held that the board of Saba Software, Inc. could not invoke the business judgment rule under the Corwin doctrine in response to a fiduciary challenge arising from Saba’s acquisition by Vector Capital Management, L.P.  According to the Court, plaintiff pled facts which supported a reasonable inference that the stockholder vote approving the acquisition was neither fully-informed nor uncoerced.  The Court also denied defendants’ motion to dismiss plaintiff’s claims that the Saba board breached its duty of loyalty and engaged in acts of bad faith by rushing the sales process, refusing to consider alternatives to the merger and granting itself substantial equity awards.

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Chancery Court Dismisses Minority Stockholders’ Action Seeking Quasi-Appraisal in United Capital Corp. Buyout

By: Shoshannah Katz and Andrew Gahan

In In re United Capital Corp., Stockholders Litigation, C.A. No. 11619-VCMR (Del. Ch. Jan. 4, 2017), the Delaware Court of Chancery dismissed a suit brought by plaintiff minority stockholders (“Plaintiff”) that sought a quasi-appraisal to remedy alleged breaches of the duty of disclosure in connection with the acquisition of United Capital Corp. (“United Capital” or “Company”) via short-form merger.  The Court concluded that Plaintiff had not adequately alleged that any omitted information was material to the decision to seek appraisal and that the duty of disclosure was not violated.

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CHANCERY COURT REAFFIRMS THE ABILITY OF LIMITED PARTNERSHIPS TO CONTRACT AROUND FIDUCIARY DUTIES

By: Scott Waxman and Tony Brown

In Adrian Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Mar. 29, 2016), the Court of Chancery held that a limited partnership agreement can extinguish the common law duty of disclosure that exists under Delaware law.  Where a limited partnership agreement expressly eliminated fiduciary duties and replaced them with an alternative contractual governance scheme, the court declined to reinsert a duty of disclosure and determined that additional disclosure obligations are not compelled by the implied covenant of good faith and fair dealing.

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Stockholder’s Challenge to $35M Stock Issuance to Freeport-McMoran CEO Dismissed by Delaware Court of Chancery

By Holly Hatfield and James Parks

A stockholder’s claims regarding a $35 million stock issuance to Freeport-McMoran CEO Richard Adkerson were dismissed. Governance changes within Freeport that were thought to have triggered an option in Adkerson’s employment contract that would have permitted him to quit and receive a $46 million severance package allowed the board to preempt that eventuality by issuing him $35 million in stock.

In Shaev v. Adkerson, C.A. No. 10436-VCN (Del. Ch. Oct. 5, 2015), Vice Chancellor Noble, writing for the Delaware Court of Chancery, granted defendant Freeport-McMoran’s (“Freeport” or the “Company”) motion to dismiss plaintiff Victoria Shaev’s (“Shaev” or “Plaintiff”) direct and derivative claims under Court of Chancery Rules 12(b)(6) and 23.1.

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