In The Cirillo Family Trust v. Aram Moezinia, Lewis Tepper, Mark Walter, and DAVA Pharmaceuticals, Inc., C.A. No. 10116-CB (Del. Ch. Jul. 11, 2018), the Delaware Chancery Court granted the defendants’ motion dismissing certain claims arising from the 2014 merger between DAVA Pharmaceuticals, Inc. (“DAVA”) and an affiliate of Endo Pharmaceuticals, Inc. (such affiliate, “Endo”). The Court held that Section 205 of the Delaware General Corporation Law (the “DGCL”) validated deficiencies in the written consents to the merger (the “Written Consents”) and a director’s reasonable, good faith reliance on the advice of legal counsel hired for specific expertise can exculpate the director for a fiduciary duty breach. The Court also granted part of the plaintiff’s motion to amend the complaint to add a claim against certain directors in their capacities as officers of DAVA.
In In re Hansen Medical, Inc. Stockholders Litigation, C.A. No. 12316-VCMR (Del. Ch. June 18, 2018), the Delaware Court of Chancery found that plaintiffs had stated a reasonably conceivable claim that the acquisition of Hansen Medical, Inc. (“Hansen”) by Auris Surgical Robotics, Inc. (“Auris”) should be reviewed under the entire fairness standard of review because the transaction involved a controlling stockholder group which extracted benefits from the transaction not shared with the minority. The Court denied motions to dismiss filed by the alleged control group and Hansen’s directors and officers.
In Lavin v. West Corporation, C.A. No. 2017-0547-JRS (Del. Ch. December 29, 2017), the Court of Chancery held that stockholder plaintiff Mark Lavin (“Lavin”) had adequately demonstrated a credible basis from which the Court could infer that wrongdoing had occurred regarding the merger of West Corporation (the “Company”) and Apollo Global Management (“Apollo”) in support of Lavin’s Section 220 demand for inspection, and that a Corwin defense (that the transaction at issue was approved by a majority of disinterested and informed stockholders) is not a bar to an otherwise properly supported Section 220 demand for inspection.
In Alan Kahn v. Michael D. Stern, et al., C.A. No. 12498-VCG (Del. Ch. Aug. 28, 2017), the Delaware Chancery Court granted a motion to dismiss the stockholder plaintiff’s claims that the director defendants breached their fiduciary duties when they approved a merger that included side deals. The Court noted that the plaintiff had the burden of proving either that the board was not disinterested or that the board acted in bad faith with respect to the disclosures in the information statement released to stockholders. The Court concluded that the plaintiff failed to state a claim upon which relief could be granted.
In Buttonwood Tree Value Partners L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del. Ch. July 24, 2017), the Delaware Chancery Court denied, in part, a motion to dismiss claims for breach of the fiduciary duty of loyalty brought by minority stockholders in R. L. Polk and Co., Inc. (“Polk”) against the directors of Polk and members of the Polk family, who controlled Polk, in connection with a self-tender offer. In this case, the Court held that it was reasonably conceivable that the Polk directors who were affiliated with the Polk family deliberately caused Polk to conduct a self-tender offer at a low price to enable Polk family insiders to maximize their proceeds from a future sale of Polk.
By Scott E. Waxman and Uri S. Segelman
In In re Cyan, Inc. Stockholders Litigation, C.A. No. 11027-CB (May 11, 2017), the Delaware Court of Chancery dismissed Cyan, Inc. stockholders’ complaint alleging breach of duty by Cyan’s board in merging with Ciena Corp., holding that the plaintiffs had failed to plead sufficient facts to support a reasonable inference that a majority of Cyan’s board was interested in the transaction or acted in bad faith so as to sustain a non-exculpated claim for breach of fiduciary duty. In so doing, the court further denied plaintiffs’ claim for equitable relief of quasi-appraisal, holding that since such relief is typically awarded to redress disclosure deficiencies that are the product of a fiduciary breach, and given that plaintiffs failed to identify any material misrepresentation or omission from Cyan, or to allege any other viable claim for a fiduciary breach, there was no basis to impose a quasi-appraisal remedy.
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.
In In re Chelsea Therapeutics International Ltd. Stockholders Litigation, Consol. C.A. No. 9640-VCG (Del. Ch. May 20, 2016), the Delaware Chancery Court held that Plaintiffs, who alleged bad faith on the part of corporate directors based on a failure to adequately take into account speculative financial projections in evaluating the adequateness of an acquisition offer, had failed to state a claim on which relief could be granted.
In Friedman v. Maffei, et al, C.A. No. 11105-VCMR (Del. Ch. Apr. 13, 2016), the Court of Chancery dismissed derivative claims brought by Julie Friedman on behalf of TripAdvisor, Inc. (“TripAdvisor”) concerning the vesting of 200,000 restricted stock units (“RSUs”) of Expedia stock belonging to Dara Khosrowshahi, a former TripAdvisor director and current CEO of Expedia, Inc. (“Expedia”). In considering defendants’ motion to dismiss, the court concluded that Friedman failed to plead particularized facts that raise a reasonable doubt that the TripAdvisor board (the “Board”) validly exercised its business judgment in refusing her demand. Because the plaintiff could not show the Board wrongfully refused her demand, the court granted the motion to dismiss.