Category Archives: djcl

“Red Flags” and the Duty of Oversight

Sarah Baker Under Delaware law, the fiduciary duty of oversight imposes several obligations on boards of directors, including the responsibility to oversee companies and their employees by implementing compliance systems designed to detect and report corporate misconduct.  Courts have uniformly held … Continue reading

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Rule 23.1: Take it to the Board or the Court, Not Both

Kevin Packer In its recent decision in Zucker v. Hassell, the Court of Chancery addressed when a shareholder can have standing to pursue derivative actions in the demand refusal context. In Zucker the stockholder plaintiff argued that he had derivative … Continue reading

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Direct and Derivative Claims in El Paso v. Brinckerhoff

Melaina Hudack In its recent decision in El Paso v. Brinckerhoff, the Delaware Supreme Court reversed the Court of Chancery’s decision and, in doing so, helped to clarify how to determine whether a stockholder claim is derivative, direct, or both. … Continue reading

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In re OM Group, Inc. Stockholders Litigation: The Value of a Vote

Caneel Radinson-Blasucci In its recent In re OM Group, Inc. Stockholders Litigation (“OMG”) opinion, the Court of Chancery addressed an interesting wrinkle in determining the appropriate standard of review for assessing stockholder’s fiduciary duty claims regarding directors’ conduct in negotiating … Continue reading

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Post-Close Disclosure Claims in Nguyen v. Barrett

John Brady Nguyen v. Barrett deals with post-close claims of breach of fiduciary duty and improper/partial disclosure arising out of a Merger Agreement between Millennial Media, Inc. (“Millennial” or “The Company”) and AOL through which AOL would acquire Millennial through … Continue reading

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Genuine Parts Requires Genuine Jurisdiction: Protecting Our Economy Through Constitutional Principles

Brittany Giusini        The Delaware Supreme Court’s recent opinion in Genuine Parts Co. v. Cepec gives clarity to long-standing personal jurisdiction principles by acknowledging an unfettered exercise of judicial power over businesses creates constitutional and economic concerns. In Genuine Parts, a Georgia … Continue reading

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Annual Review of Key Delaware Corporate and Commercial Decisions

Francis Pileggi  This is the twelfth year that I am providing an annual list of key Delaware corporate and commercial decisions. In some of my past annual reviews, I listed only three key cases, and in other years I listed a few … Continue reading

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Rebutting Fairness in Business: A Look at In Re Books-A-Million

Lindsay Killian In its recent decision in In Re Books-A-Million, Inc. Stockholders Litigation (“BAM”), the Delaware Court of Chancery addressed a basis for challenging a shift from entire fairness review to the business judgment rule that the Delaware Supreme Court … Continue reading

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The Chancery Court Strictly Adheres to the Proper Purpose Requirement in 220 Actions in Two Recent Decisions

Katelyn Tuoni Section 220 of the Delaware General Corporation Law provides a process for stockholders to request access to a corporation’s books and records for inspection.  Section 220 requires that stockholders comply with certain procedural and substantive requirements for making … Continue reading

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Contractual Versus Statutory Rights In Books And Records Demands On Delaware Statutory Trusts

Jason Rigby In Grand Acquisition, LLC, v. Passco Indian Springs DST, the Delaware Court of Chancery determined a beneficial owner of a Delaware Statutory Trust (“DST”) had the right to inspect the books and records of the DST based on the … Continue reading

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Calesa Associates: Recognizing an Anomaly of Corporate Law Pleadings

Matthew Goeller In Calesa Associates, L.P. v. American Capital, Ltd., Vice Chancellor Glasscock denied defendants’ motion to dismiss plaintiffs’ claims alleging that directors of Halt Medical, Inc. (“Halt”) and its alleged controller American Capital, Ltd. (“American Capital”) had engaged in an … Continue reading

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In re Appraisal of Dell Inc.: Eliminating the Tension Between a Share-Tracing Requirement and the Continuous Record Holder Requirement

Ashley Callaway The Delaware Chancery Court caused quite a stir with the issuance of the opinion for In re Appraisal of Dell, Inc. last summer.  Articles with titles such as “Dell Stockholders Lose Appraisal Rights as Custodial Bank’s Common Back-Office … Continue reading

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Does the Equitable Mootness Doctrine Apply to Appeals from Chapter 7 Liquidations?

Jennifer Penberthy Buckley When implementation of a confirmed Chapter 11 plan proceeds while an appeal is pending, the District Court or the Court of Appeals may be presented with a dilemma. First, reversing the confirmed plan may detrimentally impact third … Continue reading

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Section 141(k) Mandatory Prohibition of For-Cause Removal of a Declassified Board

Kendra Rodwell On December 21, 2015, in In re Vaalco Energy Shareholder Litigation, the Delaware Court of Chancery granted the plaintiffs’ motion for summary judgment, invalidating a provision included in Vaalco Energy’s bylaws and charter that purported to make directors … Continue reading

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One of These Things is Not Like the Other: Student Bar Loan Distinguished from Traditionally Nondischargeable Student Loan Debt

Kaitlin E. Maloney  In a recent turn of events regarding the dischargeability of student loan debt, the United States Bankruptcy Court for the Eastern District of New York ruled that a law school graduate’s loan taken for the purpose of … Continue reading

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Applying Omnicare and Protecting Investors Under § 11 of the ‘33 Act

Nicholas D. Picollelli, Jr. In order for a company to offer securities in interstate commerce, it must comply with the requirements of the Securities Act of 1933.  The Securities Act “protects investors by ensuring that companies issuing securities . . … Continue reading

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EZCorp Deems Entire Fairness Standard Appropriate When Controlling Shareholder Receives Non-Ratable Benefits

Helene Episcopo In the Court of Chancery’s recent opinion, In re EZCorp Inc. Consulting Agreement Derivative Litigation (“EZCorp”), the court grappled with the appropriate standard of review for business transactions between a controlled company and a controlling shareholder.  In this … Continue reading

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In Re Trulia, Inc. Stockholder Litigation: End to Disclosure Settlements?

Erin Rogers In January 2016, the Court of Chancery issued an opinion in In re Trulia, Inc. Stockholder Litigation that will surely have an impact on the amount of disclosure settlements and merger-related litigation. The court expressed three concerns regarding … Continue reading

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The Impact of Obergefell on Employee Benefits in Delaware

Elizabeth Miosi On June 26, 2015, the United States Supreme Court issued its historic ruling in Obergefell v. Hodges, holding that the right to marry is a fundamental right inherent in the liberty protected by the Fourteenth Amendment. The opinion also mandates that … Continue reading

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Puerto Rican Debt Crisis: A Proposal to Amend Federal Bankruptcy Law

Ashley B. DiLiberto Puerto Rico is deeply in debt, and this United States territory is in desperate need of help.  Puerto Rico owes approximately $72 billion to its creditors, and the financial avalanche is creating chaos in the lives of … Continue reading

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Affordable Care Act Creates Incentives for Small Businesses to Provide Health Benefits

Samantha Darrow Osborne Recently, the Affordable Care Act (“ACA”) has substantially increased individual penalties, which create an incentive for small businesses to partake in offering insurance to their employees.  In 2015, the penalty for failing to obtain health coverage was … Continue reading

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Considerations in Implementing Country-by-Country Reporting

John Brady Introduction On October 20, 2015, the Organization for Economic Co-operation and Development (“OECD”) released the final report on Base Erosion Profit Sharing (“BEPS”) rules to thwart aggressive transfer pricing strategies involving intercompany transactions used by companies to lower … Continue reading

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Delaware Supreme Court Finds Third-Party Advisor Liable for the Board’s Breach

Michael Laukaitis  The Delaware Supreme Court narrowly refined the Revlon analysis in RBC Capital Markets, LLC v. Jervis (“Rural Metro”).  The Court found that financial advisors aid and abet a director’s breach of fiduciary duties when they knowingly induce, advise, … Continue reading

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Fine-Tuning Revlon: The Consequence of Fair and Fully Informed Stockholder Votes

Nicholas D. Picollelli, Jr. In the context of strategic acquisitions, the Supreme Court of Delaware’s recent opinion in Corwin v. KKR Financial Holdings LLC challenges the validity of the Revlon doctrine as it applies to conflict-free mergers.  Revlon requires directors … Continue reading

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The U.S. Government and Corinthian Colleges, Inc.: Picking Winners and Losers

Christopher Kephart Thanks to a relatively obscure federal statute, with rules written during the Clinton administration regarding the discharge of federal student loans, taxpayers must be on alert and students receiving federal student aid need to pay attention.  The 2015 … Continue reading

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Director Independence Analysis Refined

Sabrina M. Hendershot In a rare reversal of a Court of Chancery decision, the Delaware Supreme Court revived a pension fund’s derivative complaint, holding that demand on the board would have been futile.  In Delaware County Employees Retirement Fund v. … Continue reading

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Bargaining Away Fiduciary Duty: Considering Partnership Agreements After Kinder Morgan

Donald Huddler The recent Dole and Kinder Morgan Court of Chancery opinions highlight the differing roles of fiduciary duties in corporations and limited partnerships.  The Dole shareholder litigation questioned the actions of corporate board members in considering an insider offer … Continue reading

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Chancery Court Issues Discretionary Remedy to Dole Shareholders in Fraud

Brandon Harper In an August 27, 2015 Chancery Court opinion, Vice Chancellor Laster awarded shareholders of Dole Food Company damages upwards of $148 million for CEO David Murdock’s and President and COO C. Michael Carter’s fraudulent violation of their fiduciary … Continue reading

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Amendments to DGCL Sections 204 and 205: Another Example of How Delaware Does Corporate Law Best

Jacob Fedechko The recent amendments to 8 Del. C. §§ 204, 205 are prime examples of how the Delaware legislature facilitates the development of corporate law by enhancing flexibility in corporate affairs. Sections 204 and 205 first became part of … Continue reading

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In El Paso the Court of Chancery Found that the Modification of Fiduciary Duties Does Not Grant carte blanche

Thibaut Lesure This decision comes as a reminder that even though a limited partnership agreement may eliminate, expand or limit its partners’ fiduciary duties through express and unambiguous language, the duty of good faith and fair dealing remains.  Indeed, under … Continue reading

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Proposed Financial Firm Tax

Brian J. King On January 17, 2015, President Obama, in a White House press release, proposed a “7 basis point fee,” or tax on the liabilities of financial institutions with assets over $50 billion (“Liability Tax”).  This tax is expected … Continue reading

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Direct Mktg. Ass’n v. Brohl: A Temporary Win for On-Line Retailers

Adam Young In a recent decision, Direct Mktg. Ass’n v. Brohl, the United States Supreme Court held that the Tax Injunction Act (“TIA”) does not bar out-of-state retailers from challenging Colorado’s notice and reporting requirements in federal court.  In 2010, … Continue reading

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Proposed Forum Selection Amendment Reinforces Boilermakers, Spells Waterworks for City of Providence and, As Always, Delaware Prevails

Kyle Wu In the beginning, there was New Jersey.  New Jersey dominated the corporate law world at the turn of the twentieth century and was able to boast that the state was home to most of the largest corporations in … Continue reading

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Miramar Police Officers’ Retirement Plan v. Murdoch: Not Bound By The Past

Justin Forcier On April 7, 2015, Chancellor Bouchard issued an opinion holding that a subsidiary corporation is not bound by a settlement agreement entered into by the parent corporation before the subsidiary was spun off.  In 2006, News Corporation (“Old … Continue reading

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Material or Not: Can Failure to Disclose Under S-K Item 303 Give Rise to a Fraud Class Action?

Sabrina M. Hendershot A new question has arisen in the realm of securities litigation: does an alleged failure to make disclosure under Item 303 of Regulation S-K in a filing with the Securities Exchange Commission (“SEC”) give rise to a … Continue reading

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The Corporate Law Background of the Necessary and Proper Clause: A Synopsis and Practical Effect

Candice I. Walker What exactly does the phrase “necessary and proper” mean as it pertains to Article I, Section 8 of the United States Constitution? Did the Framers intend for the doublet to be interpreted as a sort of “rhetorical … Continue reading

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Amendments to Delaware’s Public Benefit Corporation Statute

John Gentile In 2013, Delaware adopted legislation permitting the formation of “public benefit corporations.”  Delaware joined the growing number of states addressing the growing demands of business leaders, investors, social activists and others looking for an alternative to the business … Continue reading

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Accelerated Arbitration Rejuvenation: State Passes the Delaware Rapid Arbitration Act

Alexander Bonder Besieged by legal obstacles, Delaware’s alternative dispute resolution method for business matters, 10 Del. C. § 349, came to a complete halt in 2013.  Fortunately, the General Assembly has rebounded with the passage of the Delaware Rapid Arbitration … Continue reading

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Proposed Amendments to Delaware’s Appraisal Statute: How Much Do They Matter?

Jacob Fedechko Delaware appraisal litigation has been receiving its fair share of attention from commentators and the judiciary.  Now it is time for the legislature to enter the mix.  In response to the controversy surrounding “appraisal arbitrage,” the Delaware Bar … Continue reading

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Tax Avoidance Trends Among Multinational Enterprises: An Examination of Intellectual Property Transaction and Corporate Income Tax Avoidance

Brian J. King It is no secret that large multinational enterprises (“MNEs”), a large percentage of which are Delaware corporate entities, have long been on the cutting edge of clever ways to minimize, if not avoid, tax liability. Information and misinformation abound … Continue reading

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3M Cogent Appraisal Litigation—Stock Based Compensation as a Factor in the Discounted Cash Flow Analysis—Parsons’s Side of the Table

Alex Faris In mid-2013, Vice Chancellor Donald F. Parsons issued an opinion regarding the fair value of Cogent, which was acquired by 3M in December of 2010. Stockholders of Cogent filed suit against the board of the newly formed 3M Cogent, … Continue reading

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Stock-Based Compensation as a Cash Expense in Appraisal Rights Litigation

John Gentile Appraisal rights litigation has been steadily rising in both the number of petitions filed and the dollar amounts at stake. Historically, appraisal rights litigation has been considered risky due to the wide discretion the court has under statute … Continue reading

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Appraisal “Arbitrage”: Give It Another Name, But Let It Continue

Thomas H. Kramer Two recent decisions from the Court of Chancery of Delaware have generated calls for legislative action to revise Delaware’s appraisal statute, 8 Del. C. § 262. Appraisal, once a relatively obscure statutory remedy for the loss of … Continue reading

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Putting a Stop to Appraisal Arbitrage

William J. Burton In two recent opinions, the Delaware Court of Chancery wrestled with an important question regarding appraisal litigation. Namely, the court faced the issue of whether under 8 Del. C. § 262, a beneficial owner who acquires shares … Continue reading

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RadioShack: Only the Relevant Survive

Michael Van Gorder and Tara C. Pakrouh On February 5, 2015, RadioShack Corporation (“RadioShack”), along with several of its affiliates, filed for Chapter 11 Bankruptcy protection. RadioShack had considered filing for bankruptcy for quite some time. Now that RadioShack has … Continue reading

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Lehman Brothers Holdings, Inc. v. Spanish Broadcasting Systems, Inc.: Anything You Don’t Say or Do May Be Used Against You

Tara C. Pakrouh In a recent order, the Delaware Supreme Court affirmed a Delaware Court of Chancery determination that Lehman Brothers Holdings, Inc. (“Lehman”), acquiesced to an alleged violation of Lehman and Spanish Broadcasting System, Inc.’s (“SBS”) Certificate of Designation … Continue reading

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