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09/23/20

[UPDATED] Juul Labs – Internal Affairs

The Delaware Court of Chancery, in Juul Labs, Inc. v. Daniel Grove, C.A. No. 2020-0005-JTL, opinion (Del. Ch. Aug. 13, 2020), finds inspection of a California headquartered Delaware corporation’s books and records is a matter of internal affairs controlled by Delaware law, not California law, required by a forum selection charter provision to be litigated in Delaware.

NEW:  Morris James discusses the decision in Chancery Holds Statutory Rights to Inspect Books and Records of a Delaware Corporation are Subject to the Internal Affairs Doctrine and Governed Exclusively by Delaware Law.

White and Williams discusses the decision in Move Over California, Delaware Law Applies to Internal Corporate Affairs.

Orrick discusses the decision in Delaware Chancery Court Confirms that Inspection Rights to Books and Records of Delaware Companies Are Governed by Delaware Law, Even if the Company Is Headquartered Elsewhere.

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09/18/20

[UPDATED] USG – Disclosure Claim

The Delaware Court of Chancery, in In re USG Corp. Stockholder Litigation, C.A. No. 2018-0602-SG (consol.), memo. op. (Del. Ch. Aug. 31, 2020), found that an acquisition target’s directors’ failure to disclose their view of the target’s intrinsic value resulted in an uninformed stockholder vote, precluding a Corwin ratification defense, but the same disclosure violation did not state an unexculpated breach of fiduciary duty claim.

NEW:  Morris James discusses the decision in Chancery Rules Failure to Disclose “Intrinsic Value” Precludes Corwin Defense – But Does Not Necessarily Suggest a Breach of the Duty of Loyalty.

Cleary Gottlieb discusses the decision in Stockholder Claims Dismissed Even After Corwin Defense Fails.

Shearman & Sterling discusses the decision in Even After Finding Corwin Inapplicable Because of Alleged Misstatements, Delaware Court of Chancery Dismisses Post-Merger Damages Claims For Failure to Please Bad Faith.

[UPDATED] Anthem-Cigna – Efforts Clause

The Delaware Court of Chancery, in In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114-JTL (consol.), memo. op. (Del. Ch. Aug. 31, 2020), found, in a post-trial ruling, that neither party to a failed merger established entitlement to damages for breaches of “efforts” obligations under the merger agreement, or entitlement to a termination fee.

NEW:  Cahill Gordon discusses the decision in Cigna : Delaware Court Of Chancery Denies Damages After Collapse Of Proposed $54 Billion Merger.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Denies Billion-Dollar Damages in Cigna-Anthem Row.

Fried Frank discusses the decision in Lessons from Anthem-Cigna, Including Avoiding the Result of No Damages for Clear Breaches of a Merger Agreement.

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[UPDATED] AgSpring – Material Adverse Effect

The Delaware Court of Chancery, in Agspring Holdco, LLC, et al. v. NGP X US Holdings, LP, et al., C.A. No. 2019-0567-AGB, memo. op. (Del. Ch. July 30, 2020), found contractual fraud claims brought by the buyer of a business against the seller well pled, including a claim that defendant fraudulently represented no Material Adverse Effects at closing despite knowledge of drastically reduced earnings.

NEW:  $$$ Law360 discusses the decision in Chancery Ruling Highlights Fraud Claim Risk For PE Sellers.

K&L Gates discusses the decision in Chancery Court Rules on Agribusiness Sale Fraud Suit.

Morris James discusses the decision in Chancery Denies Sellers’ Request for Dismissal, Finding That Fraud Claims Were Timely Filed and Properly Pled.

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[UPDATED] Braga – Board Observer Rights

The Delaware Court of Chancery, in Braga Investment & Advisory, LLC v. Yenni Income Opportunities Fund I, LP, C.A. No. 2017-0393-AGB, memo. op. (Del. Ch. June 8, 2020), construed investor’s entitlement to “Board packages” in connection with its board observer right to entitle investor only to materials that management determined in good faith were required by the board in connection with meetings.

NEW:  K&L Gates discusses the decision in Failed Breach of Contract Claims Underscore Chancery Court’s Focus on Contractual Plain Language Over Outside Evidence.

Morris James discusses the decision in In Post-Trial Opinion, Chancery Finds for Defendant, Rejecting Claims Alleging Breach of Purchase Agreement and Right to “Board Packages”.

[UPDATED] Board Diversity

NEW:  Olshan Frome Wolosky discusses passage of a bill by the California legislature that would require increased racial and ethnic diversity on corporate boards of directors for domestic and foreign corporations having their principal place of business in California in California State Legislature Passes Bill Requiring Each Public Company Headquartered in the State to Include a Minimum Number of Directors from Underrepresented Communities on its Board.

Reuters discusses challenges of increasing diversity on corporate boards posed by lack of disclosure and self-reporting of ethnicity in Color blind? How boardroom diversity data eludes advocates.

D&O Diary’s Kevin LaCroix discusses the Board Challenge, pursuant to which corporate Pledge Partners agree to add a Black director in the next twelve months in Growing Number of Companies Pledge to Address Board Diversity Issues.

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09/17/20

[UPDATED] Otto Candies – Vicarious Liability

The Delaware Court of Chancery, in Otto Candies, LLC, et al. v. KPMG, LLP, et al., C.A. No. 2018-0435-MTZ, memo. op. (Del. Ch. Aug. 21, 2020, found that an auditor was not vicariously liable for negligence of its foreign affiliate through an agency relationship or as part of a joint venture.

NEW:  Foley & Lardner discusses the decision in Delaware Affirms Limitation of Vicarious Liability Within Global Networks.

$$$ Law360 discusses the decision in KPMG Once Again Ducks $1B Negligence Claims In Chancery.

[UPDATED] Applied Energetics – Defective Corporate Acts

The Delaware Court of Chancery, in Applied Energetics, Inc. v. George Farley, et al., C.A. No. 2018-0489-JTL, opinion (Del. Ch. Aug. 3, 2020), finds that director action by unanimous consent without a quorum is invalid, but constitutes a failure of authorization rather than a lack of corporate power, and may therefore be validated under 8 Del. C. §§ 204 and 205.

NEW:  K&L Gates discusses the decision in Chancery Court Holds Under-Manned Board’s Acts Were Invalid But Potentially Susceptible to Validation Under §205.

Cooley discusses the decision in Do We Have a Quorum?

Francis Pileggi discusses the decision in Chancery Court ruling addresses Section 205’s application to ex-officer’s alleged defective corporate acts.

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09/16/20

[UPDATED] Federal Forum Selection

NEW:  Freshfields discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in Get thee to Federal Court: California court enforces federal forum provision for IPO securities lawsuits.

Orrick discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in Dismissing Securities Act Claims, California State Court Holds That Federal Forum Selection Provision in Delaware Corporate Charter Is Enforceable.

Fenwick & West discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California Judge Rules That Federal Forum Provisions May Be Permitted.

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[UPDATED] Duty of Oversight

NEW:  Boards Should Care More About Recent “Caremark” Claims and Cybersecurity discusses recent Delaware case law addressing the Caremark duty of oversight and their implications for potential risk of liability related to cybersecurity risk.

Potter Anderson discusses recent Delaware decisions in which claims for oversight liability survived motions to dismiss, noting dissimilarities in the analyses that do not support interpretation of multiple such decisions as constituting a trend in Three Is Not A Trend: Another Caremark Claim Survives A Motion To Dismiss, But Does Not Reflect A Change In The Law.

McDermott Will & Emery discusses criminal prosecution of the CEO of Blue Bell seeking to prove specific intent, and its implications for board oversight obligations in The Blue Bell Dairy CEO Indictment and its Implications for Executive Liability.

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Metlife – Red Flags

The Delaware Court of Chancery, in In re Metlife, Inc. Derivative Litigation, C.A. No. 2019-0452-SG (consol.), memo. op. (Del. Ch. Aug. 17, 2020), dismisses Caremark claims, finding no substantial likelihood of director liability for bad-faith breach of the fiduciary oversight duty based on an alleged failure to adopt modern practices in one business segment following regulatory action affecting an analogous segment.

Morris James discusses the decision in Chancery Dismisses Caremark Claims Against Metlife Board.

09/14/20

[UPDATED] Conflicts of Interest

NEW:  Wilson Sonsini discusses recent Delaware case law addressing application of Alan Kahn, et al. v. M&F Worldwide Corp., et al., No. 334, 2013, opinion (Del. Mar. 14, 2014), as a protective mechanism in controlling stockholder transactions in Recent Delaware Cases on Managing Conflicts: Board- and Stockholder-Level Measures from MFWCase Law.

Wilson Sonsini discusses recent Delaware case law involving stockholder conflicts in Recent Delaware Cases on Managing Conflicts: Stockholder-Level Measures.

Wilson Sonsini discusses recent Delaware case law involving director conflicts in Recent Delaware Cases on Managing Conflicts: Board-Level Measures.

[UPDATED] DLO Enterprises – Asset Sale

The Delaware Court of Chancery, in DLO Enterprises, Inc. v. Innovative Chemicals Products Group, LLC, C.A. No. 2019-0276-MTZ, letter op. (Del. Ch. June 1, 2020), finds the rule that a merger target’s attorney-client privilege regarding merger negotiations passes by statute to the surviving corporation absent an express contractual carve out does not apply in the context of an asset sale.

NEW:  McGuireWoods discusses the decision in Delaware Court Provides Transactional and Practical Guidance: Part II.

Freshfields discusses the decision in Delaware Chancery Court Rules That Pre-Closing Attorney Client Privilege Over Deal Related Communications Stays with Sellers in an Asset Purchase.

Morris James discusses the decision in Chancery Finds Pre-Closing Privilege Did Not Transfer to Buyer Under Asset Purchase Agreement.

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09/10/20

Infomedia – Anti-Reliance Clause

The Delaware Superior Court, in InfoMedia Group, Inc. v. Orange Health Solutions, Inc., et al., C.A. No. N19C-10-212-AML-CCLD, memo. op. (Del. Super. July 31, 2020), dismissed buyer’s fraud claims based on extra-contractual misrepresentations in connection with an agreement having an anti-reliance clause, distinguishing authorities cited as allowing fraud claims based on omissions.

Morris James discusses the decision in CCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims.

[UPDATED] WeWork – Adverse Interests

The Delaware Court of Chancery, in In re WeWork Litigation, C.A. No. 2020-0258-AGB (consol.), opinion (Del. Ch. Aug. 21, 2020), finds that company management could not withhold company privileged information from directors who served on a special committee of a company’s board based on management’s unilateral determination that the committee members’ interests were adverse to the company’s interests.

NEW:  Sheppard Mullin discusses the decision in Delaware Court of Chancery Clarifies that Management Cannot Unilaterally Curtail a Director’s Access to Corporation’s Privileged Information.

Kramer Levin discusses the decision in Delaware Court of Chancery Confirms Directors’ Right to Access Company’s Privileged Information.

Frank Reynolds discusses the decision in Chancery says management can’t exclude any director faction from attorney/client document discovery.

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09/08/20

[UPDATED] UMTH – General Partner Fiduciary Duties

The Delaware Court of Chancery, David C. Fannin, et al. v. UMTH Land Development, LP, et al. and United Development Funding III, LP, C.A. No. 12541-VCF, memo. op. (Del. Ch. July 31, 2020), ruled, under In re USACafes, LP Litigation, C.A. No. *11146-CA (consol.), opinion (Del. Ch. June 7, 1991), that directors of a corporation that serves as a limited partnership’s general partner owe fiduciary duties to the limited partnership.

NEW:  Morris James discusses the decision in Chancery Rejects Bid to Jettison USACafes and its Holding That, Absent Agreement to the Contrary, the Controllers of a Corporate General Partner Owe Fiduciary Duties.

Weil Gotshal discusses the decision in The Limits of Interposing a Limited Liability Entity as the General Partner of a Limited Partnership.

[UPDATED] AmerisourceBergen – Duty of Oversight

The Delaware Court of Chancery, in Teamsters Local 443 Health Services & Insurance Plan, et al. v. John G. Chou, et al. and AmerisourceBergen Corp., C.A. No. 2019-0816-SG, memo. op. (Del. Ch. Aug. 24, 2020), finds demand futile based on director defendants’ substantial likelihood of liability for breach of their Caremark oversight duty where red flags allegedly warned them of mission-critical compliance failures in their highly regulated industry.

NEW:  Francis Pileggi discusses the decision in Chancery explains how AmerisourceBergen plaintiffs’ Caremark claim passed pre-suit demand test.

Tulane Law’s Professor Ann Lipton discusses the decision in A Cautious Caremark Opinion.

Troutman Pepper discusses the decision in The Latest Successful Caremark Claim.

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