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11/18/20

[UPDATED] Altaba – Interim Distribution During Dissolution

The Delaware Court of Chancery, in In re Altaba, Inc., C.A. No. 2020-0413-JTL, opinion (Del. Ch. Oct. 19, 2020), rules that a dissolved corporation may obtain Court approval for an interim distribution of assets to stockholders on a showing, analogous to that required for summary judgment, of sufficient reserves to satisfy creditor claims.

NEW:  K&L Gates discusses the decision in Court of Chancery Allows For Interim Distribution to Stockholders of Altaba, Inc., With Some Conditions.

$$$ Richards Layton & Finger discusses the decision in Court of Chancery Permits $4.3 Billion Interim Distribution in Altaba Dissolution.

11/17/20

[UPDATED] Baker Hughes – Disclosure Duties

The Delaware Court of Chancery, in In re Baker Hughes, Inc. Merger Litigation, C.A. No. 2019-0638-AGB (consol.), memo. op. (Del. Ch. Oct. 27, 2020), dismissed claims defendant officers who stood to receive change-in-control payments through a merger breached their fiduciary duties by approving the transaction but allowed disclosure claims against one defendant to stand.

NEW:  Frank Reynolds discusses the decision in Chancery says only Baker Hughes CEO is still on the hook for disclosures in merger with GE Oil & Gas.

Reuters discusses the decision in Delaware court axes Baker Hughes shareholder claims over GE merger.

[UPDATED] Facebook – Director Independence

The Delaware Court of Chancery, in United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund v. Mark Zuckerberg, et al. and Facebook, Inc., C.A. No. 2018-0671-JTL, opinion (Del. Ch. Oct. 26, 2020), dismisses derivative claims challenging director defendants’ agreement to support a stock reclassification that would provide nominal defendant’s founder with permanent voting control — a transaction that was abandoned after being challenged in a prior lawsuit — for failure to make demand, finding that directors could believe in good faith that the founder’s permanent control was in the company’s best interests, and rejecting plaintiffs’ argument that directors’ affiliation with venture capital firms overcame Delaware law’s presumption of director independence based on venture firms’ reliance on “deal flow” from the founder. 

NEW:  Paul Weiss discusses the decision in Delaware Court Of Chancery Provides New Guidance On The Standard For Analyzing Demand Futility.

$$$ Law360 discusses the decision in Facebook Ruling Highlights Risks Of Flawed Board Processes.

$$$ Fried Frank discusses the decision in Facebook Decision Highlights Risks of Back-Channel Communications with a Controller.

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11/16/20

[UPDATED] Mindbody – Fraud on the Board

The Delaware Court of Chancery, in In re Mindbody, Inc. Stockholders Litigation, C.A. No. 2019-0442-KSJM (consol.), memo. op. (Del. Ch. Oct. 2, 2020), found stockholder plaintiffs successfully pled breach of fiduciary duty claims alleging that a merger target’s Chairman and CEO orchestrated an underpriced merger in order to achieve liquidity for himself, rejecting the proposition that such a theory is viable only under circumstances involving a “fire sale.”

NEW:  Fried Frank discusses the decision in Decision Highlights the Limits of Corwin (and the Benefits of a Good Process) in the Sale of a Company to a PE Buyer — Mindbody.

NEW: Locke Lord discusses the decision in Delaware Court of Chancery Applies Revlon, Not Business Judgment Rule, Despite ‎Stockholder Approval in In re Mindbody, Inc. ‎

Goodwin discusses the decision in Delaware Court of Chancery Denies Motion to Dismiss in Shareholder Class Action Lawsuit Related to MindBody Inc.’s Billion Dollar Merger with Vista Equity Partners.

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[UPDATED] Federal Forum Selection

NEW:  Tulane Law’s Professor Ann Lipton discusses the federal forum selection charter provision that DoorDash, Inc. adopted in advance of an anticipated initial public offering in DoorDash’s Forum Selection Clause and the Exercise of Some Restraint – For Now.

Seyfarth Shaw 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 Superior Court Enforces Delaware Corporation’s Federal Forum Provision For Securities Act Lawsuits.

John Laide of Deal Point Data concludes that, following the Delaware Supreme Court’s decision in Matthew B. Salzberg, et al. and Blue Apron Holdings, Inc., et al. v. Matthew Sciabacucchi, No. 346, 2019, opinion (Del. Mar. 18, 2020; rev. Apr. 14, 2020), that Federal Forum Selection Provisions are becoming standard in the governing documents of IPO companies and existing companies, and that few companies seek shareholder input on such provisions, in Companies’ Response to Delaware Supreme Court Upholding Federal Forum Provisions.

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11/13/20

[UPDATED] Stillwater Mining – Flawed Sale Process

The Delaware Supreme Court, in Brigade Leveraged Capital Structures Fund, Ltd., et al. v. Stillwater Mining Co., No. 427, 2019, opinion (Del. Oct. 12, 2020), affirmed the Court of Chancery’s determination in a statutory appraisal proceeding that the best evidence of a company’s fair value was the deal price, finding no abuse of discretion in the trial court’s identification of sufficient indicia that the process, though flawed, was reliable.

NEW:  Cadwalader discusses the decision in Delaware Supreme Court Reaffirms Primacy of Market Evidence in Determining Fair Value in Appraisal Proceedings.

$$$ Bloomberg Law discusses the decision in Sibanye’s $2.2 Billion Stillwater Deal Ruled Fair in Delaware.

[UPDATED] Solera – D&O Insurance

The Delaware Supreme Court, in In re Solera Insurance Coverage Appeals, Nos. 413, 418, 2019, opinion (Del. Oct. 23, 2020), ruled that that a statutory appraisal proceeding was not covered by a D&O insurance policy under terms that limited coverage to alleged “violations” of law.

NEW:  Goodwin Procter discusses the decision in Delaware Supreme Court Holds D&O Insurance Policy Does Not Cover Costs in Appraisal Proceeding.

Goodwin Procter discusses the decision in Delaware Supreme Court Holds Appraisal Action Is Not “Securities Claim” Covered By D&O Insurance Policy.

Mark S. Nelson discusses the decision in Justices explain nature of appraisal proceedings.

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[UPDATED] Poison Pills

NEW: $$$ Richards Layton & Finger discusses the use of “wolf pack” poison pill triggers based on aggregate ownership positions of multiple stockholders acting in concert in Recent Developments Regarding ‘Wolf Pack’ Provisions in Rights Plans.

Wilmer Hale provides an overview of the purpose and advantages of Net Operating Loss stockholder rights plans in COVID-19: Renewed Interest by Public Companies in NOL Rights Plans.

Mark S. Nelson reports on recent research by the Council of Institutional Investors, examining poison pills adopted in 2020, which finds some pro-shareholder developments but also questions whether implementation of poison pills during the coronavirus pandemic will benefit stockholders in CII report examines the reemergence of the poison pill.

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11/12/20

[UPDATED] Climate Risk

NEW:  Cooley discusses SEC Commissioner Allison Herren Lee’s speech highlights how the role that the SEC plays in protecting investors, facilitating capital formation, and maintaining markets intersect with climate change, which she characterizes as a systemic risk, in SEC Commissioner Lee: SEC must address systemic financial risk posed by climate change.

SEC Commissioner Allison Herren Lee discusses climate change risk as having “more grave human and economic costs” than the coronavirus pandemic, and the SEC’s role as involving working with other regulators to understand and address systemic economic risk posed by climate change in Playing the Long Game: The Intersection of Climate Change Risk and Financial Regulation.

D&O Diary’s Kevin LaCroix discusses SEC Commissioner Allison Herren Lee’s speech warning that climate change poses systemic risk to markets and the economy, and its implications for corporate disclosure in Climate Change as a “Systemic Risk”: Markets, Regulation, and Disclosure.

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11/11/20

[UPDATED] Fiduciary Duties

NEW:  Don’t Go Chasing Waterfalls: Fiduciary Obligations in the Shadow of Trados discusses In re Trados, Inc. Shareholder Litigation, C.A. No. 1512-VCL (consol.), opinion (Del. Ch. Aug. 16, 2013), and its implications for directors’ discharge of fiduciary duty in venture capital backed companies that have preferred and common classes of stock.

Skadden provides an overview of fiduciary duties applicable to corporate directors under Delaware law in Directors’ Fiduciary Duties: Back to Delaware Law Basics.

The Three Fiduciaries of Delaware Corporate Law — and Eisenberg’s Error discusses variations of the duties of care and loyalty and beneficiaries of the duties owed by officers, directors, and controlling shareholders.

Terraform – Dual-Natured Claims

The Delaware Court of Chancery, in In re Terraform Power, Inc. Stockholders Litigation, C.A. No. 2019-0757-SG (consol.), memo. op. (Del. Ch. Oct. 30, 2020), found former stockholders who asserted purportedly dual-natured claims challenging a dilutive stock issuance under John A. Gentile, et al. v. Pasquale David Rossette, et al., No. 573, 2005, opinion (Del. Aug. 17, 2006), retained standing following a merger that extinguished plaintiffs’ derivative standing, rejecting the argument that recent precedent has rendered Gentile non-controlling.

NEW:  Shearman & Sterling discuss the decision in Delaware Court of Chancery Holds That Former Stockholders Can Pursue Direct Claims for Breach of Fiduciary Duty Arising From Issuance of Shares to Controlling Stockholder for Allegedly Insufficient Consideration.

$$$ Law360 discusses the decision in Chancery Moves Suit Over $650M Terraform Deal Toward Trial.

11/10/20

[UPDATED] Delaware Case Law

NEW:  $$$ Francis Pileggi and Chauna Abner discuss Delaware case law addressing when claims for breach of fiduciary duty and claims for breach of contract can and cannot be simultaneously asserted in The Exception to Pursuing Both Contract and Fiduciary Claims.

Freshfields discusses Delaware case law involving insiders who sought to aid a financially-struggling company but were later challenged by other stockholders for engaging in flawed and unfair processes, and missteps to be avoided when seeking financing or considering downside exits for distressed companies in Navigating Strategic Alternatives in Distressed Scenarios: Takeaways for Boards.

White & Williams discusses Delaware case law addressing fiduciary duties owed creditors and oversight liability in Board of Directors Guidance When Addressing Emergency Circumstances Occasioned by the COVID-19 Pandemic.

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[UPDATED] New York Business Entity Law

NEW:  Farrell Fritz discusses the New York Supreme Court’s decision in Lard-PT, LLC v Seokoh, Inc., et al., C.A. No. 651726/2020, opinion (N.Y. Sup. Oct. 20, 2020), which found that an LLC member’s breaches of an operating agreement in connection with a notice of deadlock discharged another member’s buy-out obligation, and notes practical considerations of the ruling in LLC Member Pays the Price For Not Sticking to Deadlock-Breaking Script.

Farrell Fritz discusses the New York Supreme Court’s decision in Lois Weinstein v. RAS Property Management, LLC, et al., C.A. No. 653735/2019, opinion (N.Y. Sup. Oct. 23, 2020), which held, as a matter of first impression, that commencement of a proceeding seeking dissolution or appointment of a receiver for a limited partnership can result in withdrawal of its general partner and dissolution of the entity, even if the LP agreement does not provide for dissolution under such circumstances, in Limited Partnerships and the Self-Fulfilling Dissolution Petition.

Farrel Fritz discusses the New York Supreme Court’s decision in Rena Pachter v. David Winiarsky, et al., No. 502779/20, opinion (N.Y. Sup. Oct. 13, 2020), dismissing a 50% LLC member’s claim for statutory dissolution of the LLC but finding that plaintiff stated a claim for common law dissolution that had not previously been recognized by a New York Court, and suggests that the ruling may permit LLC owners to work around the challenging requirements for statutory dissolution under New York’s LLC law in First-Impression Decision Recognizes a Cause of Action for Common-Law LLC Dissolution.

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