Tossed Out With The Weeds – Delaware Chancery Court Dismisses Derivative Action Alleging Breaches of Fiduciary Duty by DuPont Directors and Officers
By Holly Vance and Jonathan Miner
In Ironworkers v. Andreotti, Vice Chancellor Glasscock of the Delaware Chancery Court granted DuPont’s motion to dismiss for plaintiff’s failure to properly state a derivative action claim. In reaching its decision, the Court affirmed that the business judgment rule is the standard of review used in derivative actions where the plaintiff has made a demand of the board of directors and the board declined such demand.
Beginning in 2002 DuPont began to develop genetically modified corn and soybean seeds to compete with Monsanto’s “Roundup Ready” seeds, which have the ability to survive application herbicides, including Monsanto’s own Roundup herbicide. DuPont referred to the product it was developing as “GAT”. During this same time period, DuPont was also licensing the Roundup Ready gene trait from Monsanto. DuPont encountered setbacks in field testing of GAT and as a result began experiments in combining GAT together with the Roundup Ready gene trait. The relationship between DuPont and Monsanto deteriorated as DuPont attempted to develop its GAT products, and in May 2009 Monsanto brought suit against DuPont for breaches of the license agreement for the Roundup Ready gene trait, patent infringement and other related claims. In July 2012 a jury found in favor of Monsanto and awarded it $1.2 billion in damages. DuPont began steps to appeal the decision and began negotiating a settlement with Monsanto. On March 25, 2013 DuPont and Monsanto entered into a settlement agreement that was structured as a new license agreement and included royalty payments to Monsanto of $1.75 billion over 10 years for the rights to use the patent for the Roundup Ready gene trait.