Duty of Disclosure – Page 2

Chancery Court Holds That Stockholder Vote on Merger Was Neither Fully-Informed nor Uncoerced

Apr 20 2017

By: Lisa R. Stark and Taylor B. Bartholomew

In In re Saba Software, Inc. Stockholder Litigation, C.A. No. 10697-VCS (Del. Ch. Mar. 31, 2017, revised Apr. 11, 2017), the Delaware Court of Chancery held that the board of Saba Software, Inc. could not invoke the business judgment rule under the Corwin doctrine in response to a fiduciary challenge arising from Saba’s acquisition by Vector Capital Management, L.P. According to the Court, plaintiff pled facts which supported a reasonable inference that the stockholder vote approving the acquisition was neither fully-informed nor uncoerced. The Court also denied defendants’ motion to dismiss plaintiff’s claims that the Saba board breached its duty of loyalty and engaged in acts of bad faith by rushing the sales process, refusing to consider alternatives to the merger and granting itself substantial equity awards.

Chancery Court Dismisses Minority Stockholders’ Action Seeking Quasi-Appraisal in United Capital Corp. Buyout

Jan 19 2017

By: Shoshannah Katz and Andrew Gahan

In In re United Capital Corp., Stockholders Litigation, C.A. No. 11619-VCMR (Del. Ch. Jan. 4, 2017), the Delaware Court of Chancery dismissed a suit brought by plaintiff minority stockholders (“Plaintiff”) that sought a quasi-appraisal to remedy alleged breaches of the duty of disclosure in connection with the acquisition of United Capital Corp. (“United Capital” or “Company”) via short-form merger. The Court concluded that Plaintiff had not adequately alleged that any omitted information was material to the decision to seek appraisal and that the duty of disclosure was not violated.

CHANCERY COURT REAFFIRMS THE ABILITY OF LIMITED PARTNERSHIPS TO CONTRACT AROUND FIDUCIARY DUTIES

Apr 05 2016

By: Scott Waxman and Tony Brown

In Adrian Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Mar. 29, 2016), the Court of Chancery held that a limited partnership agreement can extinguish the common law duty of disclosure that exists under Delaware law. Where a limited partnership agreement expressly eliminated fiduciary duties and replaced them with an alternative contractual governance scheme, the court declined to reinsert a duty of disclosure and determined that additional disclosure obligations are not compelled by the implied covenant of good faith and fair dealing.

Stockholder’s Challenge to $35M Stock Issuance to Freeport-McMoran CEO Dismissed by Delaware Court of Chancery

Oct 19 2015

By Holly Hatfield and James Parks

A stockholder’s claims regarding a $35 million stock issuance to Freeport-McMoran CEO Richard Adkerson were dismissed. Governance changes within Freeport that were thought to have triggered an option in Adkerson’s employment contract that would have permitted him to quit and receive a $46 million severance package allowed the board to preempt that eventuality by issuing him $35 million in stock.

In Shaev v. Adkerson, C.A. No. 10436-VCN (Del. Ch. Oct. 5, 2015), Vice Chancellor Noble, writing for the Delaware Court of Chancery, granted defendant Freeport-McMoran’s (“Freeport” or the “Company”) motion to dismiss plaintiff Victoria Shaev’s (“Shaev” or “Plaintiff”) direct and derivative claims under Court of Chancery Rules 12(b)(6) and 23.1.

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