John Stigi III on Breach of Duty

The Delaware Court of Chancery Confirms that Duty of Oversight Claims Against Corporate Officers Are Subject to the Same High...

In Segway Inc. v. Hong Cai, 2023 Del. Ch. LEXIS 643 (Del. Ch. Dec. 14, 2023), the Delaware Court of Chancery (Will, V.C.) dismissed a claim for breach of fiduciary duty brought by Segway Inc. (the “Company”) against its...more

12/28/2023 / Acquisitions , Board of Directors , Breach of Duty , Business Litigation , Caremark claim , Commercial Litigation , Corporate Counsel , Corporate Officers , Dispute Resolution , Fiduciary Duty , Mergers , Oversight Duties

Delaware Court of Chancery Clarifies Heightened Standard for Recovery of Attorneys’ Fees in Disclosure-Based Deal Litigation

In Anderson v. Magellan Health, Inc., No. 2021-0202, — A.3d —-, 2023 WL 4364524 (Del. Ch. July 6, 2023) (McCormick, C.), the Delaware Court of Chancery addressed the circumstances under which the Court will award a...more

7/18/2023 / Acquisitions , Attorney's Fees , Board of Directors , Breach of Duty , Business Litigation , Corporate Governance , Delaware , Disclosure , Fiduciary Duty , Injunctive Relief , Mergers , Proxy Statements , Securities and Exchange Commission (SEC) , Securities Litigation , Shareholder Litigation , Shareholders

Ninth Circuit Enforces Delaware Forum Selection Clause to Affirm Dismissal of Derivative Claim for Alleged Violation of Section...

In Lee v. Fisher, No. 21-15923, 2023 U.S. App. LEXIS 13521 (9th Cir. June 1, 2023), the United States Court of Appeals for the Ninth Circuit, sitting en banc, affirmed the dismissal of a shareholder derivative complaint...more

6/14/2023 / Appeals , Breach of Duty , Delaware , Delaware General Corporation Law , En Banc Review , Fiduciary Duty , Forum Selection , Securities and Exchange Commission (SEC) , Securities Exchange Act of 1934 , Shareholders

California Court of Appeal Holds that a Corporation’s Direct Cause of Action for Breach of Fiduciary Duty is Legal Rather than...

In ZF Micro Solutions, Inc. v. TAT Capital Partners, Ltd., 2022 WL 4090879 (Cal. App. Aug. 8, 2022), the Fourth Appellate District of the California Court of Appeal decided, as a matter of first impression, that a...more

9/16/2022 / Appeals , Breach of Duty , California , Corporate Counsel , Corporate Governance , Fiduciary Duty , Reversal , Securities and Exchange Commission (SEC) , Securities Litigation , Shareholders

Delaware Supreme Court Holds That Surviving “Entire Fairness” Review is Not Conclusive of a Breach of Fiduciary Duty Claim Where...

In Coster v. UIP Companies, Inc., No. 49-2020, 2021 WL 2644094 (Del. June 28, 2021), the Delaware Supreme Court reversed a Court of Chancery ruling, No. 2018-0440-KSJM, 2020 WL 429906 (Del. Ch. Jan. 28, 2020) (McCormick,...more

7/12/2021 / Board of Directors , Breach of Duty , Corporate Counsel , Corporate Governance , DE Supreme Court , Fiduciary Duty , Inequitable Conduct , Reversal , Shareholder Litigation

Delaware Court of Chancery Addresses Pleading ‘With Particularity’ Under Rule 23.1

Rule 23.1 of the Delaware Court of Chancery Rules requires a plaintiff asserting a shareholder derivative action to plead “with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff...more

5/14/2020 / Board of Directors , Breach of Duty , Burden of Proof , Demand Futility , Derivative Suit , Fiduciary Duty , Local Rules , Motion to Dismiss , Pleading Standards , Pleadings , Quid Pro Quo , Rules of Civil Procedure , Section 220 Request , Shareholder Litigation , Shareholders

Delaware Supreme Court Allows Caremark Claim to Proceed Against Directors of Ice Cream Manufacturer Following Listeria Outbreak

In Marchand v. Barnhill, No. 533, 2018, 2019 Del. LEXIS 310 (Del. June 18, 2019), the Delaware Supreme Court (Strine, C.J.) reversed a Delaware Court of Chancery (Slights, V.C.) order dismissing a derivative claim alleging...more

7/30/2019 / Bad Faith , Blue Bell Creameries , Board of Directors , Breach of Duty , Caremark claim , DE Supreme Court , Derivative Suit , Duty of Loyalty , Food and Drug Administration (FDA) , Food Manufacturers , Food Safety , Listeria , Shareholder Litigation

California Court of Appeal Enforces Delaware Forum Selection Bylaw

In Drulias v. 1st Century Bancshares, Inc., No. H045049, 2018 WL 6735137 (Cal. App. Dec. 21, 2018), the California Court of Appeal, Sixth Appellate District, affirmed an order staying a stockholder lawsuit brought in the...more

Getting to Business Judgment in an Interested Transaction: Controlling Stockholder Must Put Procedural Protections in Place Prior...

In Flood v. Synutra Int’l, Inc., No. 101, 2018, 2018 Del. LEXIS 460 (Del. Oct. 9, 2018), the Delaware Supreme Court (Strine, C.J.) held that a controlling stockholder who pursues a merger with the controlled company will have...more

10/18/2018 / Aiding and Abetting , Breach of Duty , Bright-Line Rule , Business Judgment Rule , Buyouts , Class Action , Controlling Stockholders , DE Supreme Court , Due Care , Duty of Care , Fiduciary Duty , Mergers , Minority Shareholders , Motion to Dismiss , Shareholder Litigation

Nevada Supreme Court Adopts Delaware’s Tooley Test to Determine Whether Shareholder Claims are Direct or Derivative

In Parametric Sound Corp. v. The Eighth Judicial District Court of the State of Nevada, ___ P.3d ___, 2017 WL 4078845 (Nev. Sept. 14, 2017), the Nevada Supreme Court addressed the circumstances under which breach of fiduciary...more

9/22/2017 / Breach of Duty , Derivative Suit , Fiduciary Duty , NV Supreme Court , Shareholder Litigation

Under Delaware Law, the Occurrence of Alleged Illegal Conduct at a Company Is Not Enough to Plead Demand Futility Sufficient to...

In a shareholder derivative action, to survive a motion to dismiss for failure to plead facts showing demand futility, a derivative plaintiff must plead particularized facts showing either actual involvement by a majority of...more

7/17/2017 / Board of Directors , Breach of Duty , Bribery , Demand Futility , Derivative Suit , Fiduciary Duty , Foreign Corrupt Practices Act (FCPA) , Foreign Official , Illegal Conduct , Motion to Dismiss , Pleading Standards , Qualcomm , Securities and Exchange Commission (SEC) , Securities Litigation , Shareholder Litigation , White Collar Crimes

Delaware Court of Chancery Rejects Bylaw That Required Supermajority Stockholder Vote to Remove Directors in Violation of 8 Del....

In Frechter v. Zier, C.A. No. 12038-VCG, 2017 WL 345142 (Del. Ch. Jan. 24, 2017) (Glasscock, V.C.), the Delaware Court of Chancery granted plaintiff’s motion for summary judgment on a declaratory relief claim and held that 8...more

2/7/2017 / Breach of Duty , Bylaws , Declaratory Relief , Delaware General Corporation Law , Director Removal , Duty of Loyalty , Majority Shareholders , Majority Voting Policies , Summary Judgment

Delaware Supreme Court Confirms that Dilution Claims Typically Are Derivative and Are Extinguished After a Merger

Stockholder claims alleging wrongful dilution are typically considered to be derivative in nature. Several decisions out of Delaware, however, have created exceptions to this general rule allowing stockholders to sue...more

Delaware Court of Chancery Addresses the “Cleansing Effect” of Stockholder Approval In Post-Closing M&A Damages Actions

In two recent decisions, City of Miami General Employees’ & Sanitation Employees’ Retirement Trust v. Comstock, C.A. No. 9980-CB, 2016 Del. Ch. LEXIS 133 (Del. Ch. Aug. 24, 2016) (Bouchard, C.) (“Comstock”), and Larkin v....more

9/6/2016 / Breach of Duty , Business Judgment Rule , Controlling Stockholders , Corporate Counsel , Damages , Fairness Standard , Fiduciary Duty , Mergers , Motion to Dismiss , Putative Class Actions , Securities Litigation , Standard of Review

Tenth Circuit Upholds Nevada Law By Denying Stockholders Standing to Bring Claims on Behalf of Nevada Corporation

In In re Zagg Inc. Shareholder Derivative Action, No. 15-4001, 2016 U.S. App. LEXIS 11095 (10th Cir. June 20, 2016), the United States Court of Appeals for the Tenth Circuit held that stockholders of a Utah-based, Nevada...more

7/5/2016 / Board of Directors , Breach of Duty , Demand Futility , Derivative Suit , Dismissals , Exculpatory Clauses , Fiduciary Duty , Personal Liability , Pleading Standards , Self-Interest , Shareholder Demands , Shareholder Litigation

Delaware Chancery Court Holds that Creditor Plaintiffs in Derivative Suits May Satisfy Standing Requirement by Showing...

In Quadrant Structured Products Co., Ltd. v. Vertin, C.A. No. 6990-VCL, 2015 WL 2062115 (Del. Ch. May 4, 2015), the Delaware Court of Chancery held that a creditor plaintiff needs only establish that a corporation was...more

5/28/2015 / Board of Directors , Breach of Duty , Credit Default Swaps , Creditors , Derivative Suit , Fiduciary Duty , Insolvency , Standing

Delaware Court of Chancery Rejects Contemporaneous Ownership Requirement For Creditors Asserting Derivative Claims

In Quadrant Structured Products Co. v. Vertin, C.A. No. 6990-VCL, 2014 Del. Ch. LEXIS 193 (Del. Ch. Oct. 1, 2014), the Delaware Court of Chancery held that when creditors of insolvent firms assert derivative claims, they need...more

10/28/2014 / Breach of Duty , Business Ownership , Commercial Bankruptcy , Creditors , Derivative Suit , Derivatives , Fiduciary Duty , Insolvency

Sixth Circuit Narrows Scope of Liability Under ICA Sections 36(a) and (b)

In Laborers’ Local 265 Pension Fund v. iShares Trust, No. 13-6486, 2014 U.S. App. LEXIS 18627 (6th Cir. Sept. 30, 2014), the United States Court of Appeals for the Sixth Circuit affirmed the dismissal of claims alleging...more

10/13/2014 / Appeals , Breach of Duty , Fiduciary Duty , Pensions

Delaware Court of Chancery Underscores Heightened Pleading Standard Necessary to Support a Claim for Breach of Fiduciary Duty In...

In Houseman v. Sagerman, C.A. No. 8898-VCG, 2014 WL 1478511 (Del. Ch. Apr. 16, 2014), the Delaware Court of Chancery (Glasscock, V.C.) granted, in part, a motion to dismiss filed by certain directors and the financial advisor...more

5/13/2014 / Board of Directors , Breach of Duty , Corporate Counsel , Corporate Governance , Fiduciary Duty , Mergers , Pleading Standards , Pleadings , Professional Liability , Shareholder Litigation , Shareholders

Delaware Court of Chancery Grants Summary Judgment Dismissing Breach of Fiduciary Duty Claims In Absence of Evidence of Directors’...

In In re Answers Corp. Shareholders Litigation, C.A. No. 6170-VCN, 2014 WL 463163 (Del. Ch. Feb. 3, 2014), the Delaware Court of Chancery (Noble, V.C.) granted summary judgment in favor of defendants in a stockholder class...more

3/14/2014 / Board of Directors , Breach of Duty , Fiduciary Duty , Mergers , Professional Liability , Summary Judgment

Second Circuit Holds Delaware Fiduciary Duty Law Preempted By Federal Interest In Fiscal Stability

In Starr International Co. v. Federal Reserve Bank of New York, No. 12-5022-cv, 2014 U.S. App. LEXIS 1770 (2d. Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims...more

2/5/2014 / Breach of Duty , Federal Reserve , Fiduciary Duty

California Court of Appeal Holds That Challenges to Corporate Elections Under Corporations Code Section 709 May be Predicated Upon...

In Morrical v. Rogers, No. A137011, 2013 Cal. App. LEXIS 811 (Cal. App. Oct. 10, 2013), the California Court of Appeal, First District, held that the summary procedures set forth in California Corporations Code § 709 may be...more

11/7/2013 / Board of Directors , Breach of Duty , Compliance , Conflicts of Interest , Corporate Governance , Fiduciary Duty

John Stigi III

Sheppard Mullin Richter & Hampton LLP

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