In this issue, we explore ongoing corporate law issues involving controlling stockholders, with significant decisions anticipated from the Delaware Supreme Court in 2025; the rise in litigation over earnout provisions in merger agreements; and the Court of Chancery’s dismissal of a “hybrid” of Malone false disclosure and Caremark oversight fiduciary duty claims.
2025 Outlook: Key Delaware Court Appeals and Their Impact on Corporate Law
In 2024, Delaware courts continued to address important areas of corporate law, particularly regarding controlling stockholders. Several of those high-profile decisions were decided at the trial level and are now on appeal. In 2025, we will be watching as the Delaware Supreme Court addresses issues including aiding and abetting, nominal damages, non-ratable benefits for controlling stockholders, executive compensation, ratification and attorney’s fees.
Earnout Eruption: Delaware Courts Interpret ‘Best Efforts’ Clauses Amid Surging Earnout Provisions
Delaware courts have experienced a rise in litigation concerning earnout provisions in merger agreements, prompting a focus on precise language to assess buyer discretion and potential breaches of “best efforts” provisions. Careful drafting of these provisions is essential to prevent interpretative issues.
Court of Chancery Applies Well-Settled Principles To Dismiss Malone/Caremark ‘Hybrid’ Claims
The Court of Chancery dismissed a “hybrid” of Malone false disclosure and Caremark oversight fiduciary duty claims alleging directors of a biopharmaceutical company made or allowed the company’s officers to make false positive statements about its “mission critical” drug. Applying established Delaware law, the court underscored that board members are not liable for public statements solely because they signed allegedly false securities filings or possessed oversight duties.
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