The D&O Diary

The D&O Diary

A PERIODIC JOURNAL CONTAINING ITEMS OF INTEREST FROM THE WORLD OF DIRECTORS & OFFICERS LIABILITY, WITH OCCASIONAL COMMENTARY

Category Archives: Shareholders Derivative Litigation

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Creditors’ Rights to Pursue Derivative Claims against Company Directors Under Delaware Law

Posted in Shareholders Derivative Litigation
In a detailed May 4, 2015 opinion (here), Vice Chancellor Travis Laster of the Delaware Chancery Court extensively reviewed the rights of an insolvent company’s creditors to pursue derivative claims against the company’s directors. As Francis Pileggi put it in a May 6, 2015 post on his Delaware Corporate and Commercial Litigation blog (here), Laster’s… Continue Reading

Corporate Loan Provisions Aimed at Proxy Campaigns Trigger D&O Litigation

Posted in Shareholders Derivative Litigation
In the face of increasing investor activism, companies have adopted a number of defensive measures.  Among these measures are a particular type of provision found in many corporate borrowers loan agreements – requiring the company to repay loans before they are due if a majority of the board is ousted – that are drawing increasing… Continue Reading

Cornerstone Research Releases 2014 M&A Litigation Report

Posted in Shareholders Derivative Litigation
According to the latest report from Cornerstone Research, during 2014, over 90 percent of M&A transactions resulting in at least one lawsuit, but each deal attracted a smaller average number of lawsuits and in fewer jurisdictions than in past years. The report, entitled “Shareholder Litigation Involving Acquisitions of Public Companies: Review of 2014 M&A Litigation”… Continue Reading

Takeover Litigation Continued at Heightened Levels in 2014

Posted in Shareholders Derivative Litigation
One of the most distinctive corporate and securities litigation trend in recent years has been the surge in M&A-related litigation, with virtually every deal attracting at least one lawsuit. This trend continued again in 2014, according to a recently updated study from Matthew Cain, an economic fellow at the SEC, and University of California Berkeley… Continue Reading

One Plaintiff, Dozens of Merger Objection Lawsuits, Millions in Attorneys’ Fees, Zero for Shareholders

Posted in Shareholders Derivative Litigation
It is now well-established that pretty much every M&A deal attracts at least one lawsuit from a shareholder objecting to the transaction. According to research by Notre Dame business professor Matthew Cain and Ohio State law professor Steven Davidoff, 97.3% of all takeovers in 2013 with a value of over $100 million experienced at least… Continue Reading

Massive and Unusual Freeport-McMoRan Derivative Lawsuit Settlement Finalized

Posted in Shareholders Derivative Litigation
The parties to the Freeport-McMorRan Copper & Gold, Inc. Derivative Litigation have finalized an agreement to settle the consolidated litigation pending in the Delaware Chancery Court in exchange for a payment of $137.5 million and for the company’s agreement to adopt certain corporate governance reforms. The settlement represents the third largest derivative lawsuit settlement ever.… Continue Reading

Largest Derivative Lawsuit Settlements

Posted in Shareholders Derivative Litigation
My post earlier this week about the $275 million Activision Blizzard shareholder derivative lawsuit settlement – and in particular my suggestion that the Activision settlement may be the largest derivative suit settlement ever – provoked an interesting flurry of emails and conversations about the lineup of other large derivative lawsuit settlements. To address the various… Continue Reading

Two Recent Massive Merger Objection Lawsuit Settlements Include Significant D&O Insurer Contributions

Posted in Shareholders Derivative Litigation
One of the great litigation curses in recent times in the corporate litigation arena has been the rise of merger objection litigation. These kinds of lawsuits, which these days arise in connection with almost every M&A transaction, often are settled for nothing more than an agreement to make additional disclosures and to pay the plaintiffs’… Continue Reading

More Shareholder Litigation Involving Corporate Inversion Transactions

Posted in Shareholders Derivative Litigation
One of the more distinctive business trends in recent months has been the surge of so-called corporate inversion transactions, in which a domestic U.S. company merges with a non-U.S. company, with the the successor company to be based in the foreign country in order to take advantage of a more favorable corporate tax regime. These… Continue Reading

Texas Appellate Court Affirms Transocean Deepwater Horizon Derivative Suit Dismissal: An Interesting Angle on Corporate Inversion Transactions?

Posted in Shareholders Derivative Litigation
In a July 24, 2014 opinion (here), an intermediate Texas appellate court, applying Texas law, affirmed the trial court’s dismissal on forum non conveniens grounds of the Deepwater Horizon disaster-related shareholder derivative suit filed against Switzerland-domiciled Transocean Limited. The court’s ruling is interesting in and of itself, but it may be even more interesting in… Continue Reading

Despite Forum Selection Clause, Del. Chancery Court Declines to Enjoin Louisiana Action

Posted in Shareholders Derivative Litigation
Earlier this year, when Chancellor Leo Strine issued an opinion in the Chevron case upholding the validity under Delaware law of a forum selection clause in the company’s corporate by-laws, a number of questions remained unanswered, including in particular what would happen if, notwithstanding the forum selection provision, a shareholder nevertheless filed an action in… Continue Reading

Delaware Chancery Court: Forum Selection Bylaw Valid

Posted in Shareholders Derivative Litigation
On June 25, 2013, in a judicial development that may help ease the curse of multi-jurisdiction litigation, ChancellorLeo E. Strine, Jr. of the Delaware Court of Chancery held that forum selection bylaws adopted by Chevron and Federal Express are statutorily and contractually valid. The company’s by-laws designated Delaware as the sole forum for derivative lawsuits,… Continue Reading

D&O Insurance to Fund Entire “Largest Ever” $139 Million News Corp. Derivative Suit Settlement

Posted in Shareholders Derivative Litigation
In what the plaintiffs’ lawyers claim to be the largest derivative lawsuit settlement ever, the parties to the News Corp. shareholder derivative litigation have agreed to settle the consolidated cases for $139 million. The company also agreed to tighten oversight of the company’s operations and to establish a whistleblower hotline, as well as other corporate… Continue Reading

Delaware Supreme Court Blasts Chancery Court’s Controversial Refusal to Recognize California Court Judgment

Posted in Shareholders Derivative Litigation
One of the more vexing litigation problems to emerge recently has been the proliferation of multi-jurisdiction litigation, where corporate defendants are forced to litigate essentially the same claim in multiple courts at the same time. This problem is a particular issue in the context of M&A litigation, although not contained to those kinds of lawsuits.… Continue Reading

Delaware Chancery Court: A Sweeping Vision of Outside Directors’ Foreign Operations Oversight Responsibilities?

Posted in Shareholders Derivative Litigation
In the current global economy, many companies have operations and assets in far-flung corners of the world. These geographically dispersed arrangements have a number of implications for the concerned companies. According to a recent decision from the Delaware Court of Chancery, the arrangements may also have important implications of these companies’ outside directors, at least… Continue Reading

Fifth Circuit Affirms Dismissal of BP Deepwater Horizon Derivative Suit

Posted in Shareholders Derivative Litigation
The Deepwater Horizon platform explosion and oil spill took place in the Gulf of Mexico, about 250 miles southeast of Houston. The environmental damage took place in the Gulf and along the Gulf shore in the Southeastern United States. When BP’s shareholders tried to sue the board of directors of BP — a corporation organized under… Continue Reading

Tough Week for Fee-Seeking and “Fast Filer” Plaintiffs’ Lawyers

Posted in Shareholders Derivative Litigation
Our legal system is one of our society’s crowning achievements. But for all of its grandeur, our legal system is not without its flaws. Among other things, our system encourages litigiousness that all too often involves frivolous suits and lawyers’-fee driven litigation, including the recent phenomenon of multi-jurisdiction derivative litigation driven by plaintiffs’ lawyers competing… Continue Reading

Cornerstone Research Releases Updated Study of M&A Litigation

Posted in Shareholders Derivative Litigation
On April 25, 2012, Cornerstone Research released a report written by Stanford Business School Professor Robert Daines and Cornerstone Research Principal Olga Koumrian entitled “Recent Developments in Shareholder Litigation Involving Mergers and Acquisitions – March 2012 Update” (here). This memorandum is the latest in a series of recent papers documenting the growth in merger related… Continue Reading

Taking a Look at the Limits of Indemnification

Posted in Shareholders Derivative Litigation
Indemnification is the first and most important line of defense for the protection of directors and officers. But corporate officials are not always entitled to indemnification. For example, under Delaware law, they cannot claim mandatory indemnification if their defense is not successful. And they cannot seek permissive indemnification is they did not act in good… Continue Reading

Takeover Litigation in 2011

Posted in Shareholders Derivative Litigation
In their paper “A Great Game: The Dynamics of State Competition and Litigation” (here), Ohio State Law Professor Steven Davidoff and Notre Dame Finance Professor Matthew Cain analyzed the M&A related litigation during the period 2005 to 2010. I discussed this article in a prior post, here. In a newly released February 2, 2012 paper… Continue Reading

All the M&A-Related Litigation Reference Material in One Convenient Location

Posted in Shareholders Derivative Litigation
During last week’s PLUS D&O Symposium, several of the panels discussed the problems surrounding the current onslaught of M&A-related litigation – and appropriately so, as the surging levels of M&A litigation is one of the most distinct and troubling current litigation trends. During the course of the discussion at the conference, several of the speakers… Continue Reading

A Small Step Toward Curbing the Follow-On Derivative Suit Curse

Posted in Shareholders Derivative Litigation
One feature of the recent changing mix of corporate and securities litigation has been the rise in the filing of follow-on derivative lawsuits in the wake of securities class action lawsuit filings. As Wilson Sonsini partner Boris Feldman recently noted, “like a moth drawn to a candle,” the derivative bar watches class action filings and… Continue Reading

Delaware Chancery Court Enters $1.263 Billion Shareholders’ Derivative Suit Award

Posted in Shareholders Derivative Litigation
In an interesting October 14, 2011 post-trial opinion, Delaware Chancellor Leo Strine entered a $1.263 billion award in the Southern Peru Copper Corporation Shareholder Derivative Litigation. The lawsuit relates to Southern Peru’s April 2005 acquisition of Minerva México, a Mexican mining company, from Groupo México, Southern Peru’s controlling shareholder. Chancellor Strine concluded that as a result… Continue Reading

OFAC Violations: A New Potential Source of D&O Liability Exposure?

Posted in Shareholders Derivative Litigation
In a lawsuit suggesting a new area of potential liability for corporate directors and officers, a shareholder of J.P. Morgan Chase has filed a derivative lawsuit against the company, as nominal defendant, and certain of its directors and officers alleging breaches of fiduciary duty in connection with the company’s recent $88.3 settlement with the U.S.… Continue Reading