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In the wake of the 2019 merger of Viacom and CBS that formed ViacomCBS (later renamed Paramount Global), former shareholders of both CBS and Viacom filed separate D&O liability lawsuits. As discussed here, the CBS shareholders’ lawsuit settled $165.5 million. The separate Viacom shareholders’ lawsuit settled for $122.5 million, and now the battle has shifted to insurance coverage litigation in which the Viacom’s excess insurers contend that coverage for the settlement is precluded by the primary policy’s Bump-Up Provision.

In an interesting August 10, 2023, opinion, Delaware Superior Court Judge Sheldon K. Rennie, applying Delaware law, granted Viacom’s motion for partial summary judgment, holding that the Bump-Up Provision does not preclude coverage for the settlement. As discussed below, Judge Rennie’s holding turned on the nature of the transaction in which Viacom and CBS merged, and, even more significantly, on the contrast between the wording of the Bump-Up Provision, on the one hand, and other policy provisions dealing with merger situations, on the other hand. A copy of Judge Rennie’s opinion can be found here.…

Continue Reading Bump-Up Provision Does Not Bar Viacom Shareholders’ Suit Settlement Coverage

There have recently been a number of Delaware court decisions relating to the Duty of Oversight. In the following guest post, Frederick M Zauderer, Esq., Senior Vice President, Head of Complex Claims – North American Liability at AXIS Capital Holdings, Ltd., Joseph P. Monteleone, Esq., Partner at Weber Gallagher, and Alvin H. Fenichel, CPA, Senior Advisor at H.S. Grace & Company, Inc., take a look at the recent Delaware Duty of Oversight decisions and consider their implications. A version of this article previously was published on the Association of Corporate Counsel (ACC) Docket site (here).   I would like to thank the authors for allowing me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.…

Continue Reading Guest Post: Board Oversight Duties: Recent Adventures in the Delaware Chancery

In what is as far as I know the largest shareholder derivative lawsuit settlement ever as measured by dollar value, the defendant board members in the Tesla Board compensation derivative suit have agreed to settle the case for a combination of payments and transfers with a total value of $735 million. The agreement settles a Delaware Chancery Court lawsuit that a public pension fund shareholder filed against the board in June 2020 alleging that the since at least 2017 the board had received “unfair and excessive” compensation. The settlement is subject to court approval. A copy of the parties’ stipulation of settlement in the case, filed with the court on July 14, 2023, can be found here.…

Continue Reading Tesla Board Compensation Derivative Suit Settles for $735 Million

On June 1, 2023, in a much-anticipated decision, the Ninth Circuit held, in a split en banc decision in the long-running board diversity lawsuit filed against the board of The Gap, that the provision in the company’s bylaws designating a Delaware state court forum for derivative actions was enforceable, even as to claims asserted derivatively under Section 14(a), and, accordingly, the appellate court affirmed the district court’s dismissal of the action. The decision, which validates company’s use of these kinds of forum selection clauses, also creates a split in the federal judicial circuits which could mean that the issue could be headed to the U.S. Supreme Court. A copy of the Ninth Circuit’s decision can be found here.…

Continue Reading Ninth Circuit En Banc Ruling Upholds Forum Selection Clause

As I have chronicled on this blog (most recently, here), a wave of litigation has followed in the wake of the SPAC boom in late 2020 and early 2021. Since January 1, 2021, over 60 SPAC-related securities class actions have been filed, and there has also been a number of Delaware state court breach of fiduciary duty lawsuits, as well. Although many of these suits have only just been filed and therefore have not yet been subjected to judicial scrutiny, there have been several dismissal motion rulings in a number of these cases. A May 2023 memo from the Jones Day law firm entitled “SPAC Litigation: A Review of Recent Developments” (here) reviews the state of play in the various judicial rulings so far in the SPAC-related cases.  As the memo notes, “many high-profile suits have recently survived motions to dismiss (at least in part), and at least one has been resolved through a significant settlement.”…

Continue Reading Key SPAC-Related Litigation Developments

In a ruling last week, Delaware Vice Chancellor Travis Laster denied motions to dismiss in the shareholder derivative suit against Facebook executives for failing over the course of several years to protect users’ data privacy. The alleged privacy violations to which the lawsuit relates were the subject of a massive $5 billion penalty that Facebook agreed to pay to the FTC to settle charges that the company had violated a 2012 consent order relating to protecting users’ privacy. As discussed in a May 10, 2023, Law360 article (here), Vice Chancellor Laster made his ruling from the bench in a telephonic hearing. Vice Chancellor Laster’s ruling is also discussed in a May 10, 2023, Associated Press article (here). As discussed below, Vice Chancellor Laster’s ruling underscores the extent to which privacy-related issues represent an area of significant corporate liability exposure.…

Continue Reading Court Denies Dismissal Motion in Facebook User Data Privacy Derivative Suit

In the past, shareholder derivative lawsuits tended to settle for the defendants’ agreement to adopt corporate therapeutics and the payment of plaintiffs’ attorneys’ fees. There typically was not a cash component to the settlement, and rarely a substantial cash component. In more recent years, settlement patterns have changed, and, increasingly, derivative suit settlements have entailed large amounts of cash. The latest example of these new derivative suit settlement patterns is the $167.5 settlement of the derivative lawsuit brought by CBS shareholders in Delaware Chancery Court in connection with CBS’s $30 billion 2019 acquisition of Viacom. (The combined company was known as ViacomCBS, which changed its named to Paramount Global in February 2022.) Paramount Global disclosed the settlement of the CBS shareholder derivative lawsuit it its April 21, 2023 filing on Form 8-K, here.…

Continue Reading CBS Shareholder Derivative Suit Relating to Viacom Merger Settles for $167.5 Million

If you own a device connected to the Internet, then you know that on Tuesday Dominion Voting Systems and Fox Corp. agreed to a $787.5 million settlement of Dominion’s defamation lawsuit against Fox relating to Fox News’s coverage of the 2020 Presidential election and its aftermath. The settlement doesn’t mean the end of related litigation, however; there is, for example, the separate lawsuit that voting-machine company Smartmatic brought against Fox Corp. in New York state court that remains pending. There are a host of other lawsuits that Dominion is pursuing related the 2020 Presidential election conspiracy theories, including, for example, lawsuits against Mike Lindell, the MyPillow executive, and news outlets such as Newsmax.

And then there is the derivative lawsuit that a Fox Corp. shareholder filed in Delaware Chancery Court last week against Fox Corp. Chairman Rupert Murdoch and four other Fox executives, in which the plaintiff alleges that the defendants breached their fiduciary duties by permitting the company’s news subsidiary to make false reports about the 2020 presidential election in order to avoid losing viewers. The shareholder suit, in and of itself, presents some interesting issues, but in light of Tuesday’s settlement in the Dominion lawsuit, and the threatening prospects of the additional litigation still pending against Fox Corp., the shareholder lawsuit may now be even more interesting.…

Continue Reading The Derivative Suit Against the Fox Board Just Got a Lot More Interesting

Though SPAC-related lawsuits were among the most important factors contributing to securities class action litigation filing volume in 2022, SPAC-related litigation has not yet been as significant of a factor so far in 2023. But while there have been relatively few SPAC related securities suits filed this year, there has been SPAC-related Delaware state court breach of fiduciary duty litigation. In the latest example of this Delaware state court litigation activity, plaintiff shareholders recently filed a Delaware Chancery Court lawsuit against the directors of a SPAC; the post-merger de-SPAC company, as successor in interest in the SPAC; and the SPAC’s sponsor, alleging that the defendants breached their fiduciary duties in connection with the merger. A copy of the plaintiff’s March 31, 2023, complaint can be found here.…

Continue Reading SPAC Board and Sponsor Hit with Delaware State Court Breach of Fiduciary Duty Direct Action

Delaware’s courts traditionally have said that breach of the duty of oversight claims (sometimes referred to as Caremark claims) are “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” However, in series of cases following the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, Delaware courts have sustained a number of breach of the duty of oversight claims. More recently, Vice Chancellor Laster, in a pair of decisions in the McDonald’s case, elaborated significantly on the reach of duty of oversight. Among other things, Laster made it clear that the duty extends to corporate officers as well as to directors. Some commentators (including me) were concerned that Laster’s elaborations could lead to further lawsuits alleging breach of the duty of oversight.

Now, in what is the first high-profile post-McDonald’s Caremark claim of which I am aware, a group of four institutional investors has brought a breach of the duty of oversight claim against certain directors and officers of Meta, alleging that the executives failed to take sufficient action with respect to allegations that the company’s social media sites were being used for human trafficking. The new complaint appears to have been shaped to reflect many of the implications arising from Laster’s decisions in the McDonald’s case. A copy of the redacted public version of the plaintiffs’ March 20, 2023, complaint in the Meta case can be found here.…

Continue Reading Meta Board and Execs Hit with Oversight Duty Breach Claim Based on Trafficking Allegations