Insights: The Delaware Edition

Skadden Publication

In a case of first impression, the Court of Chancery held recently that officers, like directors, owe their companies a duty of oversight, although the scope of that will vary with their responsibilities. Two other Chancery rulings involved transactions where a founder played a role in the deal and subsequent litigation. In one case, a special committee was praised for its approach to control the acquisition process to prevent any conflict taint, while in the second case the court found that a special committee failed to prevent the CEO from steering a sale process to benefit himself, and it awarded shareholders damages against him and the buyer. In two other recent cases, the court penalized parties who destroyed documents, imposing an adverse inference in one case and default judgment in the other.

The Court of Chancery Holds That Corporate Officers, Like Directors, Owe a Duty of Oversight 
For the first time, a Delaware court has recognized a duty of oversight for corporate officers, similar to those owed by directors. The scope of such duties are context-driven and could differ in application based on responsibilities.

Post-Trial Oracle Ruling Provides a Roadmap for Navigating Transactions With an Influential Fiduciary on Both Sides of the Deal
A Chancery Court ruling rejecting claims that a co-founder and director was a controller during the purchase of a company in which he held a stake shows how a special committee process can be structured to guard against potential conflicts.

Court Finds Mindbody CEO Liable Under Revlon and That Buyer Aided and Abetted Disclosure Violations
A Court of Chancery finding that a CEO breached his fiduciary duties by tipping the scales in favor of a preferred buyer and authorizing misleading disclosures offers guidance to boards and officers about their duties in negotiating a sale.

Premium on Preservation: Recent Delaware Rulings Underscore the Importance of Preserving Documents
Two decisions this year illustrate how Delaware courts will rigorously enforce parties’ discovery obligations, and may draw adverse inferences or grant default judgment where documents have been deliberately destroyed.