Latest Articles

Under Delaware law, when a derivative plaintiff loses its stockholder status as the result of a merger, the plaintiff usually also loses its standing to pursue a derivative suit on behalf of the corporation.  This rule is subject to only two limited exceptions: (1) when “the merger itself is the subject of a claim of fraud, being perpetrated merely to deprive shareholders of the standing to bring a derivative action,” and (2) when “the merger…
“Veil piercing” is an equitable remedy that allows a plaintiff with a claim against an entity to obtain relief from the entity’s owners, in spite of laws providing for limited liability.  When the owners provide personal guarantees or otherwise contract around liability protections, or when the owners are sued in their own right based on their own conduct, it is not necessary to pierce a veil of limited liability.  True veil piercing – where the…
The Delaware Supreme Court reversed the dismissal of a derivative suit for failure to make demand, finding that the complaint alleged particularized facts sufficient to create a reasonable doubt as to the disinterestedness and independence of a majority of directors, in Sandys v. Pincus, No. 157, 2016 (Del. Dec. 5, 2016).  In Sandys, the plaintiff alleged that some top managers and directors at Zynga, Inc. were given an exemption to Zynga’s rule preventing sales by…
For the first time since 1997, the United States Supreme Court explored the requirements for proving a federal securities fraud claim based on insider trading, in Salman v. United States (Dec. 6, 2016).  The Salman opinion confirms that a factfinder may infer a personal benefit to a tipper from a gift of confidential information to a trading relative or friend, without the added requirement of “proof of a meaningful relationship” that had been imposed by…
The Delaware Supreme Court recently held that the plain language of an employment agreement and an LLC agreement prevented an LLC from interjecting a fraudulent inducement defense into a summary proceeding for the advancement of litigation expenses under Section 18-108 of the Delaware LLC Act. Trascent Mgmt. Consulting, LLC v. Bouri, No. 126, 2016 (Del. Nov. 28, 2016). In Trascent, an LLC brought claims against a terminated executive for breach of his employment agreement. The…