The following post is based on a memo released by Pepper Hamilton LLP on September 4, 2013.
A recent post-trial decision by Vice Chancellor J. Travis Laster of the Delaware Court of Chancery puts directors serving as designees of preferred investors on notice that they must attempt to maximize value for common shareholders, or risk being found liable for breach of fiduciary duty. The opinion, In re Trados Inc. Shareholder Litigation, C.A. No. 1512-VCL (Del. Ch. Aug. 16, 2013), is available at http://courts.delaware.gov/opinions/download.aspx?ID=193520.1
The court observed that directors serving on behalf of preferred shareholders may face a … Read more
In its widely followed Allergan decision, the Delaware Court of Chancery declined to apply collateral estoppel to dismiss a Delaware derivative complaint even though a California federal court dismissed (with prejudice) essentially the same complaint brought by different stockholders. The Court of Chancery had reasoned that there was no privity between the derivative stockholders because, until a stockholder survives a motion to dismiss based on failure to make demand, the stockholder is not acting on behalf of the corporation. Moreover, the Court of Chancery found that the California plaintiffs were inadequate representatives because they filed suit before seeking corporate books … Read more