Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Corporate CounselorKickerFeaturesSectionsNewsLJN Newsletters

Race to File Shareholder Derivative Suits in Delaware Slowed by Judicial Roadblock

By Daniel Perry and John M. Yarwood

In two recent opinions with wide-ranging practical implications for companies that are the target of shareholder derivative litigation, Vice Chancellor J. Travis Laster of the Delaware Chancery Court issued a well-developed, scathing critique of the plaintiffs bar's “first-to-file” mentality in derivative suits. See La. Mun. Police Emps.' Ret. Sys. v. Pyott, C.A. No. 5795-VCL, 2012 WL 2087205, (hereinafter Allergan); South v. Baker, C.A. No. 7294-VCL, 2012 WL 4372538 at **14-15 (Del. Ch. Sept. 25, 2012) (hereinafter Hecla). In these opinions, Vice Chancellor Laster was particularly focused on the unseemly “race to the courthouse” by plaintiff lawyers seeking to act as fiduciaries for a company and its stockholders in the litigation. While these decisions are not likely to reduce the threat of shareholder derivative litigation against companies, they are likely to change how the cases are litigated, and provide companies with the ability to dispose of ill-conceived, plaintiff attorney-driven litigation at an early stage in the case.

Delaware courts have, for some time now, been insisting that plaintiffs seeking to file derivative litigation on behalf of a company against its own officers and directors first use 8 Del. C. ' 220 to request an opporunity to review relevant books and records of the corporation. These so-called “books-and-records” requests can provide a shareholder with the ability to conduct a limited pre-suit investigation in order to assess whether litigation is appropriate. See, e.g., Wood v. Baum, 953 A.2d 136, 144 (Del. 2008); Beam v. Stewart, 845 A.2d 1040, 1056-57 (Del. 2004); White v. Panic, 783 A.2d 543, 556-57 (Del. 2001); Brehm v. Eisner, 746 A.2d 244, 266-67 (Del. 2000); Grimes v. Donald, 623 A.2d 1207, 1216 (Del. 1996); In re Dow Chem. Co. Derivative Litig., No. 4349-CC, 2010 WL 66769 (Del. Ch. Jan. 11, 2010); Desimone v. Barrows, 924 A.2d 908, 951 (Del. Ch. 2007); Rattner v. Bidzos, No. Civ.A. 19700, 2003 WL 22284323, at *14 (Del. Ch. Sept. 30, 2003); Guttman v. Huang, 823 A.2d 492, 493 (Del. Ch. 2003). But the plaintiffs bar has simply not heeded the direction of the Delaware courts.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Transfer Tax Implications on Real Property Leases Image

The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.