It’s been a tough week for longstanding precedent – and for shareholders claiming corporate wrongdoing -- in the Delaware Supreme Court.
, which, as I’ll explain, allowed shareholders to proceed with derivative suits by accusing board members of approving tainted transactions.
Facebook subsequently dropped the plan after a raft of shareholder suits – but not before spending more than $90 million to defend the reclassification and then pay the plaintiffs' lawyers whose litigation led to its abandonment. The Tri-State fund’s derivative lawsuit alleged that Facebook board members breached their duties of care and loyalty when they backed Zuckerberg’s aborted reclassification plan.
Laster’s key point was that a change in Delaware’s corporate code has undermined the rationale of the 1984 ruling. The Aronson court, he said, used business judgment deference as a sort of proxy for board members’ personal liability risk, reasoning that if the board was not entitled to deference for the underlying transaction, directors were at higher risk and therefore not be relied upon to make an independent decision about whether the corporation has a cause of action.
Laster proposed an alternative, three-part test for demand futility that, he said, harmonized Aronson and a successor case, 1993’s. Courts should determine whether the director received a personal benefit from the misconduct alleged by shareholders; whether the board members faced substantial risk of liability for shareholders’ claims; and whether the director is dependent on someone – presumably a controlling shareholder – who benefited from the deal at issue.
In light of that holding, the Supreme Court said, it was adopting Laster’s three-part test for demand futility. The Laster test, Montgomery-Reeves said, blended Aronson and Rales precedent to address the crucial question of whether directors can be trusted to act in the best interests of the corporation.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Mike Pence Hopes Supreme Court Overturns Roe And Gives U.S. ‘Fresh Start’The GOP has been highlighting the importance of court’s upcoming abortion case to rolling back abortion rights nationwide.
Read more »
Abortion Providers Ask Supreme Court To Hear Texas Abortion Case — AgainThe court previously ruled 5-4 against the abortion rights advocates.
Read more »
Texas abortion providers go back to Supreme Court to expedite challenge to six-week banA coalition of Texas abortion providers went back to the Supreme Court Thursday, asking the justices to expedite a review of the state law that bars abortions after six weeks.
Read more »
Supreme Court again asked to take up Texas abortion lawAbortion providers in Texas return to the Supreme Court, asking for quick action in taking up a challenge to the state's restrictive new law banning abortion after about six weeks of pregnancy.
Read more »
Abortion providers ask U.S. Supreme Court to intervene in challenge to Texas lawAbortion providers in Texas asked the U.S. Supreme Court to hear their case before lower courts finished ruling on their challenge to a near-total ban on abortion in the state
Read more »
What would happen if the Supreme Court overturned Roe v Wade?Roe has already been hollowed out by laws that make it hard for clinics to operate. Six states have only one clinic left
Read more »