This is the tenth year that we are providing our annual review of the key corporate and commercial decisions from Delaware’s Supreme Court and Court of Chancery. This year we decided to pick only the top five among the more than 200 or so opinions that we highlighted. We encourage readers to suggest cases that should be added (or deleted) from this list. Reasonable people may differ on our selections, and we could have added many more important decisions if we did not limit the list this year to five. Prior annual summaries are linked in the right margin of this blog. A revised version of this summary appeared as an article for the ABA publication called Business Law Today.
(The Supreme Court’s stately building in Dover is featured in the photo from the Court’s website.) Hyperlinks below lead to both a fuller synopsis and each slip opinion.
C&J Energy Services, Inc. v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, Del. Supr., No. 655/657, 2014 (Dec. 19, 2014). This Delaware Supreme Court opinion is noteworthy because it clarifies the version of fiduciary duties known as the Revlon standard that apply to a board of directors when they are selling their company, or there is a change in control. A shorthand reference for this opinion is that: a formal auction is not required to satisfy the Revlon standard. It also features a rare reversal of the Court of Chancery, and clarifies the standard that Chancery must follow when granting a mandatory injunction.
ATP Tour, Inc. v. Deutscher Tennis Bund, Del. Supr., No. 534, 2013 (May 8, 2014). The Delaware Supreme Court decided certified questions of law from the District of Delaware regarding whether it was consistent with Delaware law for a bylaw provision to provide for shifting attorneys’ fees to an unsuccessful plaintiff pursuing intra-corporate litigation. Short Answer: Such a bylaw provision is generally enforceable subject to equitable exceptions. This opinion has generated copious commentary among academics and others. Legislation addressing the issues in this opinion is expected to be considered in the Delaware Legislature during its 2015 session that ends in June.
Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, Del. Supr., No. 614, 2013 (July 23, 2014). This Delaware Supreme Court en banc opinion requires Wal-Mart to produce documents about an alleged bribery scandal involving their Mexican subsidiary. Even though the initial focus of this case was on DGCL Section 220 and what documents a stockholder of Wal-Mart could demand, the most noteworthy aspect of this decision is that for the first time the Delaware Supreme Court directly addressed and recognized an exception to the rule that documents protected by the attorney/client privilege do not need to be produced. It is referred to as the Garner exception after a case of that name from the Fifth Circuit.
In this case, the Delaware high court ruled that the well-established attorney/client privilege does not apply to bar production, or the privilege is subject to an exception, if a stockholder needs the otherwise inaccessible information to sue a director for breach of fiduciary duty. A similar analysis was applied to documents otherwise protected by the work-product doctrine. This opinion will have lasting importance for corporate and commercial litigators regarding this topic.
Kahn v. M & F Worldwide Corp., Del. Supr., No. 334, 2013 (March 14, 2014). The Delaware Supreme Court affirmed the Court of Chancery’s decision granting summary judgment to the defendants under the business judgment standard of review (and not the entire fairness standard) where the controlling stockholder, MacAndrews & Forbes, conditioned its offer upon the MFW Board agreeing, ab initio, to two procedural protections: approval by both a Special Committee and by a majority of the minority stockholders.
In Re Rural Metro Corporation Stockholder Litigation, C.A. No. 6350-VCL (Del. Ch. Mar. 7, 2014). The Court of Chancery found RBC Capital Markets LLC liable for aiding and abetting the breach of fiduciary duties of directors by advising simultaneously Rural/Metro Corp. on the value of the company in connection with a sale to Warburg Pincus LLC, while other bankers at RBC were pitching their services to Warburg in an effort to gain fees by helping Warburg finance the same deal. In a subsequent opinion, substantial damages were assessed against RBC.
SUPPLEMENT: We are thrilled and honored that the venerable Professor Stephen Bainbridge, one of the nation’s top corporate law scholars and a favorite of Delaware courts and this blog, has graciously linked to this post on his blog, along with a very flattering description. It doesn’t get much better than this for someone who makes his living practicing corporate litigation.