A recent Delaware Court of Chancery decision provides a concise summary of the fiduciary duty of disclosure in the context of a proxy statement. In Stansell v. Rosensweig, C.A. No. 2023-0180-PAF (Del. Ch., June 12, 2024), the court rejected the claim that the proxy statement should have included a reference to reports that students are using the company’s online services to help them cheat on homework.

Highlights

  • The court restated established Delaware law that directors are not required to accept factual allegations prior to a formal adjudication.  This is sometimes referred to as directors having no duty to engage in self-flagellation. See Slip op. at 13.
  • The court reiterated that Delaware has adopted the federal standard for materiality in this context. Slip op. at 12.
  • The court provided a cogent analysis of the logical fallacies in the factual allegations for the claims that the proxy statement omitted material information. See Slip op. at 14 – 20.
  • The court noted the procedural issues involved with the decision by the plaintiff not to seek relief until after the annual meeting which the proxy statement related to.