I’m attending today a symposium hosted by the above center at the University of Delaware, organized by the center’s head, Prof. Larry Cunningham. The title is: “Boardroom Legacy: Weinbergs of Goldman Sachs & The Evolution of Courtroom Governance”.

The impetus of the convocation is the 1948 Princeton senior paper of John Weinberg, that has never previously been published, which provided intellectual insights on corporate governance that played a key role beginning in the middle of the last century, and has continuing relevance today. After his Princeton days, he became the chairman of Goldman Sachs, and it is his name graces the corporate center where the symposium is being held.

The program and materials are available at this link. Highlights of the day featured panels and presentations that included insights on:

  • The history of corporate governance
  • Directing with AI: Corporate Governance, AI Governance, and the Board
  • Board composition
  • Reflections on Integrity, Diligence, and Profit in the Director’s Role
  • Keynote speech by former Delaware Supreme Court Chief Justice Leo Strine, Jr.

The Court of Chancery recently explained who must receive notice in order to satisfy the requirements of 6 Del. C. § 18-110, which provides a summary procedure for LLCs, similar to § 225 for corporations, to determine the proper manager of an LLC. In HREF Senior Worthington LLC v. Conroe WN LLC, C.A. No. 2024-1148-MTZ (Del. Ch. Oct. 2, 2025), the court explained that one of the parties with a potential claim to the disputed office did not receive notice. The company at the center of the § 18-110 claim was never served with the complaint, and no other form of notice was distributed.

The court explained the reasons why it was necessary to give that party notice in this proceeding. Because it did not receive notice, even though the court stated that it had nearly completed its opinion after an expedited trial in this matter, the court required the parties to provide that proper notice before it would be able to issue its final decision.

In the meantime, the court did the parties the courtesy of explaining its reasoning for the “draft” decision. Specifically, the court described the unusual procedural posture as follows: “So that all can proceed as efficiently as possible, I will do the parties the courtesy of sharing what my draft opinion currently holds . . . .” Slip op. at 4.

This letter ruling provides a cornucopia of important principles and procedural requirements for § 18-110 cases that I will merely highlight.

Highlights

  • The court noted that § 18-110 (a) requires that the limited liability company involved be named as a party. See footnote 3.
  • The issue presented to the court in this case was whether HREF Senior Worthington LLC (“HREF”) was the sole manager of HoldCo, the LLC involved.
  • But this case marched forward without notice to a purported member of the entity involved, that the defendants argued was also a HoldCo co-manager. That member was MStar Conroe, LLC (“MStar”).
  • The court observed that no summons was ever sought for or issued to HoldCo, the complaint was not sent to HoldCo’s registered agent, and no other form of notice was distributed in a way that would reach MStar.
  • The court underscored that a § 18-110 proceeding is in rem, not in personam.
  • Although all claimants to the disputed office did not need to be served with process because the court’s jurisdiction is based on its power over the res, see footnote 11, unlike in personam actions, service of process in an in rem action does not create personal jurisdiction. Slip op. at 3.
  • A judgment based on § 18-110 does not require that all claimants to the disputed office be subject to in personam jurisdiction in order for the court to make an authoritative adjudication on the question of who holds the office. See footnote 12.
  • Nonetheless, service is a means of giving notice and an opportunity to be heard to those who might lose their property. A party with a potential claim to the res who does not receive adequate notice is not bound by the results of the litigation. Therefore, the court must be satisfied that all such parties have received notice before it can rule. See Slip op. at 4 and footnote 15.
  • The problem presented at this juncture, which the court realized while preparing its post-trial opinion, and which apparently the parties did not address, is that a member of the LLC whom defendants argue is a co-manager of the LLC, did not receive any notice of this dispute as to whether HREF is the sole manager of HoldCo.
  • The court held that HREF is HoldCo’s sole manager.
  • The court included in its reasoning the truism that § 18-402 of the LLC Act “mandates that management shall be vested in the manager who shall be chosen in the manner provided in the limited liability company agreement.” Slip op. at 5.
  • The court parsed the terms of the agreement which were “undisputably triggered” to provide for HREF to be the sole manager. Slip op. at 5. See also footnotes 18 and 19. The court rejected the reasoning of the defendants that the “purpose clause” overrode other provisions in the agreement regarding how the manager of the LLC was chosen. Slip op. at 7.
  • After explaining the procedural conundrum and the reasoning to support the “draft decision,” the court concluded with the following sentence: “The matter is back in your hands.”

A recent Delaware Court of Chancery decision interpreted the Delaware Rapid Arbitration Act (“DRAA”), about which there is a relative paucity of published opinions. See OBI Pharma, Inc. v. Biosion, Inc., C.A. No. 2025-0965-KSJM (Del. Ch. Sept. 26, 2025).

This short letter ruling addressed an issue regarding the appointment of a panel of three arbitrators. An agreement between the parties required disputes to be resolved pursuant to arbitration under the DRAA,10 Del. C. § 5801, et seq. The relevant agreement did not provide a procedure for the selection of a panel of three arbitrators. Because the parties could not agree on who to select as arbitrators, they submitted a list of six arbitrators to the court, all of whom were qualified under § 5805(b) of the DRAA. The court picked three persons from that list.

Highlights

  • The court observed that in 2015, the Delaware Supreme Court adopted rules that govern the procedure in arbitrations under DRAA. Those rules are available on the Court’s website.
  • The court noted that under DRAA Rule 9, its letter ruling officially commenced the arbitration pursuant to 10 Del. C. § 5805(b).
  • Rule 9 also provides that the appointed arbitrators must file with the Court of Chancery and serve upon the parties, a written notice of acceptance of appointment as an arbitrator and set forth their email address, postal address, telephone and fax numbers, as well as the form in which written submissions to the arbitrator shall be made. The court waived the obligation to provide fax numbers.
  • This letter ruling and order are noteworthy for two reasons: (1) it shows that “somebody” is using the DRAA; and (2) it provides guidance regarding procedural issues that arise under the DRAA.

Recent developments in AI allow for summaries of court decisions without the need, in theory, for much human input. So, what is the usefulness of blogs by lawyers (such as this one–now in its 20th year) that cover a particular legal topic if AI can do so much of the work? The answer is: insights of the author, for example based on experience, that can highlight nuances and noteworthy aspects of a decision not self-evident within the four corners of the decision itself, e.g., what parts of the decision would have the most widespread application or usefulness, or topics not previously covered in the same way or to the same extent by prior cases.

The father of blogging for lawyers, Kevin O’Keefe, is the owner of LexBlog, which is a company that provides technical support and consulting for lawyers who write blogs. He suggests humanizing a blog perhaps by including details on the blog’s author and expressing one’s personality or personal perspective in what would otherwise be dry legal writing, as one way to distinguish blogs with content primarily created by AI.

Here goes my attempt at that approach. I recently attended the Red Mass, sponsored by the Diocese of Wilmington’s St. Thomas More Society, which is an informal group of lawyers and a few judges (but not affiliated with a national public-interest law firm with a similar name based in Chicago). The Red Mass traces its origins to the 1200s in France. It soon spread to other European countries. It began in this country in the 1800s. Historically, the Red Mass was held at the beginning of the judicial year, and its purpose is intended to invoke divine guidance for those in the legal profession. For example, the Red Mass in Washington, D.C., has been attended by members of the U.S. Supreme Court and other courts, as well as many members of the bar and holders of high political office.

Also attending the recent Wilmington Red Mass were the Knights of Malta, a group which traces its origins to about the year 1100. Members such as myself have attended the Red Mass since it began in Wilmington many years ago.

My membership in any group or attendance at any event is not a determining factor in my highlights of court decisions, or commentary on these pages about legal ethics issues and related matters, which I have been providing on this blog for the last 20 years, but perhaps this post is an example of the types of personal input that would be difficult for AI software to prepare or to create without substantial human involvement.

In a postscript to a recent ruling from the bench, a vice chancellor of the Court of Chancery made a thoughtful observation about her concerns regarding an apparent change in the tradition of civility among members of the Delaware Bar. In a Law.com article that discussed the observation, yours truly was quoted.

An overview of the article with my quotes and a link to the article itself is available here.

A recent Delaware Court of Chancery ruling addressed the scope of discovery in connection with a dispute about a failed merger to the extent that “deeply personal” and embarrassing information about a CEO was sought, purportedly in connection with the role the CEO played in the alleged failure of his company to use contractually mandated efforts to close the deal. This short blog post highlights the reasoning in the matter of Albertson Companies, Inc. v. The Kroger Co., C.A. No. 2024-1276-LWW (Del. Ch. Sept. 12, 2025), but is limited to highlighting the reasoning in the court’s decision that may be broadly applicable to other corporate and commercial cases generally.

As an aside, the court does not address, and this short blog post does not expound on, the slightly different situation where irrelevant personal allegations are included in a complaint or other court filings, and the court refuses to strike those public allegations. In that situation, much like dealing with a bully in a school yard, if one does not find suitable means to push back on that abusive behavior, it emboldens the bully.

Key Factual Background

About three months after the merger at issue was blocked on antitrust grounds, the CEO resigned due to personal conduct, unrelated to the business, that according to the official statement, was inconsistent with the business ethics policy of Kroger. The announcement of the resignation emphasized that the conduct of the CEO was not related to the financial performance or operations or reporting of the company, and did not involve any Kroger employees. After a meet and confer as well as proffers presented in confidence for in camera review, the court determined that the requested documents were not discoverable.

Highlights

  • The court reviewed the broad scope of discovery under Court of Chancery Rule 26(b)(1) that allows discovery “regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action”—but there are limitations.
  • The limitations on the scope of discovery include proportionality. The court explained that the conduct about which discovery was sought was “far afield from Kroger’s alleged breach of contractual obligations. Even if tangentially relevant, discovery of sensitive details of [his] personal life risks a needless diversion in this suit.” Id. at 4.
  • The court acknowledged that if the performance of the CEO fell short due to personal distractions, the impact of that distraction on the efforts of the company may be pertinent, but the “source of his distraction is immaterial.” Id. at 5.
  • The court reasoned that even if the conduct of an individual might breach corporate policy, it is not discoverable in this case if it did not affect “her ability to facilitate regulatory approval for a merger.”
  • In its analysis about whether to allow discovery of “private and personal information only peripherally related to the substance of the likely testimony at trial,” the court observed that such requests would probably meet “with a predisposition to treat them as discovery abuse.’” Id. at 7.
  • The proportionality requirement in this case revealed that “the potential repercussions of revealing deeply personal information outweigh any slight benefit, given the extensive information about [the CEO’s] performance as CEO that has been or will be produced by Kroger.” Id. at 9.
  • The court rejected the argument, as applied to the facts of this case, that even if Delaware courts in commercial litigation routinely require discovery of potentially embarrassing but relevant material about executive misconduct, the “tenuous relevance, if any, of that information is disproportionate to the risk of injecting a burdensome, distracting, and prejudicial issue into the commercial dispute.” Id. at 10.
  • In sum, the court concluded that the information sought would be of little probative value. Id. at 11.

The Delaware Court of Chancery recently determined the proper composition of a board in a proceeding under DGCL § 225 styled as Rainbow Mountain Inc. v. Begeman, C.A. No. 2018-0403-PAF (Del. Ch. August 25, 2025).

This case involved a dispute among 5 siblings and their extended family over the management and ownership of Virginia real estate they inherited. The litigation of this internecine dispute has spanned more than two decades, with lawsuits in Delaware and Virginia. See footnote 8. The corporation involved was a nonstock corporation.

There is no separate Delaware statute for nonstock corporations. Instead DGCL § 114 is a “translator” provision.

There are many important factual aspects of this 33-page decision that deserve careful attention, but my intent in this short blog post is to highlight a few of the most noteworthy and widely applicable aspects of the legal analysis.

Highlights

  • This post-trial opinion held that the written consent at issue validly removed prior board members of a nonstock corporation which rendered invalid the subsequent decisions of a later board that was not properly constituted.
  • The court explained the well-settled principle that a § 225 proceeding is limited in scope. Slip op. at 14-15.
  • To determine the validity of a written consent in May 2017, the court needed to decide whether persons signing the written consent validly constituted a majority of the members–at that time–of the nonstock corporation. Slip op. at 16. See § 141(k) and (d), as well as § 228(b). The court’s analysis on this particular issue, applying the facts of this case, spanned almost 10-pages. Slip op. at 17-26.
  • Applying its equitable powers, and based in part on § 227(b), the court appointed a Magistrate in Chancery to oversee an annual meeting under § 215 to elect directors.
  • The court also addressed the issue of the proper method to amend the Certificate of Incorporation for a nonstock corporation, pursuant to § 242(b)(3).

Frank Reynolds, who has been covering Delaware corporate decisions for various national publications for over 40 years, prepared this article.

The Court of Chancery recently refused to dismiss most of the unique Caremark claims a bankruptcy administrator brought against former Teligent Inc. directors and officers who allegedly wrecked their pharmaceutical company by failing to monitor regulatory compliance risks, in Giuliano v. Grenfell-Gardner, et. al., C.A. No. 2021-0452-KSJM (Del. Ch. Sept. 3, 2025).

Chancellor Kathaleen McCormick found well-supported allegations that even though Teligent’s core pharmaceutical manufacturing business was by nature closely regulated by the U.S. Food and Drug Administration, the directors and officers never sought a way to inform the board about FDA decisions that could penalize the company or stop production.

She said the plaintiff, representing the successor to the now-defunct Teligent, may prove the ex-directors violated the guidelines set by the seminal Caremark decision  simply because they did not  even try to create an advisory committee or other means to inform the board –even after it “became aware of potential FDA violations during a November 2017 board meeting.” In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996).

Two Caremark claims in tension

Corporate law specialists will be interested in how the Chancellor concluded that:

Because this suit was not derivative—i.e., it was brought directly by a representative (bankruptcy administrator) of Teligent, VJGJ, Inc.–plaintiff had complete access to proof of the Caremark failure-to-monitor-risk claim.

However, that same unique position made it difficult for plaintiff to prove a second common Caremark claim–failure to respond to red flags. The Chancellor found that the record shows the board apparently saw none of the FDA violations for failure to comply with regulations and sawno red flags waving– because no one officially informed the board.

Nevertheless, failure to comply with FDA regulations meant a halt to production, revenue and finally, the end of existence for Teligent.

Background

Teligent management eventually learned of some of the numerous warnings and notices of violations issued from 2017 thru 2021 and hired consultants to address FDA concerns but was dissatisfied with the results.  Meanwhile, Teligent’s public disclosures largely kept investors in the dark as the FDA notices became “harsher.” In late 2021, Teligent filed Chapter 11 bankruptcy in Delaware. The court said initially a shareholder filed a derivative suit in Delaware charging Teligent officers and directors breached their fiduciary duties of care by failing to monitor and correct the company’s quality control problems. After the bankruptcy court appointed plan administrator Alfred Giuliano for Teligent’s successor company he was later substituted as the plaintiff in this Chancery Court action, and the bankruptcy claims were stayed.

Was “reasonable conceivability” met?

The Chancellor said reasonable conceivability is the minimum standard for board-level monitoring and reporting systems.  She said in its Marchand decision on a Caremark claim, the Delaware Supreme Court clarified that a reasonably designed monitoring and reporting system, at a minimum, addresses “mission critical” risks.  Marchand v. Barnhil, 212 A.3d 805, 821 (Del. 2019).

The directors argued that there must have been a functioning reporting system of some sort because even though compliance issues were not in the minutes, board members knew of the FDA Letters and inspections and director defendants argued that FDA compliance was “too important to the company not to be discussed.”

Were red flags waived in front of board?

The Chancellor rejected that reasoning, finding that, “these arguments ignore the well-pled  allegations and call for defense-friendly inferences the court cannot make at this procedural stage.”

Regarding the red flag claims, the plaintiff’s unique position as a representative of the company–and not the board–works against the bankruptcy administrator, Giuliano, the Chancellor said.  “The requirement that Plaintiff plead facts sufficient to support that a director consciously disregarded a red flag also underscores the limited utility of Plaintiff’s informational advantage relative to stockholder plaintiffs,” the court said. “Plaintiff has access to management’s emails, not the Director Defendants’ communications. When pleading its red-flag theory, therefore, Plaintiff is informationally situated similar to a stockholder plaintiff in derivative actions.”

 The Chancellor ruled that: “Well-pled allegation concerning the lack of a reporting system makes it hard to infer that the Board received red flags of non-compliance”.

Officer Caremark duty: the same but more specific

Officers owe the same fiduciary duties as directors, including oversight obligations, although the scope and application of those duties is situationally specific, the Chancellor said in setting the red flag standard for officers.  ‘’An officer has an obligation to establish a reporting system. To hold an officer liable for information-system violations under Caremark, “the alleged oversight violation would need to fall within [the corporate officer’s] sphere of corporate responsibility,’ she said. 

“An officer also has a duty, when confronted with red flags, to either address them or report upward to more senior officers or to the board”, the Chancellor added.

She found that plaintiff adequately made a red flag claim against CEO Jason Grenfell-Gardner and Chief Science Officer Stephen Richardson. “Just as it is reasonably conceivable that the Board failed to receive notice of red flags, it is reasonably conceivable that Grenfell-Gardner and Richardson were aware of the red flags and failed to report them to the Board.”

The Chancellor noted: alleging conduct that constitutes reckless indifference or actions that are breach of the duty of care is “more than simple carelessness.”

Breach of the duty of care claims were dismissed because that charge requires proof that the fiduciary acted with “gross negligence without the bounds of reason.”

This article was prepared by Keith Walter, a partner in the Delaware Office of Lewis Brisbois.

In Sarwal v. Nephrosant, Inc., C.A. No. 2023-0222-BWD (Del. Ch. Aug. 28, 2025), the Court of Chancery addressed a counterclaim brought under the Delaware Computer Related Offenses Act in an action in which the plaintiff sought advancement and indemnification for expenses incurred during an internal investigation concerning complaints about the defendant’s products.

During that investigation, the defendant alleged that the plaintiff used an email account associated with the School of Medicine at the University of California, San Francisco, to access, download, and delete tens of thousands of confidential company documents stored in a Box account.

The defendant asserted a counterclaim alleging that these actions violated the Delaware Computer Related Offenses Act, 11 Del. C. §§ 931–941. The plaintiff moved to dismiss the counterclaim for failure to state a claim, arguing that the Act lacks extraterritorial effect.

Court’s Analysis

The Court examined Title 11, Section 204(a) of the Delaware Code, which governs the territorial applicability of criminal statutes, and analyzed the conduct alleged in the counterclaims. The Court found that none of the alleged conduct occurred in Delaware and that the counterclaims did not allege that any resulting harm occurred in Delaware or that the computer systems at issue were located in Delaware.

The defendant argued that Section 204(a) nevertheless applied because the allegedly deleted information belonged to a Delaware corporation. The Court rejected that argument, explaining that the defendant cited “no authority that uses the state of incorporation of the plaintiff as a controlling, predominant, or even weighty factor when determining what law governs a claim for computer-related offenses.” The Court further held that Section 204(a)(5) did not apply because Sections 933, 934, and 935 of the Delaware Computer Related Offenses Act do not “expressly prohibit conduct outside the State.”

Accordingly, the Court dismissed the counterclaim for failure to state a reasonably conceivable claim under the Delaware Computer Related Offenses Act.