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  • Delaware Court Of Chancery Rejects Motion To Stay SPAC Breach Of Fiduciary Duty Suit Pending Parallel Federal Securities Action

    On March 7, 2022, Vice Chancellor Lori W. Will of the Delaware Court of Chancery denied a motion to stay a putative class action brought by legacy stockholders of DiamondPeak Holding Corp., a special purpose acquisition company (“SPAC”), alleging that its directors and controlling stockholders breached their fiduciary duties in connection with the SPAC’s acquisition of Lordstown Motors Corp. (“Legacy LMC”).  In re Lordstown Motors Corp. Stockholders Litigation, CA. No. 2021-1066-LWW (Del. Ch. March 10, 2022) (the “Delaware Action”).  Plaintiffs alleged that  defendant directors failed to disclose certain information about Legacy LMC’s business and that the SPAC’s controlling stockholders pursued the acquisition to advance their own interests to the detriment of minority stockholders.  Defendants argued that the Delaware Action should be stayed pending resolution of an earlier-filed securities class action (the “Securities Action”) in the United States District Court for the Northern District of Ohio.  The Court declined to grant the stay, reasoning that application of Delaware fiduciary duty law to SPACs “raises emerging issues” and that the Court’s “essential role in providing guidance in developing areas of our law would be impaired if the court were to denude its jurisdiction because a federal securities action resting on similar facts was filed first.”
    CATEGORIES : Fiduciary DutiesSPACs