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M&A and Corporate Governance Litigation
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  • Delaware Court Of Chancery Dismisses Stockholder Challenge To Certificate Of Incorporation Amendment Prolonging Voting Control By CEO/Chairman

    On April 11, 2022, Vice Chancellor Paul A. Fiorvanti of the Delaware Court of Chancery dismissed a stockholder challenge to an amendment of the certificate of incorporation of The Trade Desk, Inc. (the “Company”).  According to the complaint, the amendment effectively extended the voting control of the Company’s co-founder, Chairman, and CEO (the “CEO”) by extending the duration of a dual-class stock structure.  Plaintiff asserted claims against the CEO and other directors for breach of fiduciary duties in approving the amendment.  The Court dismissed the complaint because it found that the transaction process complied with the procedural protections necessary for application of the deferential business judgment rule pursuant to Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”).
  • Delaware Court Of Chancery Declares Company Actions On Behalf Of One Half Of Deadlocked Board Were Unauthorized And Contrary To Corporate Neutrality Principle

    On June 16, 2022, Vice Chancellor Lori W. Will of the Delaware Court of Chancery granted declaratory judgment in favor of plaintiffs — four members of the board of Aerojet Rocketdyne Holdings, Inc. (the “Company”), including its Executive Chairman — against defendants — the other four members of the Company’s board, including its CEO — after the eight-member board had deadlocked in connection with the Company’s impending board election.  In Re Aerojet Rocketdyne Holdings Inc., No. CV 2022-0127-LWW (Del. Ch. June 16, 2022).  The case arose after each faction had proposed its own slate of board nominees.  Plaintiffs challenged certain actions allegedly undertaken by the Company at the behest of defendants, such as the issuance of a Company press release purporting to express the Company’s disappointment in the slate proposed by plaintiffs and the retention of counsel on behalf of the Company to pursue litigation against plaintiffs.  Following a trial, the Court held that such actions were unauthorized and contrary to the corporate neutrality principle.  The Court explained that a Delaware corporation “must remain neutral when a there is a legitimate question as to who is entitled to speak or act on its behalf,” and [w]here a board cannot validly exercise its ultimate decision-making power, neither faction has a greater claim to the company’s name or resources.”
  • California Superior Court Strikes Down Director Diversity Mandate

    On May 13, 2022, Judge Maureen Duffy Lewis of the Superior Court of the State of California for Los Angeles County entered judgement in favor of three taxpayers bringing state constitutional challenges to S.B. 826, a bill for a California law that required the boards of California corporations to include women.  Crest v. Padilla, Case No. 19 STCV 27561 (Cal. Super. Ct. L.A. Cnty. May 13, 2022).  The law mandated that, by December 31, 2021, publicly held companies incorporated in California must appoint at least one woman on boards of four or fewer directors, two women on boards of five directors, and three women on boards of six or more directors.  The Court agreed with plaintiffs that the law violated the California constitution’s Equal Protection Clause.