Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

Delaware Corporate Law: Recent Trends and Developments

Skadden / Key Takeaways

Howard L. Ellin Edward B. Micheletti Jenness E. Parker

On January 28, 2025, Skadden hosted a webinar on recent developments in Delaware corporate law. Skadden partners Howard Ellin (Mergers and Acquisitions/New York), Ed Micheletti (Litigation/Wilmington) and Jenness Parker (Litigation/Wilmington) discussed:

  • Numerous decisions and trends in books and records requests
  • Sale process transactions
  • Controlling stockholder issues
  • Derivative litigation, including Caremark claims and special litigation committee developments
  • Advance notice bylaws

Below are high-level takeaways.

Books and Records

Statutory books and records demands continue to be utilized frequently by stockholders in advance of filing complaints raising derivative claims (such as Caremark) or post-closing class action merger challenges. As a result, litigation over books and records represents a large volume of the Court of Chancery’s docket. The Court frequently transfers books and records matters to a growing number of Magistrates in Chancery. The Court has also been very clear that, in most instances, stockholders and companies should negotiate a reasonable package of information as opposed to litigating over every demand for books and records. While defenses are limited, a handful of recent cases were dismissed on technical grounds under the statute, or for failing to meet the minimal “credible basis” standard.

Recent decisions:

Roberta Ann K.W. Wong Leung Revocable Tr. U/A Dated 03/09/2018 v. Amazon.com, Inc., 2024 WL 1916089 (Del. Ch. May 1, 2024) (rejecting demand):

  • A petitioner lacked a credible basis to investigate wrongdoing when relying on a government investigation that determined the company did not commit any intentional or knowing violations of law.

Floreani v. FloSports, Inc., 2024 WL 4637689 (Del. Ch. Oct. 31, 2024) (rejecting demand):

  • A stockholder was not entitled to books and records when the stockholder’s demands failed to meet the statutory requirements of §220 — for lacking a power of attorney, not making a demand under oath, and for filing a complaint before the company’s statutory five-day window to respond closed.

Sale Process (Revlon) Cases

At Revlon’s core is the principle that directors must seek out the best price reasonably available when selling the company, and there is no “single blueprint” for how directors achieve that goal. Revlon was developed decades ago at a time when most merger litigations involved equitable, injunctive relief. More recently, the Court of Chancery and Delaware Supreme Court have addressed Revlon issues post-closing, with plaintiffs seeking money damages. Regardless of the posture, both courts continue to find a breach of fiduciary duty when certain officers or directors tilt the sale process in favor of one bidder, without adequate board oversight.

Plaintiffs in deal litigation cases continue to bring aiding and abetting claims against acquirers and their financial advisors. The Delaware Supreme Court recently confirmed that such claims are among the hardest to allege or prove, and success requires a showing that the buyer or financial advisor knowingly exploited a conflict.

Recent decisions:

In re Mindbody, Inc. S’holder Litig., 2024 WL 4926910 (Del. Dec. 2, 2024) (aiding and abetting claim dismissed):

  • The trial court held that the buyer aided and abetted the CEO’s disclosure violations because the advisors were subject to a contractual provision to review proxy materials and correct material omissions or misstatements.
  • The Supreme Court reversed the trial court’s decision, finding that the buyer did not knowingly participate in the target CEO’s disclosure violations by remaining passive as to the CEO’s disclosures.

In re Columbia Pipeline Grp., Inc., Merger Litig., 316 A.3d 359 (Del. Ch. 2024):

  • The Court of Chancery held that a buyer aided and abetted a breach of fiduciary duty where the CEO and CFO of the seller were seeking cash to fund their retirements, and the buyer used this conflict to its advantage, and none of this was disclosed to the stockholders. (The CEO and CFO settled before trial; the buyer tried the aiding and abetting case, but lost, and had to pay significant damages. The case is currently on appeal.)

Corwin Doctrine

The Corwin doctrine applies when there is no conflicted controller, and stockholders are fully informed and not coerced when approving a merger transaction, resulting in an irrebuttable presumption that the business judgment rule applies. The Corwin doctrine places an emphasis on robust disclosures and remains a viable option for dismissing Revlon and other applicable merger claims.

Recent decisions:

In re Anaplan, Inc. S’holders Litig., 2024 WL 3086013 (Del. Ch. June 21, 2024), aff’d, 2025 WL 369753 (Del. Feb. 3, 2025) (ORDER):

  • Anaplan officers and directors allegedly breached an interim operating covenant in a merger agreement, leading to a revised merger agreement with a 41% premium that was overwhelmingly approved by stockholders, despite being approximately $400 million less than the original deal. Corwin applied to dismiss the case because the Anaplan stockholders approved the deal based on full information and were not coerced.
  • On February 3, 2025, the Delaware Supreme Court, sitting en banc, affirmed the Court of Chancery decision.

Sciannella v. AstraZeneca UK Ltd., 2024 WL 3327765 (Del. Ch. July 8, 2024) (case dismissed):

  • Corwin applied because the complaint failed to plead that that the stockholder vote was uninformed, as the Schedule 14-D9 contained no material disclosure deficiencies.

Controlling Stockholder Cases

The debate over controlling stockholders continues to be a central focus of Delaware corporate law. The presence of a controller (who either has “mathematical” voting control, or control by alleged influence over a board) results in greater judicial focus on whether allegations of actual control or transaction-specific control state a claim. In situations where a controller is seeking a non-ratable benefit, MFW continues to provide a powerful way to render conflicted transactions subject to the business judgment rule and to secure dismissal.

Delaware courts also continued to provide guidance on the scope of MFW and compliance with MFW’s requirements.

Recent decisions:

In re Match Grp. Inc. Deriv. Litig., 315 A.3d 446 (Del. 2024):

  • In this closely followed case, the Delaware Supreme Court confirmed that: (i) MFW applies to all transactions (not just squeeze-out mergers) where a controller stands on both sides and receives a non-ratable benefit and (ii) the special committee members must all be independent.

City of Dearborn Police & Fire Revised Ret. Sys. v. Brookfield Asset Mgmt. Inc., 314 A.3d 1108 (Del. 2024) and City of Sarasota Firefighters’ Pension Fund v. Inovalon Hldgs., Inc., 319 A.3d 271 (Del. 2024):

  • Reversing two MFW dismissals due to deficient disclosures about conflicts involving advisors to the special committee. Specifically, bankers advising a target must disclose material conflicts, including its proprietary holdings in the buyer. The Court also frowned on disclosures suggesting the advisor “may” have an investment in the buyer’s stock, when the bank indeed held such an investment.

Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024):

  • The Court held post-trial that Musk failed to prove entire fairness (because MFW was not applicable) where Musk (a 21.9% stockholder) was held to be a controller over the company and the transaction, and disclosures were inaccurate. The Court ultimately rescinded the equity grant as a remedy for the fiduciary breaches. The case is currently on appeal.

Palkon v. Maffei (TripAdvisor), 311 A.3d 255 (Del. Ch. 2024), rev’d, Maffei v. Palkon, 2025 WL 384054 (Del. Feb. 4, 2025):

  • The Delaware Supreme Court recently reversed the Court of Chancery’s application of entire fairness to a reincorporation decision from Delaware to Nevada. The Delaware Supreme Court held that the business judgment rule should apply to the redomestication decision when there are no well-pled allegations of a material, non-ratable benefit flowing to the directors or controllers and that “an alleged reduction in liability exposure” in Nevada was not material because it was hypothetical and speculative.

Caremark Cases

Caremark claims have seen a resurgence in Delaware over the past decade, but the great majority of them have been dismissed. Caremark claims are often referred to as the most difficult claim to plead under Delaware law, and historically only a rare minority of cases have survived past the pleading stage — where there were material problematic underlying facts reflecting a lack of oversight rooted in bad faith. In general, the Court of Chancery has determined that a plaintiff fails to plead bad faith when the allegations concede that the board proactively created a reasonable system of internal controls and promptly responded to “red flags.”

Recent decisions:

In re TransUnion Deriv. S’holder Litig., 324 A.3d 869 (Del. Ch. 2024) (case dismissed):

  • Plaintiffs failed to plead that the directors acted in bad faith in response to a consent order when the directors took immediate action to comply with the order, relied on counsel to comply and created a committee to oversee compliance.

In re Fibrogen, Inc. Deriv. Litig., C.A. No. 2022-0331-SG (Del. Ch. Oct. 2, 2024) (case dismissed):

  • The Court rejected attempts to plead that directors knowingly misled stockholders with false statements when issuing disclosures about the company’s products (Malone claims) or that the directors consciously ignored “red flags” about this misconduct.

Special Litigation Committees

A special litigation committee (SLC) can be formed to investigate claims that belong to the corporation, and to make recommendations as to whether derivative claims are worth pursuing. SLC’s have recently been formed in connection with several derivative claims arising from various corporate conduct. Two recent cases involved unique circumstances.

Recent decisions:

In re Baker Hughes, a GE Co., Deriv. Litig., 312 A.3d 1154 (Del. 2024) (Order; affirming decision to terminate derivative litigation):

  • The one person SLC is very rare and largely disfavored by the courts. However, the one person SLC in this case was considered independent from the interested directors, acted in good faith and conducted a thorough investigation and found reasonable grounds to terminate the litigation.

In re Oracle Corp. Deriv. Litig., 2025 WL 249066 (Del. Jan 21, 2025):

  • When the SLC turns litigation back to the plaintiffs — a very rare occurrence —ordinary discovery rules and decisions interpreting them are the proper method to address any privilege or work product issues.

Advance Notice Bylaws

Delaware corporate law relies on a bedrock principle that corporate decisions be “twice-tested” to determine if board action is: (i) legal and (ii) equitable. The equitable review is a fact-specific analysis to determine if the bylaw was enacted in response to a threat to a legitimate corporate purpose and if the amendment was a reasonable response to the threat.

In 2024, the Delaware Supreme Court applied this framework to the adoption of advance notice bylaws in the context of a potential proxy fight.

Recent decisions:

Kellner v. AIM ImmunoTech Inc., 320 A.3d 239 (Del. 2024):

  • When evaluating a challenge to an advance notice bylaw, courts consider: (i) whether the bylaws are consistent with the charter, not prohibited by law and address a proper subject matter and (ii) whether the board’s adoption, amendment or application were equitable under the circumstances of the case.
  • Regardless of whether a threat existed at the time of the adoption, the Court will scrutinize as-applied challenges for reasonableness and to determine whether the application was equitable.
  • One advance notice bylaw (the “Ownership Provision”) was deemed “indecipherable” and invalid. Multiple other provisions were deemed invalid as inequitable, given that the board adopted these bylaws to thwart the proxy contest. However, because the plaintiff stockholder had submitted false information in response to the board’s requests, the Supreme Court held no further action was necessary in the case.

2025 Trends

In December 2024, the Delaware Supreme Court reversed in part the Court of Chancery’s ruling in Mindbody, rejecting an aiding and abetting claim against the buyer, and the Supreme Court has already issued two significant decisions in 2025: It reaffirmed the Corwin doctrine in Anaplan (affirming the Court of Chancery dismissal) and reversed the TripAdvisor decision, holding that the business judgment rule, not entire fairness, should apply to the decision in that case to redomesticate.

Two other pending appeals could also have a significant impact on Delaware law. The Delaware Supreme Court’s upcoming decision in the Tesla compensation case is highly anticipated and will likely reveal the Court’s views on controller status, stockholder ratification and attorneys’ fees. There is also another major decision on the horizon involving a Revlon sale process claim in Columbia Pipeline, where the Court will consider on appeal the aiding and abetting claim sustained against the buyer, and also potentially whether or not a “nominal” damages award ($.50 per share) is a fair remedy under the circumstances.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

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