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2009 Developments in Delaware Corporate Law

September 1, 2009, Donald J. Wolfe, Jr., Michael K. Reilly

During the late spring and summer of 2009, the Delaware courts rendered several decisions on topics of interest to corporate practitioners.

In July, the Court of Chancery issued two decisions implicating the reach and limitations of the Delaware Supreme Court’s recent decision in Lyondell Chemical Company v. Ryan. In Wayne County Employees’ Retirement System v. Corti, the Court of Chancery considered whether an allegedly conflicted board of directors failed to satisfy its Revlon duties, ultimately granting a motion to dismiss the claim and reiterating Lyondell’s holding that Revlon does not require a target board to carry out a perfect process in a sale of control. By contrast, in Louisiana Municipal Police Employees’ Retirement System v. Fertitta, the Court of Chancery declined to dismiss a complaint challenging a proposed merger between the company and entities controlled by a controlling stockholder.

In a case entitled In re Trados Inc. Shareholder Litigation, the Court of Chancery considered the diverging interests of common and preferred stockholders and found that directors may be found in breach of their duty of loyalty by favoring the interests of preferred stockholders over those of common stockholders.

In a matter of first impression brought before the Delaware Supreme Court in Berger v. Pubco Corp., the Court articulated a new quasi-appraisal remedy to address circumstances in which a controlling stockholder violates its disclosure obligations in a short form merger.

In San Antonio Fire & Police Pension Fund v. Amylin Pharmaceuticals, Inc., the Delaware Court of Chancery interpreted a "poison put" provision in a trust indenture, holding that, for purposes of the indenture’s continuing director provision, a board of directors was permitted to "approve" as continuing directors persons nominated by dissident stockholders, even though the board opposed the election of the dissident slate.

Finally, in Dubroff v. Wren Holdings, LLC, the Court of Chancery determined that a notice provided pursuant to Section 228(e) of the General Corporation Law of the State of Delaware failed to provide appropriate disclosure to the non-consenting stockholders.

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