Delaware’s Caremark cases continue to be catnip for me.

The latest is the Delaware Supreme Court’s Lebanon County Employees’ Retirement Fund v. Collis, reversing VC Laster’s decision from last year.

Plaintiffs alleged that AmerisourceBergen’s board of directors violated opioid drug laws by failing to monitor suspicious prescriptions, to the point where they altered their internal reporting systems so that fewer prescriptions would be flagged.  Ultimately, this conduct caused severe damage to the company, through a $6 billion global settlement, as well as other settlements and litigation costs.

VC Laster explored the allegations in detail, ultimately determining that, standing alone, the complaint stated a claim against the AmerisourceBergen board for a violation of Caremark duties. 

But!  Plot twist.  Because in mid 2022, after the plaintiffs’ complaint was filed, a federal West Virginia court cleared AmerisourceBergen of misconduct.  The case was filed by a city and county in West Virginia – areas that were ground zero for the opioid crisis – and among thousands of similar cases consolidated for pretrial proceedings in a larger multidistrict litigation.  After a bench trial, the judge found that the plaintiffs had failed to prove that AmerisourceBergen did not maintain an effective control system.  According…

As I’ve mentioned before, the Department of Labor is now taking another go at improving advice standards for retirement accounts.  I put a quick letter together to give some reasons why I think it’s important to have high standards for advice in this context.

Although written to the Department of Labor, I tried to put the letter together in a way that would help journalists and others understand some of the critical issues facing Labor and the need to put some real protections in place.

One of the talking points often deployed by the industry here is that people should understand that they are in a sales environment and not rely overmuch on the insurance producer deploying every known psychological trick to generate trust.  In reality, many people–particularly older Americans do not understand that the advice is not free.  

My sense is that the rulemaking will probable go through and then we’ll find out how much room the courts will give to protect people here.

After Twitter v. Musk concluded, there remained a bit of satellite litigation in the form of a claim brought by Twitter shareholder Luigi Crispo, who alleged that his lawsuit against Musk – filed in the midst of the dispute with Twitter – had in fact materially contributed to the Twitter v. Musk settlement, and therefore he should be entitled to attorneys’ fees. 

(Pause for laughter.)

Anyway, the legal merit of that claim turned on whether Crispo’s claims against Musk – as a stockholder, for breaching the merger agreement with Twitter – themselves ever had any merit to begin with.  In October of this year, Chancellor McCormick held that they did not, but the way she got there put merger planners in something of a bind.

One issue that came up during the whole … thing … was what kind of damages Twitter could get if it prevailed in its claim that Musk breached the merger agreement, but if specific performance was for some reason unavailable.  (And yes, sorry, I can’t help but mention, this is an issue I discuss in more detail in my paper, Every Billionaire is a Policy Failure).  The merger agreement had a damages cap…

You may already have seen the news that Judge Charles Breyer refused to dismiss claims against Elon Musk arising out of l’affaire Twitter.  Specifically, a class of shareholders alleged that Musk’s desperate efforts to get out of the deal – including his accusation of spam and his insistence that Twitter violated its contractual obligations by refusing to provide him with information – depressed the price of Twitter stock by creating uncertainty regarding closing.  As a result, some investors were harmed by selling stock too soon.  In Pampena v. Musk, 2023 WL 8588853 (N.D. Cal. Dec. 11, 2023), Judge Breyer dismissed claims based on several of Musk’s statements, but sustained others.  He reasoned:

The May 13 tweet reads as follows: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” … Defendant represented to a reasonable investor that the Twitter deal was on hold—and would not close—until Twitter provided information supporting its bot calculations. Or, put another way, a reasonable investor could have plausibly understood that Twitter was obligated to provide Defendant with the requested information for the deal to close…. The Court finds that Defendant’s statement did give an

…

Two interesting matters related to the internal affairs doctrine came up recently, and since I just wrote a whole paper on this subject, I can’t resist mentioning them here.

First, VC Laster issued an opinion in Sunder Energy v. Jackson et al,.  The question was whether certain LLC members and employees violated noncompetes included in the LLC agreement, but Laster began by railing against the trend of companies attempting to avoid the employment law of states where they do business by writing employment-related terms into entity organizational documents, and then issuing equity compensation to employees.  The companies do so apparently in hopes that the employment-related terms will then be treated as entity internal affairs matters governed by the state of organization (Delaware), rather than employment terms governed by the employee’s home state.  Sunder Energy was not the first time Laster objected to the practice; earlier, he gave a long speech on the matter in his transcript ruling in Strategic Funding Source Holdings LLC v. Kirincic, which I quoted extensively in my paper. 

Anyway, that’s not the only thing of interest in the case; it also presents an interesting cautionary tale that will work well in the…

It’s tough to know what to write here today.  I was fortunate enough to be working from home when I started getting emails from the University.  This is what the first ones said:

(11:51 a.m.) University Police responding to report of shots fire in BEH evacuate to a safe area, RUN-HIDE-FIGHT.

(11:57 a.m.). University Police responding to confirmed active shooter in BEH. This is not a test.  RUN-HIDE-FIGHT.

My first thought was to wonder why they were not texting me.  Then it was to realize that if I were not getting texts, many of my colleagues might not either.  The BEH building code meant the shooter was at the Business School–just a short, short walk from the law school.  I started texting my colleagues.  At least all of them that I had numbers for.  As people checked in, I learned that my colleagues were sheltering in place as the school locked down.  I reached out to some students who I’d worked with and had numbers for to make sure they were okay.  Fortunately, the two that I connected with were not on campus.  But they very easily could have been.  Our final exams have started and students not taking exams…

This week, we had two interesting, and very different, decisions on the validity of anti-activist bylaws.

The first decision, out of Delaware, upheld certain advance notice bylaws in the context of a motion for a preliminary injunction, while the second, from the Second Circuit, rejected control share acquisition bylaws adopted by a closed-end mutual fund.

The first decision, Paragon Technologies v. Cryan, concerned Paragon’s activist attack on penny stock Ocean Powers Technology (OPT).  After Paragon expressed interest, OPT adopted an advance notice bylaw requiring director nominees offer a wealth of information, including any plans that would be required to be disclosed on a 13D, any business or personal interests that could create conflicts between the nominees and OPT, and any circumstances that could delay a nominee receiving security clearance, while simultaneously adopting a NOL pill (for more on those, read Christine Hurt).

Paragon submitted some documents in connection with the bylaw, but the “plans” only said it would “fix OPT.”  OPT identified numerous deficiencies in Paragon’s submission, Paragon submitted more information including that its plans were to reduce expenses and focus on industry growth.  Long story short: OPT kept finding deficiencies to complain about, and ultimately…