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Eugene Choi is an associate in the Corporate Practice Group in the firm's Orange County office.

In United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, No. 404, 2020, — A.3d –, 2021 WL 3433261 (Del. Sept. 23, 2021), the Delaware Supreme Court adopted a new three-pronged test for determining whether pre-suit demand by a stockholder plaintiff would have been futile.  This new test builds up and refines the Aronson and Rales demand futility tests for derivative claims.  The Court’s decision comes on the heels of Brookfield Asset Mgmt. v. Rosson, where the Court clarified derivative standing by overruling the oft-criticized direct-and-derivative “dual-natured” claim under Gentile v. Rossette (see blog article here).  This decision is another step toward simplifying Delaware law with respect to derivative claims.

Continue Reading Delaware Supreme Court Adopts New Three-Prong Test for Demand Futility

In Manti Holdings, LLC v. Authentix Acquisition Co., Inc., No. 354, 2020, 2021 WL 4165159 (Del. Sept. 13, 2021), the Delaware Supreme Court issued an important opinion affirming the use of stockholders agreements by and among Delaware corporations and its stockholders to waive stockholders’ rights of appraisal under Section 262 of the Delaware General Corporation Law.  The Manti Holdings decision further solidifies Delaware’s strong policy preference of freedom of contract and private ordering, and confirms that Delaware corporations can have its stockholders waive appraisal rights.  Note, however, that not every appraisal waiver may be valid.  It also raises the question of what other seemingly “mandatory” stockholder rights may be waived in documents that are not a charter or bylaw.

Continue Reading Delaware Supreme Court Affirms the Use of Stockholders Agreements to Waive Appraisal Rights

In Shareholder Representative Services LLC v. Albertsons Companies, Inc., 2021 WL 2311455 (Del. Ch. June 7, 2021), the Delaware Court of Chancery (Slights, V.C.) provided key guidance on mergers and acquisitions (“M&A”) earnout disputes regarding contractual earnout language, the applicability of the implied covenant of good faith and fair dealing, extra-contractual discussions and promises and post-closing behavior of the acquirer.  This opinion serves as a reminder to M&A transaction parties on important drafting concepts in earnouts, as well as how to conduct themselves during the negotiations and earnout period.
Continue Reading Delaware Court of Chancery Decision Provides Guidance on M&A Earnouts