Deal Diary

Recent rulings underscore the attention boards of directors and management must continue to pay to the risks faced by companies across all sectors of the economy and their potential impact on business operations. Last year’s decision in In re Boeing Co. Derivative Litigation¹ only serves as the most recent reminder of the potential exposures (including personal liability) companies, boards of directors and management may face.

On March 29, 2021, the U.S. Supreme Court heard oral argument in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System.¹ In this closely watched case, the Court is expected to clarify the evidentiary burden for rebutting the “fraud on the market” presumption of reliance at the class certification stage in securities fraud class actions.

In mid-March 2020, concerned about opportunistic activist stockholders, a precipitous decline in oil prices and corresponding stock volatility, as well as uncertainty created by the unprecedented COVID-19 pandemic, the board of directors of the Williams Companies, Inc. (“Williams” or the “Company”) adopted a one-year stockholder rights plan with a five percent trigger (the “Williams Plan”). Less than a year later, the Delaware Court of Chancery, after reviewing the Williams Plan under the Unocal standard, permanently enjoined it, and found that the directors had breached their fiduciary duties, thereby rendering it unenforceable.

The world has changed a lot since our 2020 report. A global pandemic; a reckoning on race, inequality and social justice; a climate crisis; an economic shock; and increased political polarization have created challenging dynamics for companies and boards globally. The role of the board in managing risk and charting the course ahead is more critical today than ever before. This report delves into these wide-ranging and interlocking issues and offers insight on how directors and management must proactively embrace their stewardship roles in this brave new world.

In High River Ltd. P’ship v. Occidental Petroleum Corp., No. CV 2019-0403-JRS, 2019 WL 6040285 (Del. Ch. Nov. 14, 2019), the Court of Chancery of the state of Delaware recently refused to hold that Section 220 books and records demands could be used solely for furthering a proxy contest without otherwise stating and demonstrating a proper purpose, such as exploring a credible basis of corporate mismanagement. In this article we explore potential takeaways from the High River opinion and considerations for stockholders in making Section 220 demands and supplemental approaches aimed at enhancing the efficacy of such pleadings and demands based on Delaware case law.