Shareholder Derivative Actions

On June 6, 2023, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s judgment in favor of Cravath client Elon Musk on all counts in a stockholder derivative suit related to Tesla, Inc.’s (“Tesla”) 2016 acquisition of SolarCity Corp. (“SolarCity”).

On August 19, 2022, the New York Supreme Court Commercial Division issued a decision dismissing a shareholder derivative action filed against current and former directors and officers of Novartis AG (“Novartis”) and several Novartis subsidiaries who, along with the Company, were represented by Cravath. Justice Margaret Chan of the Commercial Division dismissed the suit without prejudice to refile in Basel, Switzerland as required by a forum selection clause contained in Novartis’s Articles of Incorporation.

On April 27, 2022, the Delaware Court of Chancery granted judgment in favor of Cravath client Elon Musk on all counts in a stockholder derivative suit regarding the 2016 acquisition of SolarCity Corp. (“SolarCity”) by Tesla, Inc. (“Tesla”). The Court of Chancery’s 131‑page opinion in favor of Mr. Musk followed a highly publicized 11‑day trial in July and August 2021, and post‑trial briefing and oral argument held in January 2022.

On June 16, 2017, the Delaware Court of Chancery dismissed a stockholder derivative lawsuit brought against current and former directors and officers of Qualcomm Incorporated alleging, among other claims, that defendants breached their fiduciary duties by allegedly failing to prevent purported FCPA violations by the company. In granting the dismissal, Vice Chancellor Tamika R. Montgomery‑Reeves held that the complaint did not plead sufficient facts to infer that the individual defendants had acted in bad faith or that the directors faced a substantial likelihood of personal liability such that plaintiffs’ failure to make a demand on the board to bring a suit was excused.

On March 22, 2012, the New York Appellate Division, First Department, affirmed New York State Supreme Court Justice Shirley W. Kornreich’s December 10, 2010, decision in favor of Cravath client Morgan Stanley. Judge Kornreich had granted Morgan Stanley’s motion to dismiss a shareholder derivative action brought against current and former Morgan Stanley directors and executive officers and, nominally, Morgan Stanley (Security Police and Fire Professionals of America Retirement Fund, et al. v. John J. Mack, et al.). The action alleged breach of fiduciary duty, corporate waste and unjust enrichment arising from the total amount of compensation that Morgan Stanley paid its employees in fiscal years 2006, 2007 and 2009. The Court ruled that the complaint failed to show that pre-suit demand on Morgan Stanley’s Board of Directors would have been futile because the complaint failed to raise a reasonable doubt that a majority of the Board was disinterested, that a majority of the Board was independent or that the Board’s decision was protected by the business judgment rule. The complaint was dismissed with prejudice, and plaintiffs appealed.

On July 31, 2023, Cravath published the latest edition of its Quarterly Review, which examines the Q2 2023 M&A, activism and corporate governance landscape. The Review provides an overview of activity in those areas, highlights notable cases in the M&A space, shares trends in activism activity and notes key developments in corporate governance over the second quarter of 2023. This edition also examines the Federal Trade Commission and Department of Justice’s proposed changes to the merger guidelines and other antitrust enforcement and policy developments, alongside recent Delaware cases and pronouncements related to corporate governance matters.

On April 28, 2023, Cravath published the latest edition of its Finance & Capital Markets Quarterly Review, which provides an update on the bond, equity and loan markets and restructuring activity during the first quarter of 2023. This edition also examines several recent litigation decisions and restructuring developments, and a variety of SEC rulemaking, comment and enforcement updates.

On April 28, 2023, Cravath published the latest edition of its Quarterly Review, which examines the Q1 2023 M&A, activism and corporate governance landscape. The Review provides an overview of activity in those areas, highlights notable cases in the M&A space, shares trends in activism activity and notes key developments in corporate governance over the first quarter of 2023. This edition also examines other first‑quarter highlights, including the first Delaware judicial decision to hold that non‑director corporate officers owe stockholders a fiduciary duty of oversight, recent antitrust policy developments and enforcement actions, the continuing increase in global activist activity and recent pronouncements related to corporate governance matters.

New York University School of Law announced Cravath partner Helam Gebremariam as a member of its Board of Trustees, commending her “broad range of experience and expertise” and “dedication to NYU Law.” NYU Law noted Helam’s practice in Cravath’s Litigation Department, where she specializes in complex civil litigation, particularly relating to antitrust, contractual disputes and securities and shareholder derivitative suits, as well as her prior work at the U.S. Department for Justice.

On May 26, 2022, Cravath partner Gary A. Bornstein participated in “Delaware Law Developments 2022: What All Business Lawyers Need to Know,” a program presented virtually by the Practising Law Institute. Gary spoke on a panel entitled “Fiduciary Litigation,” which discussed recent Delaware Supreme Court decisions, controlling stockholders and control groups, and other recent developments.