2024 Securities, Shareholder, and M&A Litigation Outlook

Below is an excerpt of the Outlook for 2024 from our publication, which also includes an executive summary and coverage of key decisions from 2023 in Delaware courts.

The outlook for 2024

2023 was a busy year, with both the Delaware courts and others, including the U.S. Supreme Court, weighing in on shareholder and M&A litigation issues. The Delaware Court of Chancery issued several notable decisions on issues critical to companies incorporated in Delaware, as well as those seeking to engage in transactions with Delaware-incorporated entities. Over the past year, our coverage has highlighted four trends.

• The Delaware courts continued to address Section 220, issuing decisions that demonstrated the importance of responding to a stockholder and providing books and records if the stockholder has met the requirements, including identifying a proper purpose.
• The Delaware courts provided additional guidance on the application of Corwin cleansing, finding cleansing appropriate if there are no allegations to support a reasonable inference that a vote was not fully informed, but inappropriate when stockholders were unaware of material conflicts or when a deal included long-lasting defensive measures.
• The Delaware courts issued decisions that further developed the law surrounding Caremark claims, which have seen a resurgence since the 2019 Marchand v. Barnhill decision. Decisions in 2023 addressed the duty of oversight for officers, the appropriate showing needed to plead a Caremark claim, statutes of limitations, and tolling principles.
• Many decisions in 2023 turned on a close reading of contractual language, both in standalone agreements, such as voting agreements, as well as in foundational documents, like partnership and LLC agreements. These decisions demonstrate the significant impact that contractual language can have on shareholder claims.

In addition, several courts, including the U.S. Supreme Court, issued notable decisions that impact corporations and shareholders in Delaware and beyond, including opinions related to the interpretation of the phrase “such security” in the Securities Act of 1933 and the mechanisms available to enforce fee advancement orders. More detail on these trends and cases can be found below.

In 2024, we expect to see the Delaware courts continue to develop the law in these and other areas. At the end of 2023, several cases addressing transactions with controllers or conflicts of interest remained pending in Delaware. Decisions in these cases, which are expected this year, will provide insight into the courts’ views of who is a controlling shareholder, what constitutes a conflicted transaction, and when and how a special committee should be implemented. In 2024, we expect more Caremark claims to be filed, leading to more opinions that will further define the contours of the Caremark doctrine. 2024 also may see developments around ESG. Companies and shareholders alike continue to juggle “greenwashing,” “greenhushing,” new ESG disclosure rules, and the uptick in backlash litigation. While ESG litigation is brought on many theories nationwide, a Delaware court has one case pending that alleges a breach of fiduciary duty based on actions alleged to be beneficial for the company but a “net-negative” for society. Guidance from Delaware courts on ESG issues will be significant for Delaware-incorporated entities and beyond.

Click the image below to view the full outlook.

Authored by Allison M. Wuertz, Jon Talotta, William (Bill) M. Regan, David R. Michaeli, Christopher Pickens, Ann Kim, Jordan Teti, Maura Allen, Sean MacDonald,  Tyler Waywell, Shannon Zhang, Elizabeth Cochrane, Jason Chohonis, Christine Jiha, and William Winter.