BLT: July 2012



Business & Corporate

Building the Section 11 "Due Diligence" Defense for Outside Directors

Section 11 of the Securities Act of 1933 imposes civil liability when a securities registration statement filed with the Securities and Exchange Commission contains a false or misleading material statement or material omission. Section 11, however, gives defendants other than the issuer a powerful defense—the "due diligence" defense. Outside directors should be exceptionally well-positioned to establish this defense, but their counsel must be mindful of potential complications. This article outlines how to establish a “due diligence” defense for outside directors.


Business & Corporate

DELAWARE INSIDER: Collateral Estoppel Doesn't Bar Second Derivative Case After First is Dismissed

This article reviews a recent Delaware Court of Chancery opinion concluding that a derivative shareholder plaintiff does not have authority to step into the shoes of the corporation, if a corporation is opposing the litigation, until a court finds either that (1) demand on the board of directors is excused as futile or (2) the board is wrongfully refusing the demand. The article addresses: (1) the court's rationale for its decision; (2) the court's disagreement with prior case law; and (3) the potential impact on derivative litigation involving Delaware corporations if the decision survives appeal.