November 02, 2018

MONTH-IN-BRIEF: Corporations, LLCs & Partnerships

Lawrence A. Goldman, Tarik Haskins

Corporate Governance

Activist Investor Aided and Abetted A Breach of Fiduciary Duties; No Damages Awarded

By Eric S. Klinger-Wilensky

In In re PLX Technology Inc. Shareholders Litigation (Del. Ch. Oct. 16, 2018), the Court of Chancery held that an activist investor aided and abetted breaches of fiduciary duty by a corporation’s board of directors in connection with the board’s approval of a sale transaction.  The board designee of the investor failed to share with the board certain information obtained from the buyer prior to signing.  The Court also found that the directors breached their duty of disclosure by failing to disclose that information to stockholders, as well as by making materially misleading disclosures describing a set of projections.  The Court, however, awarded no damages, citing, in part, the fact that the transaction was an arm’s-length transaction arising from a sale process that “was sufficiently reliable to exclude the plaintiffs’ damages contention.” The opinion contains detailed discussions of Delaware law on aiding and abetting liability, disclosures and sale processes.

Tarik Haskins

Partner; Morris, Nichols, Arsht & Tunnell LLP

Tarik is a partner in the Commercial Law Counseling Group. His practice covers a range of commercial transactions including mergers and acquisitions, secured financings, joint ventures, and business counseling.

Lawrence A. Goldman

Counsel, Gibbons P.C.

Larry, a member of the Corporate Department of Gibbons P.C., counsels middle market and smaller public company clients on a broad array of corporate and transactional matters, focusing on mergers and acquisitions (domestic and cross-border); capital formation and finance; governance; private placements and securities law compliance; distressed business restructuring and the corporate aspects of bankruptcy reorganization; and the organization and governance of joint ventures. He has substantial experience representing audit committees and other special board committees in corporate governance and internal investigation matters. He is a frequent speaker nationally on corporate matters, with a particular emphasis on the organization and operation of businesses as limited liability companies or other alternative entities. He is the author of The New Jersey Limited Liability Company Forms and Practice Manual and has been engaged as an expert witness on alternative entity governance and other corporate issues in litigation arising from transactional matters. Larry is a graduate of Colgate University, Boston University School of Law, and New York University School of Law (LL.M Taxation).