The most noteworthy cases this month are the following:

•     Judge Wood, writing for the Seventh Circuit Court of Appeals, affirmed the dismissal of claims by shareholders of an acquired corporation that their company’s financial adviser failed to advise them on hedging against losses in the shares of the acquirer.  The court found that the claim was properly brought as direct, and not derivative, but that the financial adviser owed no such duty to the plaintiff shareholders.  Its agreement was merely to provide a fairness opinion to the corporation.  The court also found that the statute of limitations barred the claims.

•     Chancellor Chandler of the Delaware Chancery Court granted in part and denied in part a motion to dismiss claims that a company’s sales process was flawed, by putting an officer seeking a management buyout in charge of the search process.  The court found that demand was excused, because the merger process was so obviously flawed that the board was grossly negligent.  However, gross negligence did not rise to the level of bad faith, so the directors’ breach of the duty of care was sheltered by the certificate’s exculpatory provision.  Claims could proceed, though, against the officer who organized the management buyout.

•     Vice Chancellor Strine of the Delaware Chancery Court held for defendants who had been convicted, finding they had a right to advancement while appealing those convictions.  The “final disposition” of the action, terminating the advancement obligation, was not the initial sentencing of the defendants but the conclusion of the action after all appeals of right had expired.  Appealing a conviction was not an affirmative initiation of an action but a continuation of the defense.  Eliminating the advancement right before appeals were taken would have various perverse results and was contrary both to the ordinary understanding of the language and the interests to be protected by advancement.

•     Vice Chancellor Lamb of the Delaware Chancery Court awarded defendants $250,000 in litigation fees, about a quarter of what they requested.  The court found that the amount of fees was unreasonable in light of the very limited briefing covered by the fee award.  Defendants also duplicated too much of the work.

•     Vice Chancellor Noble of the Delaware Chancery Court held that defendants had not waived their attorney-client privilege with respect to emails regarding plaintiff’s role in a settlement.  The parties disputed whether the plaintiffs had any role in achieving a lucrative settlement, and hence able to receive attorneys’ fees.  The defendants hadcarefully structured their argument based on objective, non-privileged sources and consequently had not put the content of their communications at issue.  Nor were the emails necessary for the resolution of the controversy.

•     Vice Chancellor Strine of the Delaware Chancery Court denied a company’s motion for summary judgment on an appraisal demand as untimely presented.  The shareholder presented such a demand in response to a notice, but the merger was delayed, and the demand arrived before the merger.  The court held that such a demand was premature and legally ineffective.  However, much of the fault rested with the corporation making unclear communications about the timing and nature of the need for demand, so it could not use the defense.

•     Vice Chancellor Parsons of the Delaware Chancery Court granted plaintiffs’ motion to sanction attorneys for an acquirer in litigation by representatives of the acquired company, because the former interviewed former employees of the acquired ex parte and used their documents, after being put on notice of claims of attorney-client privilege.  The court rejected claims of backing up a former attorney’s computer, though, absent evidence that files were accessed.  The conduct was not so egregious as to warrant the dismissal of claims, but the court disqualified individual attorneys who participated in the unethical action (though not the full firm) and granted partial attorneys’ fees and expenses.

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