Stinson Leonard Street Dodd Frank

MAKING SENSE OF DODD-FRANK

The Dodd-Frank Act has broad and deep implications that will touch every corner of financial services and multiple other industries. This site, developed and maintained by attorneys at Stinson Leonard Street, is dedicated to making sense of this complex legislation and helping businesses understand how it will affect them specifically. Our Bloggers »

Dodd-Frank

Delaware Supreme Court Scolds Special Committee Member that Joins Law Firm

by   |   June 18, 2017

The Delaware Supreme Court upheld the Chancery Court decision in Chester County Retirement Systems v. Collins et al.  In so doing, it noted one troubling aspect of the record as follows:

The plaintiff’s complaint pointed out the failure of the target to the merger to disclose that the chairman of its special committee was considering joining the special committee’s outside counsel as a partner. That fact was disclosed within weeks after the merger’s closing by the law firm in a hiring announcement. Although we, like the Court of Chancery, conclude that this fact was not material, one can understand why it caught the attention of the plaintiff, and prudence would seem to have counseled for bringing it to light earlier, especially given that the chairman’s intention to become a partner at that firm was going to become public in any event. Given when the eventual disclosure was made, the special committee chair and the committee’s outside lawyers presumably knew that this potential relationship was at

Even though we agree that this development was not material, the failure to disclose it in these circumstances nevertheless raised needless questions, in a high-salience context in which both cynicism and costs tend to run high anyway. Both of those factors increased here simply because of the fact that the chairman’s new relationship with outside counsel was disclosed after, and not before, the votes were counted. That said, the Court of Chancery correctly analyzed this and the other alleged disclosure deficiencies and found that the vote was fully informed and as a result the business judgment rule applied.