Corporate governance issues often lay at the heart of complex litigation that seeks to place fault and responsibility for M&A transactions gone sour, corporate losses or stock price drops on corporations, their fiduciaries and controlling stockholders. Because Olshan represents both plaintiffs and defendants in such disputes, we know how to build strong, trial-ready cases.
Corporate Governance Litigation
Olshan’s corporate governance litigators have broad experience representing companies, boards, special committees and individual directors across multiple industries and jurisdictions on a spectrum of issues critical to their companies' successful business operations and corporate governance matters. Our Corporate/Securities Law and Shareholder Activist teams’ comprehensive understanding of current governance requirements, best practices and SEC reporting requirements are complemented by Olshan’s litigation capabilities, particularly in the Delaware Court of Chancery, the most influential court on corporate governance matters in the United States.
We not only represent clients in litigation, but often provide real-time advice in tandem with our Shareholder Activist, Corporate/Securities Law, Securities Litigation & Enforcement and Investigations colleagues on a myriad of issues, including proxy disclosures, hostile offers, poison pills, busted or troubled M&A deals, stockholder demands, whistleblower allegations, SEC and other regulatory inquiries, alleged breaches of fiduciary duties and other challenges to corporate governance.
Directors & Officers Litigation
Directors & Officers (“D&O”) litigation involves claims for liability made against directors and officers in their capacity as fiduciaries of public and private corporations. We routinely represent directors and officers in derivative and class actions arising out of tender offers, service on special committees, going private transactions, mergers and acquisitions and other corporate actions in the Delaware Court of Chancery, New York’s state and federal courts and other courtrooms across the country. As an integral part of directors & officers litigation we assist directors and officers with claims for indemnification and advancement and in obtaining insurance coverage.
Olshan Client Blocks Freeze Out By Obtaining Status Quo Order in Delaware Court of Chancery
Olshan was lead counsel in representing Israeli company Paltop Advanced Dental Solutions Ltd. and its founder in connection with a bitterly fought battle with the officers and directors of Keystone Dental, Inc., the Delaware company with which Paltop had merged. Though the combined company’s governing documents required that the company be governed equally by Paltop and Keystone board representatives, and that Paltop would continue to be run by its founder, in March 2020, Keystone’s officers and directors took aggressive and unlawful actions by the officers and directors to freeze him out. Olshan moved swiftly, filing for expedited relief in the form of a motion for a Status Quo Order, in the Delaware Court of Chancery. On May 4 and May 13, 2020, the Court issued Status Quo Orders which restored governance of the company to the status quo as it existed before Defendants’ unlawful activities and protected Olshan’s clients by setting forth in exacting detail the actions Defendants were prohibited from taking. These Orders were critical to the client, as without them, Defendants would have taken over all control of the Company. Lori Marks-Esterman and Adrienne Ward led the litigation team, with support by Shareholder Activist Partner Elizabeth Gonzalez-Sussman. The Orders can be read here and here.
Delaware Supreme Court Affirms that Olshan Client Did Not Unfairly Dilute Minority Stockholders
On November 18, 2019, the Delaware Supreme Court upheld the August 2018 ruling by the Delaware Court of Chancery, reached after a five-day trial, that plaintiffs had no standing to bring claims that Olshan’s client Glenhill Capital Management LP, former controlling stockholder of furniture company Design Within Reach, Inc. (DWR), had unfairly diluted minority stockholders of DWR prior to its acquisition by Herman Miller, Inc. The Supreme Court also let stand the Chancery Court’s decision that the $170 million merger with Herman Miller Inc. should not voided due to inadvertent mistakes made by DWR in effecting a reverse split and later conversion of Glenhill’s preferred stock into common stock, instead affirming the Court of Chancery’s judicial validation of DWR’s ratification of the defective acts under 8 Del. C. § 205. Olshan litigation partners Adrienne Ward and Brian Katz represented Glenhill in this matter. The Supreme Court and underlying Court of Chancery decisions are available here, here and here.
Delaware Supreme Court Affirms Trial Victory by Potomac Capital Partners II, LP
Olshan acted as lead defense counsel at trial successfully representing shareholder activist client Potomac Capital Partners II LP, which had gained a board seat following an activist campaign, in Delaware Court of Chancery. On October 16, 2018, the Court determined that the shareholders of PLX Technology Inc. failed to prove that the alleged breaches of fiduciary duty by its directors caused them any financial harm in approving a sale of PLX to a competitor, and that Potomac did not aid and abet those breaches. In deciding that plaintiffs had failed to prove damages, the Court found that the financial projections relied upon by the shareholders’ valuation expert were overly aggressive and unlikely to be achieved. By Order, dated May 16, 2019, the Supreme Court of Delaware affirmed the Chancery Court’s finding that the Plaintiffs failed to prove damages. Thomas Fleming and Lori Marks-Esterman represented Potomac, with Ms. Marks-Esterman acting as lead trial counsel
Olshan Obtains Injunction Blocking Proposed Three-Way Merger: Court of Chancery Finds that Conflicted Directors Breached Fiduciary Duties by Agreeing to Preclusive Deal Terms in an “Informational Vacuum”
On March 11, 2019, Olshan clients FrontFour Capital Group LLC and FrontFour Master Fund, Ltd. prevailed after an expedited trial on the merits on class action claims that the Board of Directors of Medley Capital Corporation (“MCC”) breached their fiduciary duty in approving a merger transaction with two of MCC’s affiliates, including MCC’s investment adviser (MDLY), which was controlled by twin brothers Brook and Seth Taube, MDLY’s Co-CEOs. After a two-day trial, the Court concluded that the Special Committee lacked independence and the Taubes pushed the merger through on an “aggressive timeline” while withholding material information from the Special Committee in order to alleviate the “enormous financial pressure” facing MDLY and secure “lucrative employment contracts” for themselves. The Court found that the Special Committee “sat supine” during negotiations over the proposed transaction, allowing the Taube brothers to dominate the process and extract a “huge premium” on behalf of MDLY stockholders while MCC stockholders received none. The Court further found that “that the price being offered is well below” MCC’s fair value. Applying the entire fairness standard, the Court enjoined the proposed transaction pending corrective disclosures. Under the settlement that followed the Court’s decision, FrontFour entered into a Corporate Governance Agreement with MCC and received board representation. In a separate decision, the Court also awarded legal fees to Olshan and Delaware counsel, recognizing the corporate benefit provided to MCC. Partners Lori Marks-Esterman and Adrienne Ward led the litigation effort, supported by members of Olshan’s Shareholder Activist team, including Steve Wolosky, Ron Berenblat and Ryan Nebel. The decision can be read here.
Delaware Supreme Court Affirms Grant of Summary Judgment Dismissing Claims Against Former CFO
On December 15, 2017, the Delaware Supreme Court affirmed the grant of summary judgment to the former CFO of a Delaware company, Southern China Livestock Inc., after failed effort to go public. While a court appointed receiver had alleged that the CFO had misappropriated funds, the Court of Chancery had held that a settlement and general release entered into by the company before the receiver’s appointment was supported by good consideration. Adrienne Ward served as lead counsel. The decision can be read here.
