An extensive body of law has evolved regarding special committees, and Richards Layton has been at the forefront of this area of law from the start. Our lawyers are skilled in addressing the legal, strategic and practical issues that frequently arise in special committee matters, including the formation of committees, the proper scope of the investigation, interviewing key persons, drafting reports, negotiating appropriate resolutions, and documenting the overall process. We work to mitigate the risks that special committees face, ensure that committee members satisfy standards of director conduct, and help obtain the best outcome for the company. We understand that many investigations require a practical approach and sensitivity to the companies’ ongoing operations, as well as other legal and financial considerations. Richards Layton strongly believes in a bespoke approach to protecting its committee clients while helping to obtain the best result for the business.
Our firm has substantial experience representing special litigation committees formed to address matters involving stockholder derivative claims. Indeed, in 1981 we represented the special litigation committee in the seminal case of Zapata Corp. v. Maldonado, the first case to recognize the availability of the special litigation committee procedure under Delaware law. Since Zapata, we have acted extensively as counsel to special litigation committees, including those chartered to deal with derivative litigation involving corporations.
Since then, Richards Layton has frequently acted as counsel to special committees formed to investigate matters raised in stockholder demands, whistleblower complaints, and similar circumstances. For example, we have frequently represented committees of the boards of directors of major corporations formed to consider issues such as alleged stock price manipulation, securities violations, breach of the duty of oversight, other alleged breaches of fiduciary duty, related party transactions, harassment, and many regulatory issues such as antitrust or insider trading issues.
We Wrote the Book on Special Committee Practice
Two of our directors wrote Special Committees: Law and Practice. This comprehensive book gives practitioners a thorough working knowledge of special committee law, how to best utilize special committees, and the role of special committee members. Special Committees: Law and Practice is an authoritative reference on this important area of law—and a testament to the depth of knowledge and practical experience that our firm brings to advising special committees.
Select Experience
- Richards Layton represented a special litigation committee of the board of a biotechnology company in connection with its investigation regarding a purported stockholder’s demand that the company dismiss its suit against the stockholder. The demand alleged that the company’s suit was frivolous, demonstrated gross mismanagement by the board, and was a waste of company assets. The committee ultimately decided to dismiss the claims after its investigation.
- Richards Layton represented a special litigation committee of the board of a publicly traded technology and social media company in its investigation regarding securities cases filed in California district court, and related derivative actions filed in California state court and Delaware Chancery Court. The committee ultimately held that the settlements were appropriate and in the best interests of the company and its stockholders. The settlements were then approved by the California state and federal courts, and the Delaware action was dismissed.
- We represented a special committee of a technology company’s board in connection with its investigation of potential Delaware fiduciary claims related to alleged false and misleading public disclosures.
- Richards Layton represented a special committee of a midwestern financial institution in connection with a purported whistleblower complaint relating to concerns regarding harassment, discrimination, retaliation, regulatory issues, antitrust laws, securities laws, corporate governance, and diversity, equity, and inclusion.
- We represented the special committee of the board of a medical device company regarding its investigation of potential Caremark and other Delaware fiduciary duty claims concerning breaches of a deferred prosecution agreement.
- Richards Layton was counsel to a special committee of the board of a global biopharmaceutical company in connection with its investigation of potential Delaware fiduciary claims relating to off-label drug marketing and promotion and False Claims Act claims.
- Richards Layton represented independent directors of a cryptocurrency company investigating potential wrongdoing in financial practices involving users, including in connection with potential lending and insolvency.
- We represented the audit committee of a publicly traded natural gas company in connection with an internal investigation regarding anonymous reports concerning potentially excessive travel expenses incurred by a senior company fiduciary.
- Richards Layton represented a committee of the board of a publicly traded technology and social media company in connection with its evaluation of whether certain litigation settlements would improperly benefit company directors.
- We represented a special committee of the board of a Fortune 500 company in connection with its investigation of potential Caremark claims relating to government antitrust investigations. We requested and received millions of pages of company documents, conducted over 30 interviews, and assessed the company’s procedures and controls regarding FCPA and antitrust compliance.
- Richards Layton represented a special committee of a digital media company in connection with its investigation into purported wrongdoing by purportedly interested officers in connection with a strategic review.
- Richards Layton represented a Fortune 500 company in connection with investigating allegations of sexual harassment and other inappropriate behavior by a key officer. We conducted a highly expedited investigation resulting in action taken against the officer.
- We represented the custodian of a cryptocurrency company in connection with investigating various claims, including allegations brought in the Court of Chancery relating to fiduciary duties and other potential regulatory issues spanning the globe. A Richards Layton director served as the custodian of the entire cryptocurrency company.
- Richards Layton was counsel to a special committee of the board of a sanitation company in connection with its investigation regarding alleged false and misleading statements concerning the company’s financial condition and internal controls.
- We assisted a special committee of the board of a Fortune 500 company with its investigation regarding potential Virginia fiduciary claims related to alleged anti-competitive practices.
- Richards Layton served as counsel to a special committee of the board of a Fortune 500 company in connection with its investigation of potential Virginia fiduciary claims and federal securities law violations regarding certain alleged public misstatements and omissions and purported insider trading.
- Richards Layton was counsel to a special committee of the board of a Fortune 500 company to assist with its investigation of potential fiduciary duty claims relating to alleged antitrust violations.
- We represented a special committee of the board of a Fortune 500 company in connection with its investigation of potential Virginia fiduciary claims and federal securities law claims relating to the hiring and employment of a top officer.
- Richards Layton represented a publicly traded technology company in connection with its investigation of fiduciary claims regarding alleged false and misleading public disclosures and insider trading.
- Richards Layton was counsel to a special committee of the board of a telecommunications company in connection with its investigation of potential Delaware fiduciary claims related to a business acquisition and alleged false and misleading disclosures.
- We represented a special committee of the board of a publicly traded technology company to assist with its investigation of potential Delaware fiduciary claims concerning accounting errors that required the company to restate its financial statements.
- Richards Layton was counsel to a special committee of the board of a sports media company in connection with its investigation of potential fiduciary claims regarding the board’s alleged failure to supervise or terminate for cause a senior executive officer who engaged in wrongdoing and misused company funds.
- Richards Layton represented a special committee of the board of a biotechnology company in connection with its investigation regarding a purported stockholder’s demand that the company dismiss its suit against the stockholder. The demand alleged that the company’s suit was frivolous, demonstrated gross mismanagement by the board, and was a waste of company assets.
- We were counsel to the audit committee of the board of a Fortune 500 company regarding its investigation of potential fiduciary claims in connection with alleged customer mistreatment, fraud, and other corporate wrongdoing that purportedly led the company to make false and misleading public disclosures regarding its business practices.
- Richards Layton represented a special committee of the board of a publicly traded apparel company in connection with its investigation of potential fiduciary claims related to alleged sexual misconduct by a senior company executive, the board’s oversight of and response to the alleged misconduct, and the board’s review and approval of certain related-party transactions.
- We assisted a special committee of the board of a Fortune 500 company with its investigation regarding alleged violations of state and federal law related to the company’s business practices and royalty payments, as well as potential Caremark claims against the company’s directors and officers. We reviewed the company’s internal investigation, conducted a supplemental investigation, and analyzed potential claims.
- Richards Layton served as counsel to a special committee of the board of an oil and gas company and assisted with its investigation of potential Caremark claims regarding alleged violations of federal and state air-quality laws and regulations.
- Richards Layton represented the special committee of the board of a publicly traded electronics company in connection with its investigation of potential Delaware fiduciary claims concerning company insider stock repurchases that were not disclosed as related-party transactions. We also represented the special committee in a derivative suit in which the plaintiff alleged that the special committee had wrongfully refused the plaintiff’s demand. The plaintiff’s complaint was dismissed with prejudice.
- We represented a special committee of the board of a Fortune 500 company with regard to its investigation of potential fiduciary claims and violations of the company’s federal securities disclosure and tax reporting obligations in connection with executives’ alleged personal use of the company aircraft.
- Richards Layton assisted a special committee of the board of a publicly traded fashion company with its investigation of potential fiduciary claims in connection with the company’s decision to approve an amendment to a key employee’s employment agreement, as well as potential violations of the Sarbanes-Oxley Act regarding the company’s decision to modify and forgive a loan to the employee.
- We were counsel to a special committee of the board of a petroleum products retailer in connection with its investigation of fiduciary duty claims governed by Maine law, including claims related to purportedly excessive executive compensation, company investment decisions, and a potential company sale.
- Richards Layton represented a special committee of the board of a publicly traded battery technology company in connection with its investigation of potential fiduciary duty claims related to an allegedly defective vote concerning a charter amendment to extend the SPAC’s termination date. We filed a Section 205 petition to validate an amendment to the SPAC’s charter that extended the SPAC’s termination date, a subsequent de-SPAC merger, an associated de-SPAC charter, and an issuance of common stock following the de-SPAC merger.
- We represented a special litigation committee of the board of a publicly traded telecommunications company in connection with its investigation of fiduciary duty claims related to the board’s decision to vote in favor of a merger transaction that caused director-owned stock options to vest.
Delaware Enacts Landmark Amendments to the General Corporation Law
March 26, 2025
On March 25, 2025, Governor Matt Meyer signed bipartisan legislation effecting important changes to the Delaware General Corporation Law (“DGCL”). This landmark legislation, widely endorsed by business groups and leading national law firms, is designed to reduce excessive stockholder litigation and reaffirm a foundational public policy of Delaware corporate law: deference to the decisions of independent…
The Standing Demand Committee as a Response to Entire Fairness Litigation
Delaware Business Court Insider | February 25, 2025
The prospect of costly entire fairness litigation is not limited to the M&A transactions that have historically been the focus of stockholder litigation and can encompass, for example, insider-led financings and compensation awards to influential founders. And when it arises, the risk of entire fairness litigation can alone supply plaintiffs with considerable settlement leverage.…
Recent Developments in Delaware Corporate Law
Spring 2025
Over 125 Years of Helping Clients Navigate the Intricacies of Delaware Corporate Law Richards, Layton & Finger has been defining Delaware law since 1899. Continuing our long tradition of providing insight into the evolution of our state’s influential laws, this publication highlights recent Delaware corporate and alternative entity cases as well as statutory developments in our…
Richards Layton Discusses the Standing Demand Committee in Derivative Litigation
The CLS Blue Sky Blog | February 18, 2025
Recently, corporations and fiduciaries have faced enhanced litigation risk arising from entire fairness claims challenging related-party transactions and other transactions implicating unique interests of corporate fiduciaries. This risk is most pertinent for controlled public corporations, although it has also affected public and private corporations with significant non-majority holders. The prospect of costly entire fairness litigation has…
Proposed Legislation to Amend the Delaware Corporation Law
February 18, 2025
On February 17, 2025, legislation to amend the Delaware General Corporation Law (the “DGCL”) was introduced to the Delaware General Assembly. If enacted, the legislation would, among other things: Amend Section 144 of the DGCL to provide a safe harbor for transactions in which a director or officer or a controlling stockholder may have a conflict…
February 10, 2025
Trends and Risks in Entire Fairness Litigation Recently, corporations and fiduciaries have faced enhanced litigation risk arising from entire fairness claims challenging related-party transactions and other transactions implicating unique interests of corporate fiduciaries. This risk is most pertinent for controlled public corporations, although it has also affected public and private corporations with significant non-majority holders. …
A Corporate Governance Solution to the Inefficiencies of Entire Fairness
The Business Lawyer | Fall 2024
In In re Match Group, Inc. Derivative Litigation, the Delaware Supreme Court confirmed that non-ratable transactions between corporations and their controlling stockholders are subject to review under the onerous entire fairness standard unless the transaction is approved by both a fully empowered committee of independent directors and a fully informed and uncoerced vote of the disinterested…
Trulia 2.0? The Case for a ‘Plainly Beneficial’ Standard
Delaware Business Court Insider | November 11, 2024
In 2016, the Delaware Court of Chancery held in In re Trulia Inc. Stockholder Litigation that what it called “disclosure settlements”—settlements in which a class of stockholders solely received supplemental proxy disclosures in exchange for a classwide release of claims—“would be met with continued disfavor unless the supplemental disclosures address a plainly material misrepresentation or…
Delaware Journal of Corporate Law | 2024
In early 2023, the Delaware Court of Chancery was inundated with petitions under Section 205 of the DGCL filed by former SPACs seeking to have their capital structures validated after the Court. The petitions followed a ruling granting a fee award in Garfield v. Boxed, Inc., in which the Court found a challenge to the…
2024 Amendments to the Delaware General Corporation Law
Insights | September 2024
On July 17, 2024, the Governor of the State of Delaware signed legislation enacting several significant changes to the Delaware General Corporation Law (DGCL). The 2024 amendments became effective on August 1, 2024, and apply to all contracts made by a corporation, all agreements, instruments or documents approved by the board of directors, and all agreements…
‘MFW’ Just Turned 10, but Is It Worth the Candle?
Delaware Business Court Insider | July 3, 2024
In 2014, the Delaware Supreme Court held in Kahn v. M&F Worldwide (MFW) that the business judgment rule applies to a transaction that would otherwise be subject to the exacting entire fairness standard of review due to the presence of a conflicted controlling stockholder so long as the parties condition the transaction at the outset…
Recent Developments in Delaware Corporate Law
Spring 2024
125 Years of Helping Clients Navigate the Intricacies of Delaware Corporate Law Richards, Layton & Finger has been defining Delaware law since 1899. Continuing our long tradition of providing insight into the evolution of our state’s influential laws, this publication highlights recent Delaware corporate and alternative entity cases as well as statutory developments in our state.Our…
Delaware Business Court Insider | February 14, 2024
In Grabski v. Andreessen, C.A. No. 2023-0464-KSJM (Del. Ch. Feb. 1, 2024), the Delaware Court of Chancery declined to dismiss fiduciary claims against officers and directors of Coinbase Global, Inc. who sold shares in a going-public transaction. In the opinion, the court, which has in recent years decided a number of cases involving companies going public…
Delaware Laws & Programs Affecting Business – 2024 Edition
2024
Delaware Laws & Programs Affecting Business presents an introduction to Delaware and an overview of the laws and programs relating to doing business in the state. Our economy is diverse, and our legal framework is intentionally crafted to foster robust business activity. Our widely copied business laws lead the nation in clarity and predictability. Government…
The Nature of Fiduciary Duties Owed to Limited-Life Corporations
Business Law Today | December 13, 2023
The fiduciary duties of directors of a Delaware corporation are frequently summarized as follows: “[T]he fiduciary relationship requires that the directors act prudently, loyally, and in good faith to maximize the value of the corporation over the long-term.” Embedded within that formulation is a temporal element: the duty is tied to the deliberately amorphous “long term”…
Recent Complaint Unsuccessfully Challenged ‘Standard Plain Vanilla’ Rights Plan
Delaware Business Court Insider | August 16, 2023
In Building Trades Pension Fund of Western Pennsylvania v. Desktop Metal, a stockholder plaintiff brought derivative claims against Desktop Metal, Inc., alleging that a provision of the company’s rights plan, which was adopted in connection with a proposed merger transaction, impermissibly chilled the free exercise of stockholder voting with respect to the merger agreement at an…
‘In re Lordstown Motors’: Providing Relief From ‘Untold Chaos’
Delaware Business Court Insider | March 1, 2023
In In re Lordstown Motors, the Delaware Court of Chancery provides a roadmap for former special purpose acquisition companies (SPACs) to validate capital structure uncertainties stemming from the same court’s recent decision in Garfield v. Boxed. In Lordstown, the court makes clear that Section 205 of the Delaware General Corporation Law (the DGCL) is available as…
Recent Developments in Delaware Corporate Law
Spring 2023
This publication, which highlights recent corporate and alternative entity cases and statutory developments in Delaware, continues our long tradition of providing insight into the evolution of Delaware law. Our corporate and alternative entities teams, the largest and most recognized in the state, play a crucial role in Delaware. For decades we have contributed to the development…
Three Lessons From Three Years of Post-‘Marchand’ Caselaw
Delaware Business Court Insider | November 16, 2022
Just over three years ago, the Delaware Supreme Court held in Marchand v. Barnhill that the failure to maintain an internal monitoring system that could have prevented a deadly listeria outbreak gave rise to an actionable oversight claim against the board of directors under In re Caremark International Inc. Derivative Litigation. Although the Delaware Supreme Court…
Amendments to the DGCL Permit Officer Exculpation
Insights | October 2022
On August 1, 2022, Section 102(b)(7) of the Delaware General Corporation Law (the DGCL) was amended to permit a corporation to include in its certificate of incorporation a provision to eliminate or limit the monetary liability of certain corporate officers for breach of the duty of care. Previously, the protection afforded by a so-called exculpatory provision…
The Failure of the ‘Failing Business’ Exception Under Delaware Law
Delaware Business Court Insider | June 22, 2022
In Stream TV Networks v. SeeCubic, the Delaware Supreme Court vacated a permanent injunction imposed by the Delaware Court of Chancery that prohibited Stream TV Networks, Inc. and the Rajan brothers, who collectively held a majority of the company’s stock, from blocking a negotiated transfer of all of Stream’s assets to satisfy its secured creditors. In…
Delaware Custodians, Receivers and Trustees (Oh My!)
Delaware Business Court Insider | March 9, 2022
Under Delaware law, the board of directors is generally responsible for overseeing the business and affairs of the corporation. However, where the board is incapable or unwilling to act and in other unique circumstances described below, the Delaware General Corporation Law allows stockholders, directors, creditors and other interested parties to attempt to displace the board’s decision-making…
Recent Developments in Delaware Corporate Law
Spring 2022
This publication, which highlights recent corporate and alternative entity cases and statutory developments in Delaware, continues our long tradition of providing insight into the evolution of Delaware law. Our corporate and alternative entities teams, the largest and most recognized in the state, play a crucial role in Delaware. For decades we have contributed to the development…
Amendments to the DGCL Permit Captive D&O Insurance
The Harvard Law School Forum on Corporate Governance | February 24, 2022
The Delaware General Assembly has approved legislation amending Section 145 of the Delaware General Corporation Law (the “DGCL”) to authorize a Delaware corporation to use captive insurance, which is generally defined as insurance provided by or through a wholly-owned subsidiary funded by the corporation, to protect its current and former directors, officers and other indemnifiable persons…
Rosenbaum v. CytoDyn Inc.: A Review of Advance Notice Bylaws
Insights | December 2021
In Rosenbaum v. CytoDyn Inc., the Delaware Court of Chancery denied an insurgent group’s challenge to the rejection of their notice of director nominations by CytoDyn Inc. The Court’s opinion brings some clarity to an area of the law that “may not be as settled as one would think,” providing a framework for reviewing actions taken…
Dodd-Frank and Corporate Governance
Directors & Boards | 2021 Fourth Quarter
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was enacted in response to perceived excesses and other dysfunction in the financial markets that precipitated the 2008 financial crisis. The public discourse surrounding the adoption and implementation of Dodd-Frank — including the notion that institutions deemed “too big to fail,” unless appropriately restrained, would take…
SPAC Mergers Challenged for an Alleged Statutory Foot-Fault
Delaware Business Court Insider | November 17, 2021
Stockholder-plaintiffs have filed a number of complaints in the Delaware Court of Chancery challenging at least five mergers involving Delaware special purpose acquisition companies (SPACs) in the last four months alleging that the SPAC’s failure to solicit a “class vote” of the SPAC’s Class A Common stockholders in connection with certain amendments to the SPAC’s certificate…
Three Opinions on Fraud on the Board
Harvard Law School Forum on Corporate Governance | September 8, 2021
In a footnote in a two-page order issued in 2018, the Delaware Supreme Court quietly reminded corporate law practitioners that, per the 1989 case of Mills Acquisition v. Macmillan, a complaint seeking post-closing Revlon damages can survive a motion to dismiss without pleading nonexculpated breaches of fiduciary duty by a majority of directors so long as…
What Is Fraud on the Board? 3 Opinions Seek to Answer That Question
Delaware Business Court Insider | August 18, 2021
In a footnote in a two-page order issued in 2018, the Delaware Supreme Court quietly reminded corporate law practitioners that, per the 1989 case of Mills Acquisition v. Macmillan, a complaint seeking post-closing Revlon damages can survive a motion to dismiss without pleading nonexculpated breaches of fiduciary duty by a majority of directors so long…
Insights | June 2021
Proposed legislation would amend the Delaware General Corporation Law, the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act and the Delaware Revised Uniform Partnership Act to clarify, among other things, the treatmentof capital stock owned by the corporation, provide a safe harbor procedure for the ratification of void and voidable acts and…
The Delaware Court of Chancery Enjoins “Extreme, Unprecedented” Stockholder Rights Plan
Insights | March 2021
In The Williams Companies Stockholder Litigation, the Delaware Court of Chancery enjoined a stockholder rights plan, having described it as having “an extreme, unprecedented collection of features.” Nevertheless, the opinion does not signal a major shift in Delaware law with respect to the adoption and maintenance of stockholder rights plans.…
Elimination of Statutory Barriers May Lead to New Wave of Public Benefit Corporations
Delaware Business Court Insider | February 24, 2021
On August 1, 2013, a new subchapter of the General Corporation Law of the State of Delaware (the “DGCL”) was added to enable Delaware for-profit corporations to be incorporated as or to become a Delaware public benefit corporation, or “PBC.” Rather than being operated solely to maximize value for stockholders, like traditional corporations, PBCs are required…
Delaware Laws & Programs Affecting Business – 2020 Edition
2020
Delaware Laws & Programs Affecting Business presents an introduction to Delaware and an overview of the laws and programs relating to doing business in the State. Our economy is diverse, and our legal framework is intentionally crafted to foster robust business activity. Our widely copied business laws lead the nation in clarity and predictability. Government…
Business Law Today | January 6, 2021
Recent events have spurred a social justice movement that has called for companies to commit to inclusion and diversity, specifically in the composition of their boards of directors.* In light of the foregoing, on December 1, 2020, Nasdaq filed a proposal with the U.S. Securities and Exchange Commission (“SEC”) that, if approved by the SEC, would condition…
Delaware Supreme Court on Costs in an Appraisal Proceeding
Insights | December 2020
In a recent decision, the Delaware Supreme Court held that an appraisal proceeding did not involve a violation of any law or rule and therefore did not constitute a “Securities Claim” giving rise to coverage for losses under the terms of a directors’ and officers’ insurance policy. It provided guidance regarding how the Delaware courts will…
Recent Developments Regarding ‘Wolf Pack’ Provisions in Rights Plans
Delaware Business Court Insider | November 11, 2020
A traditional stockholder rights plan remains one of the most effective tools a board of directors may use to protect the corporation’s stockholders from the threat of a hostile or abusive takeover. Rights plans often include specific provisions designed to address unique threats or issues facing the corporation. One such provision is an “acting in concert”—or…
Court of Chancery Permits $4.3 Billion Interim Distribution in Altaba Dissolution
Delaware Business Court Insider | November 4, 2020
In In re Altaba, the Delaware Court of Chancery, ruling at a preliminary stage of the dissolution process, authorized Altaba Inc. to make an interim liquidating distribution of up to $4.3 billion to its stockholders. Vice Chancellor J. Travis Laster’s opinion is noteworthy because it is one of the few opinions to authorize an interim distribution…
Special Committees: Law and Practice (2nd edition)
2014
Written by knowledgeable practitioners in corporate law and special committee practice, this comprehensive book provides in-depth explanations on the uses, benefits and disadvantages of special committees.