Delaware Law Series

Splitting Caremark’s Atom

Posted by Ryan Bubb (USC) and Gabriel Cohen (U.S. District Court, Eastern District of PA), on

Monday, August 24, 2026

Agency costs, Board monitoring, Caremark, Corporate compliance, delaware, Delaware law, duty of obedience, Duty of oversight, Public enforcement
More from: Gabriel Cohen, Ryan Bubb

Ryan Bubb is a Professor of Law and the Director of Strategic Initiatives at the USC Gould School of Law, and Gabriel Cohen is a Law Clerk on the U.S. District Court for the Eastern District of Pennsylvania and will join Bernstein Litowitz Berger & Grossmann LLP in the fall. This post is based on their recent paper and is part of the Delaware Law Series; links to other posts in the series are available here.

In December 2025, Vice Chancellor Will dismissed a derivative claim against a director whose sexual harassment of employees had produced roughly $1.6 million in liability for the corporation. Such “interpersonal” conduct, she held in Brola v. Lundgren, was “not a matter of corporate internal affairs,” and “[t]he legal system provided a remedy for his wrongdoing through New York’s employment laws.” She warned against turning the duty of loyalty into “a general morality code” and inviting “doctrinal sprawl” that would reach “a breakroom fistfight, a defamatory social media post, or theft of office supplies.”

Delaware and New York State Courts Reject Unusual Theory Under the Securities Act

Posted by Amy D. Roy, Robert A. Skinner, and Cole A. Goodman, Ropes & Gray LLP, on

Monday, August 24, 2026

delaware, Delaware courts, Delaware law, GAAP, Investment Company Act, Mutual Fund Accounting, Mutual funds, NAV, Net Asset Value, New York Courts, Section 11, Section 12(a)(2), Securities Act, Securities litigation, Securities regulation
More from: Amy Roy, Cole Goodman, Robert Skinner, Ropes & Gray

Amy D. Roy and Robert A. Skinner are Partners and Cole A. Goodman is a Counsel at Ropes & Gray LLP. This post is based on their Ropes & Gray memorandum and is part of the Delaware Law Series; links to other posts in the series are available here.

In a pair of recent decisions, the Delaware Superior Court and the New York State Supreme Court each dismissed with prejudice nearly identical cases brought against the First Eagle and JPMorgan mutual fund complexes, respectively, relating to their application of industry standard accounting practices. Putting forth an unusual theory under the Securities Act of 1933 (the “Securities Act”), the lawsuits alleged that certain mutual funds’ registration statements were misleading because they failed to disclose that, under the funds’ accounting practices, the funds’ realized income and capital gains were temporarily treated as assets (rather than liabilities) prior to those earnings being distributed to fund shareholders (typically on a quarterly or annual basis). Plaintiffs argued that this allegedly undisclosed practice artificially inflated the funds’ NAV, which caused investors to suffer various forms of harm, including higher asset-based fees and increased tax liabilities. However, plaintiffs’ theories were not grounded in the relevant accounting guidance (ASC 946-320-25-4[1]), which does not (i) require that earnings be immediately classified as liabilities, or (ii) prescribe how frequently a fund should declare distributions.

Dropbox and the Evolving Governance Debate Over Corporate Domicile

Posted by Sarah Abrams, The OakBridge Team, on

Tuesday, August 18, 2026

Corporate Migration, delaware, Delaware law, Dropbox Litigation, Fiduciary duties, Shareholder litigation
More from: Sarah Abrams, The OakBridge Team

Sarah Abrams is the Executive Vice President at The OakBridge Team and the Co-author of The D&O Diary.

The growing movement of public companies to reincorporate outside Delaware has transformed a policy debate into an increasingly significant source of corporate governance litigation. As companies have explored domiciles such as Nevada and Texas, Delaware has responded with legislative reforms, including Senate Bill 21 (“SB 21”), and judicial decisions that seek to clarify the standards governing these transactions.[1]

Against this backdrop, the recently amended complaint challenging Dropbox, Inc.’s reincorporation to Nevada raises important questions regarding the circumstances under which a reincorporation may be challenged as a breach of fiduciary duty.

The Sound of Silence

Posted by Mitu Gulati (University of Virginia), Stephen Choi (NYU), and Molly Ball (University of Virginia), on

Thursday, August 13, 2026

Contract Drafting, Deal Practice, delaware, Delaware law, Judicial Signaling, M&A, Sandbagging
More from: Mitu Gulati, Molly Ball, Stephen Choi

Mitu Gulati is the Warner-Booker Distinguished Professor of International Law at the University of Virginia School of Law, Stephen J. Choi is the Bernard Petrie Professor of Law and Business and Director of the Pollack Center at the New York University School of Law, and Molly Ball is a J.D. candidate at the University of Virginia School of Law. This post is based on their recent article.

In 2018, the Delaware Supreme Court dropped a footnote. In Eagle Force Holdings v. Campbell, Justice Valihura noted that the court had never actually decided whether a buyer who knows that some of the seller’s representations are false can still sue for breach after closing — the practice deal lawyers call “sandbagging.” Then-Chief Justice Strine, dissenting in part, confirmed, in his part of opinion, that Delaware had not yet decided the question.

Many M&A practitioners took the footnotes in Eagle Force as a signal that Delaware law was undecided on sandbagging. Because buyers rely on “pro-sandbagging” rules to protect their bargained-for representations and prevent sellers from opportunistically using the buyer’s due diligence as a shield against liability, the sudden ambiguity caused consternation among practitioners. Practitioners debated whether the signal from footnotes in Eagle Force meant that buyers needed to put in explicit pro sandbagging clauses in M&A contracts. Memos on this theme poured out, including from several prominent law firms including Ballard Spahr, Goodwin Procter, Mayer Brown, Paul Weiss, and Kramer Levin. The ABA ran CLE programming on it. A slide deck from a marquee panel of M&A lawyers at Northwestern’s Securities Regulation Institute put it bluntly: don’t assume silence is safe anymore — put an express pro-sandbagging clause in the contract.

The advice was nearly unanimous. And the market ignored it.

Legacies, Lessons and Launchpads: Charting Delaware’s Course in a New Era

Posted by Justice Karen Valihura (Wilmington Univerity), on

Wednesday, August 12, 2026

Business judgment rule, delaware, Delaware Corporate Law, Delaware law, Delaware Supreme Court, Director Independence, entire fairness, Fiduciary duties, judicial independence
More from: Karen Valihura

Justice Karen Valihura is a Distinguished Professor of Corporate Law and Founding Director of the Corporate Law, Governance and Practice Institute, Farnan School of Law, at the Wilmington University. This post is based on her 2026 Weinberg Distinguished Lecture, and is part of the Delaware Law Series; links to other posts in the series are available here.

It is a great honor for me to be part of the Weinberg Distinguished Lecture series. Thank you for inviting me. My remarks today are solely my own and are not made on behalf of the Delaware Supreme Court or any other person.

As I near the end of my twelve-year term, I have been reflecting on the amazing privilege and honor I have had serving as a Justice on the Delaware Supreme Court. I am so grateful to all who have been part of my journey. In thinking about how to describe it, I was recently inspired by NASA’s stunningly successful Artemis II Mission. That Mission – lasting only 10 days – had a successful launch, lunar fly by and a safe splashdown off the coast of San Diego. One of the Artemis II’s astronauts’ description of their “group activity” could also be used to very accurately describe working as a member of our collegial, collaborative Delaware Supreme Court. They described their “group activity” in terms of functioning as one, embracing mutual accountability, being dutifully linked, and in terms of joy-filled contribution and profound, brother-sister like camaraderie, exemplifying that high-stakes success requires prioritizing human connection.[1] These sentiments describe precisely my experience over the past twelve years, and truly, I have been blessed to have been part of this collegial Supreme Court.

Delaware Court of Chancery Issues First Decision Addressing Public Benefit Corporations

Posted by Amy Simmerman, Ryan Greecher, and James Griffin-Stanco, Wilson Sonsini Goodrich & Rosati, on

Wednesday, August 5, 2026

delaware, Delaware Court of Chancery, Delaware law, Fiduciary duties, Mergers & acquisitions, Public benefit corporations, Shareholder litigation
More from: Adrian Broderick, Amy Simmerman, James Griffin-Stanco, Jason Schoenberg, Ryan Greecher, Sarah Hand, Wilson Sonsini Goodrich & Rosati

Amy Simmerman, Ryan Greecher, and James Griffin-Stanco are Partners at Wilson Sonsini Goodrich & Rosati. This post is based on a Wilson Sonsini memorandum by Ms. Simmerman, Mr. Greecher, Mr. Griffin-Stanco, Adrian Broderick, Jason Schoenberg, and Sarah Hand, all at WSGR, and is part of the Delaware Law Series; links to other posts in the series are available here.

On July 29, 2026, Vice Chancellor Nathan Cook of the Delaware Court of Chancery issued a decision addressing, for the first time, the fiduciary duties of directors of a public benefit corporation (PBC)—including in a sale of control.[1] Under the PBC form, the purpose of corporate decision-making is not merely to advance stockholder value—as is the ultimate purpose of decision-making for a traditional Delaware corporation—but instead to balance three sets of interests: a specific public benefit purpose chosen by the PBC, the best interests of those materially affected by the corporation’s conduct, and stockholders’ pecuniary interests.[2] Delaware law first authorized the PBC form in 2013, and since that time, the form has grown in prominence, with many significant public and private companies operating as PBCs. Until this decision, however, there had not yet been direct case law guidance addressing PBCs. The decision, accordingly, is noteworthy for PBCs and companies considering adopting the PBC form.

Are Hints Disclosures? Delaware Supreme Court Revives M&A Fraud Claim Despite Buyer’s Red Flags

Posted by Frank J. Favia Jr., Jonathan A. Dhanawade, and Andrew J. Stanger, Mayer Brown LLP, on

Thursday, July 30, 2026

Contract representations & warranties, Delaware law, Due diligence, fraud, Material adverse effect, Mergers & acquisitions
More from: Andrew J. Stanger, Frank J. Favia Jr., Jonathan A. Dhanawade, Mayer Brown

Jonathan A. Dhanawade and Frank J. Favia Jr. are Partners and Andrew J. Stanger is Knowledge Counsel at Mayer Brown LLP. This post is based on their Mayer Brown memorandum and is part of the Delaware Law Series; links to other posts in the series are available here.

The Delaware Supreme Court’s recent opinion in Paragon Metals v. Smith[1] is a pointed reminder for M&A dealmakers: hints, partial disclosures, or due diligence “red flags” may not neutralize false contractual representations when the seller is actively concealing the truth. The case involved a CEO’s strategy to conceal damaging information about the target company while still attempting to avoid a fraud claim by providing enough hints about the situation to arguably put the buyer on inquiry notice about the issues. In reversing a trial court opinion, the Delaware Supreme Court held that the buyer could justifiably rely on the CEO’s representations despite imperfect due diligence because the CEO concealed critical customer-loss information and responded untruthfully when pressed. For M&A practitioners, the opinion sharpens several recurring issues, including when flawed due diligence becomes willful blindness, what standard of proof applies to Delaware fraud claims, how broadly a forward-looking “no material adverse effect” representation may reach, and what anti-reliance language can—and cannot—do.

The Delaware Supreme Court Issues a 3-2 Split Decision Allowing Post-Demand Evidence to Be Admissible in Section 220 Actions

Posted by Lauren Rosenello and Tanisha Brown, Skadden, Arps, Slate, Meagher & Flom LLP, on

Tuesday, July 28, 2026

delaware, Delaware Corporate Law, Delaware law, Delaware Supreme Court, Section 220 Books and Records, Shareholder litigation, Stockholder Inspection Rights
More from: Lauren Rosenello, Tanisha Brown, Skadden

Lauren Rosenello is a Counsel and Tanisha Brown is an Associate at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum, and is part of the Delaware Law Series; links to other posts in the series are available here.

There have been several notable split decisions over the years in the Delaware Supreme Court, but it is a rara avis to see the justices split 3-2 over an issue involving access to books and records.

On March 25, 2026, a divided Delaware Supreme Court majority held that in exceptional circumstances, the Court of Chancery may consider post-demand evidence in the Section 220 context when analyzing whether a stockholder had a credible basis to suspect wrongdoing.

Justice Gary F. Traynor authored the majority’s opinion, ruling, among other things, that “nothing in [8 Del. C.] Section 220’s text prohibits the consideration of post-demand evidence,” and that a blanket prohibition could result in inefficiencies such as a repetitive process of updated demands and complaints.[1]

Chief Justice Collins J. Seitz, Jr. and Justice Karen L. Valihura dissented, arguing that, from a policy standpoint, a bright-line rule barring post-demand evidence would “discourage a premature race to the courthouse to attempt to gain a foothold for later merits-based litigation” and also would respect the intended summary nature of Section 220 proceedings.

New Day, New Rules: Five Key Aspects of Amended DGCL Section 144 and Section 220

Posted by Edward Micheletti, Jenness Parker, and Lauren Rosenello, Skadden, Arps, Slate, Meagher & Flom LLP, on

Sunday, July 26, 2026

Books and records, Conflicted Transactions, delaware, Delaware Corporate Law, Delaware General Corporation Law, Delaware law, Section 144, Section 220
More from: Edward Micheletti, Jenness Parker, Lauren Rosenello, Skadden

Edward Micheletti and Jenness Parker are Partners and Lauren Rosenello is a Counsel at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum and is part of the Delaware Law Series; links to other posts in the series are available here.

In spring 2025, there was significant debate over Delaware’s Senate Bill 21 (SB21), which offered new Delaware amendments addressing controller and board conflicts, as well as access to books and records. These amendments, codified in amended Section 144 and Section 220, were enacted to provide greater predictability but also to limit excessive litigation.

Amended Section 144 established statutory safe harbors for conflicted transactions involving the board or controlling stockholders.
Amended Section 220 was designed to curtail broad stockholder inspection rights.

In general, these provisions were heralded by the corporate bar as a stabilizing measure for corporate practitioners, offering greater clarity and certainty for books and records demands and transactions involving conflicts, and helping to avoid incessant and unnecessary litigation costs in every transaction.

Delaware Chancery Clarifies Implied Covenant Limits

Posted by Gail Weinstein, Philip Richter, and Steven Epstein, Fried, Frank, Harris, Shriver & Jacobson LLP, on

Saturday, July 25, 2026

breach of contract, commercial contracts, contract interpretation, Contract Law, contractual gap-filling, delaware, Delaware law, Delaware litigation, implied covenant of good faith and fair dealing, third-party consent
More from: Adam Cohen, Gail Weinstein, Liza Andrews, Philip Richter, Roy Tannenbaum, Steven Epstein, Fried Frank

Gail Weinstein is a Senior Counsel, Philip Richter is a Partner and Co-Head of the M&A and Private Equity Practice, and Steven Epstein is the Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, Roy Tannenbaum, Adam Cohen, and Liza Andrews, and is part of the Delaware Law Series; links to other posts in the series are available here.

Key Points

The decision clarifies that a party’s using a contractual gap to “intentionally harm” the counterparty may constitute a breach of the implied covenant. The court rejected ASM’s argument that the parties had intentionally left a contractual gap with respect to the efforts ASM had to use to obtain the consents, in order to allocate the risk to the Vendor of the landlords not giving the consent for any reason. The court stated that, at the pleading stage, it was reasonably conceivable that, without a standard of efforts set forth in the agreement, ASM could have been neutral with the landlords, but, based on the implied covenant, could not use the contractual gap to “intentionally harm” the Vendor.
The decision underscores the need for careful drafting of third party consent conditions. Parties should consider whether to specify in their agreement a standard of efforts for obtaining such consents and may wish to specify the extent to which the other party can participate in the process of seeking to obtain them. Where a standard of efforts is not set forth, the party responsible for seeking a consent should keep in mind that, depending on the specific facts and circumstances, advocating for the third party not to give the consent may be considered to be intentionally harming the counterparty and thus a breach of the implied covenant.

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