‘Substantive economic dealings’ in advance of procedural protections necessitates further review

By Amy Leisinger, J.D. The Delaware Supreme Court has affirmed in part and reversed in part the Chancery Court’s dismissal of a complaint alleging that certain oil and gas companies and their executives caused stockholders to approve an unfair transaction based on a misleading proxy statement. According to the court, the Court of Chancery correctly held that the complaint failed to state a disclosure claim, but the complaint should not have been dismissed in its entirety, as intervening case law has provided that dismissal is not warranted if a complaint has pleaded facts supporting a reasonable inference that companies engaged in substantive economic negotiations before required procedural protections have been put in place. The court remanded the matter to the Chancery Court for further consideration (Olenik v. Lodzinski, April 5, 2019, Seitz, C.). Dismissal, intervening law. According to the Chancery Court, the business judgment rule applied to the transaction to…

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