Current Month (October 2025)
Delaware Court of Chancery Declines to Dismiss Claims of Bad Faith Arising from Microsoft’s Acquisition of Activision
By Lisa R. Stark, Hirschler Fleischer
In a recent decision challenging Microsoft Corporation’s acquisition of Activision Blizzard, Inc. (“Activision”), Sjunde AP-Fonden v. Activision Blizzard, Inc., et al., No. 2022-1001-KSJM (Del. Ch. Oct. 2, 2025), the Delaware Court of Chancery declined to dismiss claims that the members of the Activision board of directors engaged in a rushed sales process that undervalued the company in breach of its duty of good faith—all to secure a position, change of control payments, and liability protection for Activision’s chief executive officer, who was facing ouster for his role at the helm of Activision during a sexual harassment scandal. The decision highlights the pitfalls of a board’s decision to delegate the task of dealmaking to a conflicted party.
The day after The Wall Street Journal reported that Microsoft and Sony were revisiting their relationship with Activision due to the scandal, Activision’s then–Chief Executive Officer, Robert Kotick, told other Activision executives that his job was at risk, and Microsoft’s then–Vice President of Gaming raised with Kotick the idea of Microsoft acquiring Activision. The conversations ignited a single-bidder sales process that culminated in Activision agreeing to be acquired by Microsoft for $95 per share, a price below the internal range of values ($113 to $128) for Activision set forth in Activision’s strategic plan at the time. After receiving Microsoft’s bid, Activision allegedly lowered its projections multiple times, brushed off other potential bidders, and agreed that Kotick would continue to serve as CEO post-closing. Activision also negotiated a merger agreement that required Microsoft to indemnify Activision’s directors and officers for pre-merger conduct for a period of six years post-merger even if the actions amounted to willful misconduct. Altogether, Activision paid more than $100 million to resolve the investigations and claims arising from the sexual harassment scandal, and Kotick stayed on for only two months after the merger closed.
In this action, plaintiff claimed that Kotick and Activision’s other directors breached their fiduciary duties by agreeing that Activision would be acquired by Microsoft at a low price to keep Kotick’s job, secure Kotick’s change-of-control payments, and insulate Kotick from liability for his pre-closing conduct through the merger agreement’s indemnification-related provisions. According to the plaintiff, Kotick tilted the sales process to secure these personal benefits, and the rest of the members of the board acted in bad faith by enabling Kotick to run the sales process without sufficient oversight and by prioritizing a sales process that would benefit Kotick to the detriment of maximizing stockholder value.
The Court applied enhanced scrutiny under Revlon to plaintiff’s claims, rejecting defendants’ arguments that the business judgment review applied under Corwin v. KKR Fin. Hldgs. LLC, 125 A.3d 304 (Del. 2015), based on a fully informed stockholder vote. Here, the Court found that the stockholder vote approving the deal did not have a cleansing effect on the transaction under Corwin, because the proxy statement sent to stockholders failed to disclose that one of the reasons that Activision agreed to the merger was the sexual harassment scandal and therefore the stockholder vote was not fully informed as required by Corwin. Applying Revlon, the Court found that the complaint adequately pled non-exculpated claims against (1) Kotick for agreeing to a bad deal to secure his future as CEO of Activision, and (2) Activision’s other directors because they did not stop Kotick from agreeing to a bad deal.
The Court also sustained a claim that the Activision board violated its statutory authority under Delaware’s General Corporation Law, by, among other things, delegating to an ad hoc board committee the authority to negotiate the dividend provisions of the merger agreement. However, the Court dismissed plaintiff’s aiding and abetting claims asserted against Microsoft because plaintiff failed to prove that Microsoft knowingly participated in a breach of fiduciary duty.
By Bailey Kirby, Garrett, PLLC; Ashley Oldfield, Rayburn, Cooper, & Durham, P.A; and Shawn Garrett, Garrett, PLLC
On October 17, 2025, the Supreme Court of North Carolina issued its opinion in Armistead B. Mauck and Louise Cherry Mauck v. Cherry Oil Co., Inc., Julius P. “Jay” Cherry Jr., and Ann B. Cherry. Before the case arrived at the Supreme Court, Judge Mark A. Davis, Special Superior Court Judge for Complex Business Cases, dismissed the action, including dismissal of the Maucks’ claim for judicial dissolution for lack of standing under Rule 12(b)(1). The Supreme Court affirmed the dismissal of the claim on alternative grounds, namely, under Rule 12(b)(6).
Cherry Oil (the “Company”) is a closely held corporation that distributes propane and refined fuel in eastern North Carolina. With the assistance of counsel, in 1998, Jay and Ann Cherry and Armistead and Louise Mauck (the “Parties”) entered into a formal Shareholder Agreement after operating together in leadership roles within the Company since the mid 1990s. In summary, the Shareholder Agreement (1) allowed the Company to “call” a shareholder’s shares and force a sale at fair market value and (2) granted each shareholder the right to “put” all their shares up and force the Company to purchase them at fair market value. In 2020, the working relationship of the Parties began to sour. In June 2021, Jay and Ann Cherry used their 66 percent voting majority to remove Louise Mauck from the board, convened the newly reconstituted board, and voted to “call” the Maucks’ shares. The Maucks sued, alleging individual and derivative claims, including a claim for judicial dissolution under N.C.G.S. § 55-14-30(2). They argued that liquidating the Company was “reasonably necessary” to protect their rights and interests as shareholders.
Conducting a de novo review, the Court determined that, contrary to the Business Court’s decision, the Maucks had standing because they alleged the kind of injury contemplated by N.C.G.S. § 55-14-30(2)(ii) and fell within the class of people the statute authorizes to sue. However, dismissal was nonetheless warranted because the Maucks failed to assert sufficient factual allegations that, rather than use the buyback option within their shareholder’s agreement, dissolution of the corporation was “reasonably necessary.” The Court emphasized that not all buyback options will defeat dissolution claims, but rather the inquiry should be whether the liquidation of a company is reasonably necessary to protect a shareholder’s rights or interests. Here, the Court found the buyback provision in the shareholder agreement represented a sufficient bargained-for agreement that did not otherwise violate public policy and provided essentially the same relief the plaintiffs sought through judicial dissolution while avoiding the collateral fallout that such dissolution would cause.
North Carolina Business Court Analyzes Delaware Law to Decide Whether Plaintiffs Had Standing to Bring Derivative Claims
By Shawn Garrett, Garrett, PLLC; Ashley Oldfield, Rayburn, Cooper, & Durham, P.A.; and Bailey Kirby, Garrett, PLLC
On October 10, 2025, the North Carolina Business Court issued its decision in Joseph Meyer, et al. (“Plaintiffs”) v. Hatteras Investment Partners, L.P., et al. (“Defendants”) and Hatteras Master Fund, L.P. (“Master Fund”). Plaintiffs had filed suit in September 2024, alleging that Defendants breached their fiduciary duties by proposing and approving a transaction that rendered the Master Fund valueless. Defendants moved to dismiss, arguing that Plaintiffs lacked standing because they were not direct owners of the Master Fund, but instead held equity interests in one of four feeder funds (the “Feeder Funds”).
The Feeder Funds were established and named as limited partners of the Master Fund, a Delaware limited partnership. Each Plaintiff was a limited partner in one of the Feeder Funds. David B. Perkins, one of the individual defendants, managed the entity that managed the Master Fund. In 2021, a startup company (“Startup”) purportedly offered “liquidity products” to users holding alternative assets. Startup’s parent company from December 2019 through November 2021 reported in a November 2021 10-K filing that Startup was under investigation by the SEC and that it was “hemorrhaging cash.” Prior to December 2021, Perkins met with Startup’s founder and discussed a transaction where the Master Fund would transfer its alternative assets to Startup in exchange for securities. During these discussions, many risks were disclosed to Perkins, including that the securities would be illiquid until a stated maturity date and that Startup had no operating history or customer base. When disclosing the transaction to the Feeder Fund managers, Perkins stated that thorough due diligence was conducted, but he did not disclose the identity of Startup nor its risks.
Plaintiffs and Defendants both moved to dismiss. Defendants contended that Plaintiffs did not have standing to bring their action and requested dismissal with prejudice. Plaintiffs requested dismissal without prejudice, arguing that Delaware should decide the standing issue because it was a question of first impression under Delaware law. The Court examined the ownership requirement of standing, stating that Delaware law holds a plaintiff must be a partner or an assignee in a Delaware limited partnership to bring a derivative suit on behalf of a Delaware LP. The Court looked to a Delaware case, Bamford v. Penfold, L.P., C.A. No. 2019-0005-JTL (Del. Ch. Feb 28, 2020), which recognized standing in an action brought by partners on behalf of an LLC when the LP interest was held in an LLC. However, this Court, and the parties, acknowledged that Delaware has not yet addressed a double derivative action, such that limited partners in a parent entity may sue on behalf of a subsidiary. The Court concluded, however, that it was unnecessary to determine this issue because Plaintiffs had failed to satisfy the derivative demand prerequisite to suit. Accordingly, the Court dismissed the action without prejudice, leaving double derivative standing for Delaware to address.
