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MONTH-IN-BRIEF (Oct 2018)

Corporate Governance

Activist Investor Aided and Abetted A Breach of Fiduciary Duties; No Damages Awarded

By Eric S. Klinger-Wilensky

In In re PLX Technology Inc. Shareholders Litigation (Del. Ch. Oct. 16, 2018), the Court of Chancery held that an activist investor aided and abetted breaches of fiduciary duty by a corporation’s board of directors in connection with the board’s approval of a sale transaction.  The board designee of the investor failed to share with the board certain information obtained from the buyer prior to signing.  The Court also found that the directors breached their duty of disclosure by failing to disclose that information to stockholders, as well as by making materially misleading disclosures describing a set of projections.  The Court, however, awarded no damages, citing, in part, the fact that the transaction was an arm’s-length transaction arising from a sale process that “was sufficiently reliable to exclude the plaintiffs’ damages contention.” The opinion contains detailed discussions of Delaware law on aiding and abetting liability, disclosures and sale processes.

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