Corporate Counsel Weekly™ helps corporate lawyers get the big picture on the legal challenges facing corporations today. Practitioners can discover trends on the horizon and stay alert to the full...
By Michael Greene
Jan. 21 — AbbVie Inc. won't have to turn over books and records to an investor seeking to investigate whether directors breached their fiduciary duties in connection with the company's failed tax inversion deal, the Delaware Supreme Court ruled Jan. 20.
At issue was an April 2015 decision in which the Delaware Chancery Court held that plaintiff Southeastern Pennsylvania Transportation Authority failed to establish a credible basis that actionable wrongdoing had occurred (30 CCW 127, 4/22/15). In doing so, the lower court reasoned that the investor could only investigate claims that the directors breached their duty of loyalty because the company's charter contained an exculpatory provision pertaining to the board's duty of care.
The state high court majority affirmed on the basis of the chancery court's decision.
In a brief order, the majority added that while Justices Karen Valihura and James T. Vaughn Jr. agreed on the outcome of the case, they would affirm only on the ground that the investor failed to show a credible basis that even a breach of the fiduciary duty of care had occurred.
The litigation stemmed from North Chicago, Ill.-based AbbVie's plan to buy Shire Plc for an estimated $52 billion, then move the combined company's legal address to the U.K. to lower its tax bill and access cash trapped overseas.
However, the two companies in October 2014 agreed to terminate what would have been the biggest U.S. tax inversion at the time after AbbVie pulled its support for the deal in the wake of proposed changes to U.S. rules governing such transactions.
In his April 2015 decision, Vice Chancellor Sam Glasscock III said that in order to establish a proper purpose for a books and records inspection, the corporate wrongdoing sought to be investigated must be “justiciable.”
Because AbbVie's certificate of incorporation contained an exculpatory provision that insulated its directors from liability for breach of the duty of care, Glasscock found that only duty of loyalty claims could be investigated.
On appeal, the plaintiff argued that the chancery court erred by applying a heightened threshold burden for inspection requests (30 CCW 343, 11/11/15).
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The opinion is available at http://src.bna.com/cdi.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)