2022 securities, shareholder, and M&A litigation outlook

Below is an excerpt of the outlook for 2022 from our publication, which also includes an executive summary and coverage of key decisions from 2021 in Delaware courts.

The outlook for 2022

Despite the ongoing effects of the pandemic, 2021 was an active year for the Delaware courts, which, as described in our quarterly coverage, addressed a number of important issues, at times breaking new ground and making new law. Many of these decisions will continue to shape Delaware law and the courts’ docket in 2022. Over the past year, we have observed the following themes in Delaware courts:

• Courts addressed the continued impact of COVID-19, issuing two significant decisions on COVID-19 and M&A transactions;
• Delaware courts continued to address appraisal actions under Section 262, including decisions on “reverse veil piercing” and the viability of a waiver of appraisal rights;
• Delaware courts continued to define the boundaries of Caremark claims following the Delaware Supreme Court’s decision in Marchand v. Barnhill in 2018;
• The Delaware Supreme Court adopted a new universally applicable test for demand futility, while analyzing demand futility in a number of different contexts both before and after the establishment of the new test;
• Delaware courts engaged in many instances of close textual analysis of contracts to resolve matters, weighing in on contract language relating to termination, indemnification, and post-merger dispute resolution; and
• Courts continued to refine key doctrines related to M&A litigation, including dual-natured claims, fraud and fraud carve-out limitations, and the proper standards for assessing conflicted parties and the transactions involving those parties.

Looking to 2022, we expect many of the same trends to continue. For example, we no doubt will see the Delaware courts further explore the new demand futility test, providing insight into the different types of relationships that may affect independence and disinterestedness. Caremark claims also likely will continue to be an area of focus, especially as stockholders and regulators continue to focus on ESG-related issues. In addition, 2021 has firmly demonstrated that the Delaware courts are not hesitant to review core doctrines and make necessary changes – or jettison prior cases entirely, such as in the case of dual-natured Gentile claims.

We anticipate that 2022 will be no different, and that the courts will continue to look at all of the key doctrines and make adjustments, including in light of the pandemic and other world events as well as shifting priorities of market participants. Finally, the courts in 2022 will face new challenges arising from important developments on the transactional side, such as the implications from the rise in the use of SPACs in M&A transactions and increased regulatory scrutiny of deals from the Federal Trade Commission (FTC) and Department of Justice (DOJ).

Click the image below to view the full outlook.

Authored by William (Bill) M. Regan, David R. Michaeli, Allison M. Wuertz, Matt Ducharme, Maura Allen, Peter Bautz, Sam Dougherty, Tyler Waywell, Jonathan Wieder, Shannon Zhang, and Elizabeth Cochrane.