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Chancery Court Refuses Pleading Stage Dismissal Under Corwin When Stockholders Not Fully Informed of Long-Overdue Financial Restatement

Posted by on Wednesday, January 15, 2020 in Delaware Corporate Law Bulletins, En Banc.

Robert S. Reder & Amanda M. Mitchell | 73 Vand. L. Rev. En Banc 35 |

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“The factual bases underlying Vice Chancellor Slights’s refusal to entertain a Corwin defense at the pleading stage in Tangoe—delayed Securities and Exchange Commission (“SEC”) filings and inadequate financial statement disclosures to stockholders—are similar to the factual predicate underlying denial of Corwin “cleansing” in In re Saba Software, Inc. Stockholder Litigation, C.A. No. 10697–VCS, 2017 WL 1201108 (Del. Ch. Mar. 31, 2017) (“Saba”). In Saba, the Chancery Court found Corwin inapplicable because “the situation in which the Board placed its stockholders as a consequence of its allegedly wrongful action and inaction . . . created a ‘circumstance [that was] impermissibly coercive.’ ” Because Vice Chancellor Slights relied on well-pled allegations “that the Tangoe stockholders were not fully informed when they approved the Transaction,” he found it unnecessary to follow Saba’s lead in considering “whether their approval was also the product of coercion.” (For a discussion of Saba, see Robert S. Reder, Delaware Court Refuses to Invoke Corwin to “Cleanse” Alleged Director Misconduct Despite Stockholder Vote Approving Merger, 70 VAND. L. REV. EN BANC 47 (2017).)”

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