Chancery Court Blocks Use of Business Judgment Rule in Derivative Suit
The Delaware Court of Chancery has blocked the directors of the biotechnology firm Sorrento Therapeutics Inc. from invoking business judgment protections to guard against derivative claims that they used two schemes to siphon value away from the company and into their own pockets.
June 28, 2017 at 10:37 PM
3 minute read
The Delaware Court of Chancery has blocked the directors of the biotechnology firm Sorrento Therapeutics Inc. from invoking business judgment protections to guard against derivative claims that they used two schemes to siphon value away from the company and into their own pockets.
Instead, Vice Chancellor Tamika Montgomery-Reeves said it was up to defendants to prove that the actions were fair to the company and its stockholders.
Typically in derivative suits, Delaware judges employ the business judgment rule, which protects directors from shareholder second-guessing of decisions that was made in the interest of the company, even when those decisions lead to losses for investors.
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