Delaware Court of Chancery

Uh, the CEO of McDonald's [laughs] had to resign with $100 million clawback, uh, for, not just for engaging in relatively minor sexual harassment allegations, but for lying about it to his board.

And we now have a ruling by the Delaware Chancery Court talking about fiduciary duties and an obligation to investigate allegations of sexual harassment.

But sexual g- harassment is hand in glove with abuse of power.

So where is the coalition to oppose that? In 2020, one of the most interesting groups were teachers.

What?

And the Chancery Court of Delaware creates the footprint for every other country in the US on how corporations are empowered with rights.

And so a court case just ended in Delaware that says the more land you have, the more your corporation gets to vote in municipal elections.

That's huge.

Um, I, I was gonna put, put this on last, but we can...

He- so there is yet another, uh, Delaware Chancery Court shareholder lawsuit.

Um, this has been g- this is not new that, that this lawsuit's been going on.

This lawsuit's been going on ever since Endeavor went private.

At the time of the demonstration, The court reviewed the entire transaction under its strictest standard of scrutiny, describing the process as deeply flawed, noted Musk's apparent inability to acknowledge his clear conflict of interest, and then found the deal entirely fair anyway, largely because 85% of the shareholders had approved it, and Tesla's stock subsequently went up.

The judge declined to award Musk his legal costs, which is the Delaware Court of Chancery's version of a strongly worded letter.

Musk later had a falling out with Delaware over his Tesla pay package and reincorporated in Texas.

He has now completed a structurally similar acquisition, this time of XAI, in a state with far more lax securities rules.

Next we come to an abuse on which I must speak with much diffidence, for no one but a trained lawyer could properly discuss it.

The Court of Chancery.

It is the theme of much of Dickens' best work and is the whole motive of Bleak House and the famous Jarndyce and Jarndyce lawsuit.

The mixture of humor and pathos in the treatment of this subject tempts me to digress a little before explaining as best I may the actual state of the law at the time.

We are introduced to those who are interested in the vast machinery of the Court of Chancery as the great Jarndyce case drags its slow length along from the Lord Chancellor down to the starving law writer.

We see suitors of every description like the man from Shropshire and Miss Flight.

We seem to smell the musty law papers as we read the book.

We laugh, but the tears are not far off, at the humor of such people as Miss Flight, Mr. Gruppy, Conversation Kenge.

Mm-hmm.

"The filing, posted on Courthouse News and filed in the Delaware Court of Chancery, alleges that Smith, the chairman of 413 Solutions, and company CEO David Moseley committed fraudulent inducement and breach of fiduciary duty by promising to use a $2.5 million loan from Katuah LLC to obtain an interest in Project Exodus, a solar farm project in Texas."

Mm-hmm.

Now this is legalese that I, I, I'm not all that familiar with, but-

Well, Michael, thanks as always for sharing your thoughts with us, particularly on an emerging topic like this.

We'll be back next month with our next governance podcast discussion, where we'll focus on the brand new Delaware Chancery Court decision that provides valuable clarity on the Caremark standard, the concept of director bad faith.

Until then, thanks so much, everybody, for listening and for watching us online.

And as I said, the guards are coming strong for Michael's White Sox.