Series of Avoidable Missteps by an Activist Stockholder and the Target Board Led the Court of Chancery to Find Fiduciary Breaches and Stockholder Aiding and Abetting in Connection With the Sale of a Company--<em>PLX Technology</em>

Series of Avoidable Missteps by an Activist Stockholder and the Target Board Led the Court of Chancery to Find Fiduciary Breaches and Stockholder Aiding and Abetting in Connection With the Sale of a Company--PLX Technology


By: Andrew J. Colosimo, Warren S. de Wied, Steven Epstein, Christopher Ewan, Arthur Fleischer, Jr., Andrea Gede-Lange, David J. Greenwald, Randi Lally , Mark H. Lucas , Scott B. Luftglass , Brian T. Mangino , Philip Richter , Robert C. Schwenkel, David L. Shaw , Peter L. Simmons, Matthew V. Soran, Peter L. Simmons, Gail Weinstein, Maxwell Yim

In a post-trial decision, In re PLX Technology Inc. Stockholders Litigation (Oct. 16, 2018), the Delaware Court of Chancery held that an activist stockholder had aided and abetted a breach of fiduciary duties by the target company directors that was predicated on the board having succumbed to the stockholder's pressure to effect a quick sale of the company. The court suggested in dicta that the target's financial advisor likely also had aided and abetted the breach. Further, however, the court held that the plaintiffs did not prove that damages had flowed from the breach; thus, judgment was entered in favor of the defendant activist stockholder. Notwithstanding the court's findings of fiduciary breaches and aiding and abetting, in our view the decision does not change the high unlikelihood of personal liability for directors, dominant stockholders or bankers in connection with a sale process. We would suggest that PLX is most instructive as a guide to the errors by the board, the stockholder and the banker that led to the unusual findings in this case.

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