Chancery Court Refuses To Dismiss Aiding and Abetting Claim Against Target Company Financial Advisor, but Grants Dismissal to Outside Counsel and Buyer
In a search for deep-pocketed defendants in M&A-related stockholder litigation, plaintiffs often add aiding and abetting claims against financial advisors, outside counsel, and buyers to the underlying breach of fiduciary duty claims. Consider, for example, RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (“RBC”). In RBC, the Delaware Supreme Court (“Supreme Court”) affirmed a ruling by the Delaware Court of Chancery (“Chancery Court”) that assessed substantial damages against a financial advisor alleged to have aided and abetted a breach of fiduciary duties by its client, a target board of directors. The Chancery Court had determined that the financial advisor prevented the target directors from fulfilling their fiduciary duties by failing to disclose various conflicts of interest, even though the directors themselves were protected from liability by an exculpatory charter provision adopted under Section 102(b)(7) of the Delaware General Corporation Law (“Exculpatory Provision”). Nevertheless, the pleading standard established in RBC for establishing aiding and abetting liability—that is, scienter—is indeed a high one. For a discussion of RBC, see Robert S. Reder & Margaret Dodson, Delaware Supreme Court Upholds Multi-Million Dollar Damages Award Against Sell-Side M&A Advisor, 69 VAND. L. REV. EN BANC 27 (2016).
Robert S. Reder
Katherine H. Monks