Earlier this month, the Delaware Supreme Court reversed a decision of the Delaware Court of Chancery in the matter of In re Sanchez Energy Derivative Litig., No. 702, 2014 (Del. Oct. 2, 2015), finding that Vice Chancellor Glasscock’s dismissal of a pension fund’s breach-of-duty suit failed to consider the sufficient doubt that plaintiff had cast on the independence of a pivotal Sanchez Energy director who had a 50 year long friendship with the Chairman of the Board.  The Court of Chancery’s 51 page opinion can be found here: C.A. No. 9132, 2014 WL 6673895 (Del. Ch. Nov. 25, 2014).

Writing for the en banc court, Chief Justice Strine found that the swing-vote director’s friendship and business relationships was sufficient to plead that he lacked the independence to fairly decide whether the pension fund’s suit was in Sanchez Energy’s interests.  Of note, the Chief Justine wrote that the burden to prove a director lacks independence where there is no majority shareholder “can be difficult”, particularly where a plaintiff declines to first make a books and record demand on the company.

The reversal of the Court of Chancery’s dismissal of the case at the pleadings stage will allow the pension fund to move forward with discovery in this matter.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.