DE Court Rules on Deficiencies in Proxy Materials

In In re Transkaryotic Therapies, Inc., 2008 WL 2462767 (Del. Ch., June 19, 2008), the Court of Chancery of Delaware recently granted summary judgment to Transkaryotic directors alleged to have breached their fiduciary duties of disclosure (also sometimes referred to as the duty of “candor”) and loyalty in connection with Shire Pharmaceuticals' acquisition of Transkaryotic. Chancellor Chandler's decision in noteworthy in two respects. First, with regard to the duty of disclosure, the court held that damages are not an appropriate remedy for material disclosure deficiencies and, once a stockholder vote has been taken and the transaction closed, it is too late to grant injunctive relief. Second, with regard to the duty of loyalty, the court refused to characterize engaged and active behavior of directors who had relationships with a major stockholder and the CEO of the acquiring company as disloyal, absent a showing of a material personal benefit or bias.