In re Oracle Corporation Derivative Litigation
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Oracle Corporation acquired NetSuite Inc. in 2016. Following the acquisition, Oracle stockholders filed a derivative suit against Oracle directors and others, alleging that Lawrence Ellison, a co-founder and substantial equity holder in both companies, forced Oracle to overpay for NetSuite. After the Court of Chancery denied the defendants’ motion to dismiss, the Oracle board formed a special litigation committee (SLC) to review the plaintiffs’ derivative claims. The SLC investigated and tried to settle the suit but eventually returned the case to the plaintiffs to pursue. The parties litigated over five years, and the Court of Chancery held a ten-day trial, ultimately entering judgment for the remaining defendants.
The Court of Chancery found that the special committee negotiated the NetSuite transaction untainted by Ellison’s or Oracle management’s influence. The court concluded that Ellison did not exercise general control over Oracle or specific control over the transaction. The court also found that neither Ellison nor Catz withheld material information or misled the Oracle board and special committee.
On appeal, the stockholders contended that the court erred by allowing the SLC to withhold its interview memos, applying business judgment review to a transaction involving an alleged controlling stockholder, employing the wrong legal standard when evaluating whether Ellison misled the special committee, and finding that Ellison’s alleged undisclosed future operational plans were immaterial.
The Supreme Court of Delaware affirmed the Court of Chancery’s judgment. The court held that the SLC did not waive work product protection during mediation and that the plaintiffs did not demonstrate substantial need or undue hardship for the interview memos. The court also affirmed the application of business judgment review, finding that Ellison did not exercise actual control over Oracle or the transaction. Finally, the court agreed that Ellison’s undisclosed post-closing plans were immaterial to the special committee’s evaluation and negotiation of the transaction.
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