Activist Shareholders or Activist Judges: In re InfoUSA (Continued)

We are discussing In re InfoUSA. The primary materials for the case, including the opinion, can be found at the DU Corporate Governance web site.

The 79 page opinion is replete with interesting observations about the plaintiffs. One was described as "an activist shareholder," an arguably unflattering reference. We note, however, evidence in the opinion on an "activist" judge. Take, for example, the advice to at least two plaintiffs on the possibility of filing additional litigation.

• "Note that the grants of options to Clinton, although potentially an ultra vires act because improperly approved, do not automatically constitute waste. Indeed, assuming arguendo that the grant of options was given pursuant to a separate agreement between [the CEO] and Clinton, and that [the CEO] was not authorized to enter into such a contract, rescinding the options as a result of Count II might well leave Clinton with a claim against the company for unjust enrichment."

Similarly, the court "paused to note" that at least one part of the derivative suit also raised a direct claim. As the opinion described:

• "Although plaintiffs succeed in demonstrating that demand is excused, I pause to note that this aspect of Count IV [allegations of an affirmative misrepresentation by the company] presents a direct claim for relief on the part of shareholders. Where a disclosure claim states that a shareholder was denied the opportunity to exercise a fully-informed vote, the claim is direct, and where a significant shareholder's interest is increased at the sole expense of the minority, such a claim is individual in nature ant entitles plaintiffs to at least nominal damages."

In both instances, the references were dicta, legally unnecessary. With the opinion climbing almost to 80 pages, the free advice was also practically unnecessary. More importantly, the advice is also part of a disturbing trend touse dicta as a deliberate mechanism to provide "guidance" to members of the bar. As we have already discussed, this is often inconsistent with a true judicial disposition, potentially damaging to the reputation of the Delaware courts, and may well result in increased preemption.