Delaware Supreme Court Affirms Decision That Well-Pled Unocal Claim Does Not Automatically Excuse Pre-Suit Demand

By Shearman & Sterling LLP
Jan 11, 2018

On December 18, 2017, the Supreme Court of Delaware affirmed the Delaware Court of Chancery’s dismissal of a shareholder derivative action asserting that the directors of The Williams Companies, Inc. (“Williams”) breached their fiduciary duties in connection with its entry into, and subsequent cancellation of, an agreement to acquire the remaining interest in its affiliate, Williams Partners L.P. (“WPZ”). Ryan v. Armstrong, No. 230, 2017 (Del. Dec. 18, 2017). As discussed in our post regarding that decision, plaintiff alleged that the directors sought to entrench themselves by approving the WPZ transaction while Williams was the subject of acquisition overtures from another company. Ryan v. Armstrong, C.A. No. 12717-VCG (Del. Ch. May 15, 2017). The Court of Chancery held that even a “well-pled” claim under Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985)—which applies enhanced scrutiny to certain takeover defensive measures—is not, standing alone, sufficient to excuse a pre-suit demand on the board under Court of Chancery Rule 23.1 where plaintiff failed to plead sufficient “particularized facts to imply a substantial likelihood of liability for damages . . . on the part of a majority of the directors.” In its short order, the Supreme Court affirmed on the basis of the Court of Chancery’s opinion.