Cases & Deals

Emulex is granted motion to dismiss in breach of fiduciary claim

Client(s) Emulex Corporation

Jones Day represented former and current directors of Emulex Corporation in a breach of fiduciary duty claim. The plaintiff, a purported shareholder of Emulex, sued the directors for breach of fiduciary duty under Unocal v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), the Delaware Supreme Court's seminal opinion holding that a board's adoption of defensive measures in response to threats to corporate control is subject to heightened scrutiny, rather than the deferential standard of the business judgment rule.

The plaintiff claimed that the board's adoption of a share repurchase program, issuance of debt, and implementation of a cost-savings program were defensive measures taken to ward off takeover threats made by three activist hedge funds. In granting the motion to dismiss on December 8, 2014, the district court (Hon. David O. Carter) concluded that vague threats from dissatisfied shareholders are not sufficient to trigger Unocal scrutiny, and shareholder disagreements with board decisions are insufficient to rebut the business judgment rule.

Pfeffer v. Edwards, et al., Case No. SA CV 14-0796-DOC (JCGx) (C.D. Cal.)