Reed Smith Client Alerts

In Goldstein v. Denner, C.A. No. 2020-1061-JTL (May 26, 2022), the Delaware Court of Chancery signaled that directors who are repeatedly placed on board of directors by activist investors may not be able to avoid litigation by moving to dismiss. However, “outside of a Rule 12(b)(6) motion in a case governed by enhanced scrutiny, it is unlikely that a similar constellation of facts would be sufficient to overcome the presumption of good faith or to call a director’s independence into question.” This decision is important because it demonstrates the court’s careful application of the Rule 12 standard that allowed the plaintiff’s claims to move forward even though, without more, those claims may ultimately fail.


This case was spawned by the board of directors of Bioverativ, Inc.’s (the Company or Bioverativ) decision to merge with Sanofi S.A (Sanofi). In May 2017, Sanofi approached two Company directors and expressed interest in the transaction. One of those directors was defendant Alexander J. Denner, an activist investor who was responsible for placing a number of key directors on the Company’s board. Denner did not disclose the offer to the rest of the Company’s board of directors. However, Denner allegedly directed a hedge fund that he controlled (collectively, Sarissa) to purchase over 1 million shares of the Company’s stock, in violation of the Company’s insider trading policy.

Plaintiff alleges that in order to sidestep section 16(b) of the Securities Exchange Act of 1934 – which requires an insider to disgorge short-swing profits from any sale that occurs within six months of purchase – Denner rejected Sanofi’s repeated attempts to purchase the Company until the six-month short-swing period had expired. Following that expiration, the Company’s board agreed to the acquisition, allegedly at a price approximately 30 percent below the Company’s stand-alone long-term planning model.

A Company stockholder plaintiff subsequently filed suit alleging that various directors and officers had breached their fiduciary duties by (i) failing to make required disclosures, (ii) approving, falsifying, and omitting material information about the transaction, and (iii) failing to secure the highest value for the Company’s stockholders in favor of the directors’ own self-interest. The complaint also alleges that Denner had engaged in insider trading and that Sarissa had aided and abetted this breach of fiduciary duty.