Chancery Dismisses Stockholder Suit Over Expedia CEO Award

July 30, 2014

Publication| Corporate Transactions| Corporate & Chancery Litigation

In Friedman v. Khosrowshahi, C.A. No. 9161-CB (Del. Ch. July 16, 2014), the Court of Chancery dismissed theplaintiff’s claims challenging the decision by the compensation committee of Expedia Inc. to accelerate the vesting ofa restricted stock unit award. Following the well-trodden path in this “seemingly increasing area of litigation,” theplaintiff claimed that, under Sanders v. Wang, C.A. No. 16640-VCS (Del. Ch. Nov. 10, 1999), and its progeny, thecompensation committee violated the unambiguous terms of the corporation’s stock plan such that demand wasexcused under the second prong of Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984). In dismissing the claim, thecourt essentially limited the application of Sanders to situations where plaintiffs have alleged with particularity “aclear or intentional violation of a compensation plan.” Nevertheless, the opinion serves as a reminder thatstockholders are increasingly scrutinizing actions taken under equity award plans, and that boards of directors andboard committees should review the terms of the plans before making awards or adjusting the terms of existingawards.

  • sign up for our newsletter

    To keep our clients and friends updated on the latest legal news, Richards Layton distributes practice area e-alerts and newsletters. If you are interested in receiving these publications, please subscribe below.