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In re Oracle Corp. Derivative Litigation
Delaware Chancery Court
824 A.2d 917 (Del. Ch. 2003)
Shareholders of Oracle Corp. (plaintiffs) filed a complaint alleging that four members of Oracle’s board of directors, Ellison, Henley, Lucas, and Boskin (all defendants) had engaged in insider trading by selling stock in January 2001, with the knowledge that on March 1, Oracle would release an earnings report showing that it failed to meet its sales projections. Oracle’s board formed a litigation committee composed of individuals, neither of whom had been on the board at the time of the alleged insider trading. However, both of the litigation committee members were business professors at Stanford University, an institution that had received sizable donations from the accused insider traders. Boskin was also a professor at Stanford, and Lucas served on a board at Stanford. The litigation committee found that Ellison, Henley, Lucas, and Boskin had not engaged in insider trading, and that it would thus not benefit Oracle for the litigation to continue. The litigation committee stated its findings in a report that detailed its thorough investigation. The report detailed the ways in which the committee was independent, but failed to mention the fact that the accused traders were major donors to Stanford. Based on the report, Oracle moved to have the litigation dismissed.
Rule of Law
Holding and Reasoning (Strine, V.C.)
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