Delaware Ruling Provides Guidance In Derivative Litigation, Underscores Texas Procedural Differences

Last month, the Delaware Court of Chancery in Adam Grabski ex rel. Coinbase Global, Inc. v. Andreessen denied a motion by Coinbase Global, Inc.'s Special Litigation Committee ("SLC") to terminate a stockholder derivative action because the court determined that one of the members of the SLC was not independent. The decision provides guidance for boards and advisors regarding the formation, composition, and operation of special litigation committees, as well as the continued rigor with which courts scrutinize committee independence. It also offers a useful point of comparison with procedures available to companies incorporated in Texas.

At the time of the events underlying this action, Coinbase was a Delaware corporation. Nearly three years passed from the date the plaintiff-stockholder initiated the action until the date the Court of Chancery ruled the SLC was not independent. During that time, the parties engaged in extensive briefing on a motion to dismiss