Latham Secures Complete Appellate Win for Oracle’s Larry Ellison and Safra Catz in Multi-Billion Dollar Stockholder Challenge
On January 21, 2025, the Delaware Supreme Court unanimously affirmed the Court of Chancery’s post-trial judgment in favor of Latham clients Larry Ellison and Safra Catz in a stockholder derivative suit challenging Oracle Corporation’s US$9.4 billion acquisition of NetSuite in 2016. This decision marks a significant appellate victory involving one of the largest acquisitions to face a stockholder challenge through trial in Delaware.
This litigation began in 2017, when certain Oracle investors filed suit alleging that Mr. Ellison (Oracle’s founder, Chairman, and Chief Technology Officer) — with the assistance of Ms. Catz (Oracle’s CEO) — caused Oracle to overpay for NetSuite, a company that Ellison co-founded and in which he was a substantial investor. Oracle’s handling of this transaction, however, was a model for corporate best practices involving conflicted fiduciary transactions: given Mr. Ellison’s ownership interests in both Oracle and NetSuite, he recused himself entirely from the transaction, and the remainder of the Oracle board formed a Special Committee of independent and disinterested directors, which was given full authority to evaluate, negotiate, and approve or reject an acquisition of NetSuite. The Special Committee retained independent advisors, carefully analyzed the deal, and bargained aggressively to obtain NetSuite at a price so low that NetSuite’s unaffiliated stockholders almost turned it down. Oracle’s acquisition of NetSuite has proven to be an unparalleled success; with Oracle’s Fusion product serving large enterprises and NetSuite serving smaller businesses, Oracle stands alone in serving the entire cloud enterprise resource planning market.
Nevertheless, plaintiffs claimed that the NetSuite acquisition should be scrutinized by the court under Delaware’s onerous “entire fairness” standard, rather than the more deferential “business judgment” rule. Plaintiffs offered two theories for invoking that standard:
- Mr. Ellison controlled Oracle despite owning only 28% of its stock; and
- Mr. Ellison and Ms. Catz misled the Oracle Special Committee by failing to disclose Mr. Ellison’s opinions on how Oracle might best run NetSuite if the deal closed.
Mr. Ellison and Ms. Catz first prevailed in the Court of Chancery, where Latham demonstrated over the course of a two-week trial that plaintiffs’ claims were meritless.
In his 101-page opinion, Vice Chancellor Glasscock first concluded that Mr. Ellison did not exercise de facto control over Oracle. In so finding, the Vice Chancellor relied on decisive testimony from numerous witnesses put on by Latham, which demonstrated that Oracle’s board and senior management consistently exercised their independent business judgment. Nor could Mr. Ellison be deemed to have “controlled” the transaction itself, because the evidence showed that he fully recused himself from the Special Committee’s consideration of the deal, and scrupulously adhered to that recusal throughout the process. Finally, the Vice Chancellor rejected plaintiffs’ argument that entire fairness applied because Ellison and Catz committed “fraud on the board,” finding that neither Mr. Ellison nor Ms. Catz failed to disclose material information to the Special Committee. Latham showed through multiple witnesses that Oracle followed its well-established, standard modeling practices for acquisitions of this type, and that all of plaintiffs’ criticisms were unfounded.
Plaintiffs then appealed to the Delaware Supreme Court. The court held oral argument on October 23, 2024, with Latham’s Peter Wald delivering his final oral argument before retirement.
On January 21, 2025, the court issued a unanimous 43-page opinion affirming the Vice Chancellor’s decision and decisively rejecting each of the plaintiffs’ challenges.
First, the court affirmed the Vice Chancellor’s determination that Mr. Ellison was not a controlling stockholder — emphasizing that “[t]he test for actual control by a minority stockholder is not an easy one to satisfy,” and concluding that the Vice Chancellor did not clearly err in finding that plaintiffs had failed to satisfy this test. The court relied heavily on the Vice Chancellor’s extensive factual findings and noted that the plaintiffs were improperly asking the court to reweigh the evidence on appeal.
Second, the court affirmed the Vice Chancellor’s determination that Mr. Ellison did not materially mislead the Special Committee by failing to break his recusal and offer his opinions on how Oracle might operate NetSuite if the deal closed. The court explained that the Vice Chancellor did not clearly err in finding that Ellison’s opinions “were not of a magnitude that the Special Committee would have viewed [them] as important,” particularly given that those opinions simply mirrored information already “known to the Special Committee.” The court also noted its overall “skepticism” of the plaintiffs’ theory, which would have required Ellison to break his recusal — causing plaintiffs to “quickly pivot” and claim that Ellison “improperly exert[ed] his influence over the Special Committee’s work.”
Third, the court rejected plaintiffs’ challenge to the Vice Chancellor’s pre-trial determination that certain witness interview memoranda prepared by counsel for Oracle’s Special Litigation Committee constituted protected attorney work product. The court found plaintiffs’ various arguments unconvincing and held that the Vice Chancellor’s ruling did not amount to an abuse of discretion.
Peter commented, “We are very pleased with the Delaware Supreme Court’s affirmance of Vice Chancellor Glasscock’s decision and judgment, which — following lengthy discovery and a two-week trial — found for defendants Larry Ellison and Safra Catz by rejecting plaintiffs’ claims of fraud and breach of fiduciary duty in connection with Oracle’s 2016 acquisition of NetSuite. As the Supreme Court affirmed, Mr. Ellison and Ms. Catz properly conducted themselves in accordance with Delaware law throughout the transaction. Mr. Ellison did not control either Oracle or the transaction itself. As a conflicted fiduciary he properly abstained from the independent Special Committee’s consideration of the deal, and he did not withhold any material information from the Special Committee. Ms. Catz, working at the Special Committee’s direction, loyally and ably served the interests of Oracle stockholders by working to assure that Oracle paid the lowest price possible for NetSuite. NetSuite was one of the best acquisitions Oracle ever made. It has been an honor and a privilege representing Mr. Ellison and Ms. Catz throughout the last 8 years of hard-fought litigation, and it is very gratifying to see them vindicated so fully.”
Added partner Blair Connelly, who led the Latham team together with Peter, “Delaware has a well-established protocol for evaluating and consummating conflicted fiduciary transactions, and when that protocol is followed — as it was here — the best outcomes are achieved for stockholders. The decision underscores for clients and practitioners that adherence to these established principles will pay significant dividends in any subsequent litigation challenging the deal.”
Ultimately, the Delaware Supreme Court’s decision brings a resoundingly successful end to this long-running litigation and marks a significant victory for Mr. Ellison, Ms. Catz, and Oracle.
The team that achieved this victory on appeal consisted of now-retired partner Peter Wald, who argued the appeal, as well as partners Blair Connelly and Christopher Turner; counsel Adam Shamah; and associates Blake Stafford, Emily Orman, Clarissa Lu, and Yanbing (Yan) Chu. Latham was supported by Delaware counsel Elena Norman, Richard Thomas, and Alberto Chavez of Young Conaway Stargatt & Taylor LLP.
In addition, the Latham trial team that prevailed in the Court of Chancery included partner Kevin McDonough and associates Nathan Taylor, Eric Pettis, and Jarred Muller.