Fox, Snap Share Win on Liability Shield for Murdochs, Executives

Fox Corp. and Snap Inc. prevailed on appeal Wednesday against a pair of shareholder cases challenging charter provisions they adopted shielding senior executives, including media mogul Rupert Murdoch, from certain types of legal liability.

Delaware’s top court rejected parallel lawsuits filed in late 2022 by individual Snap investors and a pension fund holding Fox shares. The decision upheld a ruling last year by a judge who took the unusual step of voicing doubts about his own reasoning and urging the stockholders to appeal.

Chief Justice Collins J. Seitz Jr., writing for the high court, said the two companies didn’t act illegally when they updated their charters to add the clauses without the approval of public investors holding class A shares. The changes followed a 2022 amendment to Delaware’s corporate laws—which have authorized broad liability shields for board members since the 1980s—that for the first time permitted “exculpatory clauses” covering management.

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Although state law requires a separate vote by holders of class A stock on changes that would diminish certain shareholder prerogatives, the statute “is intended as a ‘safeguard’ to protect the powers, preferences and special rights” found expressly in a company’s charter, “not a broad grant of the right to vote on any amendment affecting any attribute of stock ownership,” Seitz said in a 28-page opinion.

The ruling concludes the two cases a little more than a year after they were brought in Delaware’s Chancery Court. The lawsuit against Fox—the first to take aim at an executive liability shield since the law was changed—said the company effectively let Murdoch and his son Lachlan, another top executive, decide on their own liability shield. The suit against Snap said it did a similar favor for its co-founders.

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Vice Chancellor J. Travis Laster, ruling in March 2023, said he might have been inclined to rule for the investors if he’d been writing on a blank slate. But the outcome was compelled by decades of “deeply settled” legal precedent, the judge said at the time.

The state high court affirmed those precedents Wednesday, saying the investors had offered “a statutory interpretation which deviated from the historical understanding,” one that “would conflict with the stability of our corporate law.”

That “stilted approach to statutory interpretation ignores the context,” Seitz said. “Stated plainly, they contend that we should pluck a single word from the statute, apply a generic dictionary definition to that word, and put on blinders to the rest of the words in the statute.”

Fox was represented by Wilson Sonsini Goodrich & Rosati PC. Snap was represented by Morris, Nichols, Arsht & Tunnell LLP. The investors were represented by Bernstein Litowitz Berger & Grossmann LLP.

The case is In re Fox Corp./Snap Inc. Sec. 242 Litig., Del., No. 120, 2023, 1/17/24.