Oracle’s NetSuite Purchase Win Looks Safe at Delaware High Court

The Delaware Supreme Court appeared disinclined Wednesday to reverse a trial judge’s decision finding Oracle Corp.’s 2016 acquisition of NetSuite Inc. was negotiated at arm’s length by a “fully-empowered special committee.”

“What are the legal issues here? I’m trying to figure out what the actual error is,” Chief Justice Collins J. Seitz Jr. asked attorneys for both Oracle founder Larry Ellison and the pension fund seeking to revive its failed challenge to the NetSuite deal.

The pension fund has offered no basis for disturbing the Chancery Court’s May 2023 opinion, which found that Ellison’s detachment from the transaction was “exactly what this court has instructed conflicted fiduciaries to do,” said Ellison’s attorney, Peter Wald of Latham & Watkins.

The pension fund appealed to the high court to review its lack of access to the special committee’s interview memos, whether Ellison is a controller of Oracle, and the trial court’s analysis of Ellison’s post-merger plan for NetSuite. “This case is about a conflicted fiduciary who initiated a conflicted merger,” said Joel Friedlander of Friedlander & Gorris, representing the Firemen’s Retirement System of St. Louis.

The plaintiffs had “the full and fair opportunity to pursue discovery,” and the committee “did not impair that ability,” said the committee’s attorney, Kevin Shannon of Potter Anderson & Corroon. “Interview memoranda are rarely produced in litigation.”

Ellison didn’t disclose his post-acquisition plan to Oracle’s board or senior managers, and the Chancery Court applied the wrong legal standard in analyzing it, Friedlander said. Justice Abigail M. LeGrow asked what else Ellison should have done “given the fact that he had removed himself from the negotiations as part of an attempt to remain outside and allow the special committee to control the process.”

Friedlander said that Ellison, who had “unique insights” into how Oracle and NetSuite would interact, could have presented his ideas directly or through intermediaries so that they were included in the decision-making process.

“I suspect if he did what you’re recommending, you’d be up here just making a different argument,” Seitz said.

The committee was entitled to receive a presentation reflective of Ellison’s intentions for operating NetSuite, Friedlander said. “The duty to disclose material facts related to value—that’s the test,” he said.

The pension fund is also represented by Robbins LLP and Robbins Geller. The board committee is also represented by Kramer Levin Naftalis & Frankel. Ellison is also represented by Young Conaway Stargatt & Taylor.

The case is In re Oracle Corp. Derivative Litig., Del., No. 139,2024, oral argument 10/23/24.