• Delaware Supreme Court Reaffirms Disgorgement as Insider Trading Remedy
  • June 29, 2011
  • Law Firm: Jones Day - Cleveland Office
  • Disavowing recent Court of Chancery precedent, the Supreme Court of Delaware has held disgorgement to be an insider trading remedy, even where the corporation itself was not harmed. Kahn v. Kohlberg Kravis Roberts & Co., L.P., No. 436, 2010 (June 20, 2011). Kahn rejected two prior Chancery Court opinions narrowly construing Brophy, a 1949 Chancery Court decision, and remanded the case before it for a determination of whether dismissal was appropriate for reasons other than a lack of corporate injury. As a result, Brophy, which was thought to be of limited vitality, has been strongly reaffirmed. It is now clear that derivative suits alleging insider trading may proceed even in the absence of any injury to the corporation itself.