Issue No. 11 — October 19, 2026

In re Cloudflare, Inc. Stockholder Litigation — the recapitalization enjoined (Del. Ch. Oct. 16, 2026, Consol. C.A. No. 2026-0772-JTL)

After the August 12 argument (Issues Nos. 2 and 7), Vice Chancellor Laster granted a preliminary injunction preserving the status quo pending trial. In the opinion's description, the recapitalization moves nine of each founder share's ten votes into new preferred stock with nominal equity value and distributes a non-voting common share for each low-vote share, after which the founders, who held 50.3 percent of the voting power as of June 5, 2026, “could divest non-voting shares without affecting their control and low-vote shares without meaningfully eroding it.”

On the interpretation of amended Section 144 of the Delaware General Corporation Law, the court accepted the defendants' positions: it rejected the plaintiffs' argument that the statute's exception for injunctive relief excluded this recapitalization from Section 144, applied the heightened presumption that the special committee's members were disinterested, and found the plaintiffs had not shown a reasonable probability of rebutting it. But the committee-approval safe harbor also requires action in good faith and without gross negligence, and the court concluded that the preliminary record gave the plaintiffs a reasonable probability of establishing a failure of good faith, citing communications and evidence concerning the committee's negotiations; it added that the due-care claim does not support injunctive relief. The court drew a preliminary inference of evidence destruction from the Signal record and reserved credibility determinations for trial. If the safe harbor is unavailable, the defendants bear the burden of proving entire fairness, and the court found a reasonable probability that they could not carry it.

The opinion makes no findings of fact and states that the directors “may have concluded in good faith” that benefiting the founders served the corporation, in which case the safe harbor would apply. The defendants must elect within ten days whether to have an initial trial limited to compliance with the committee-approval path; if they do, the court intends to hold it promptly, ideally in about ninety days.

Flexport v. Freightmate AI — resolved by stipulated judgment (N.D. Cal., No. 3:25-cv-02500)

Days before an October 19 trial, the court approved a stipulated judgment, as reported by The Loadstar (Oct. 9) and GeekWire (Oct. 12). Freightmate and co-founders Bryan Lacaillade and Yingwei (Jason) Zhao acknowledged, for purposes of the judgment, acquiring about 2,000 confidential Flexport shipping documents and using some, and that the founders knew or should have known that acquiring them violated their Flexport agreements; Freightmate is permanently barred from possessing or using Flexport confidential data, an independent forensic examiner is to inspect its systems and report by January 30, 2027, and the company may continue to compete. Freightmate did not admit the remaining allegations and denies liability; the court made no liability findings; financial terms are confidential.

In re Upstart Holdings, Inc. Securities Litigation — claims against a fund and its board designee proceed (S.D. Ohio Sept. 30, 2026, No. 2:22-cv-02935)

In the securities class action over Upstart's statements about its AI underwriting model, Judge Marbley largely denied the motion to dismiss the amended complaint's claims against Third Point, its venture arm, its founder, and Robert Schwartz, the Third Point Ventures partner who held the fund's Upstart board seat. The amended complaint alleges that Schwartz forwarded board materials and monthly performance data to Third Point personnel, and that Third Point sold about 981,000 shares in August 2021 for roughly $198 million, 2.15 million shares for more than $500 million on the day Schwartz resigned from the board, and, by December 2021, had sold most of its position for cumulative proceeds exceeding $1.7 billion.

The court held that Schwartz's alleged conduct could be imputed to Third Point, that the insider-trading allegations adequately alleged a deceptive scheme, and that the defendants' contention that Upstart knew of and approved the sharing and trades raised factual disputes not resolvable on the pleadings. It dismissed the Section 20(a) theory that Third Point and Schwartz controlled Upstart, while allowing the Section 20(a) claim that Loeb and Schwartz controlled Third Point and the Section 20A insider-trading claim to proceed. These are allegations held sufficient to proceed, not findings.

Eccles v. Shamrock Capital Advisors — the FanDuel waterfall and a potential duty to common holders (N.Y. May 23, 2024, 42 N.Y.3d 321)

As recited in the Court of Appeals' opinion (allegations accepted as true at the pleading stage), FanDuel, a Scottish company, combined in 2018 with Paddy Power Betfair's U.S. business; its board valued the consideration passing through the articles' waterfall at $465.5 million — below the roughly $559 million preference threshold — so the preferred holders received FanDuel's entire stake in the combined company and the common received nothing; Shamrock and KKR exercised drag-along rights, so no shareholder vote occurred. More than 100 common holders, including the founders, allege the valuation was deliberately depressed after Murphy v. NCAA cleared the way for states to authorize sports betting; the defendants deny wrongdoing, as reported. New York's Court of Appeals held that the law of the place of incorporation presumptively governs internal affairs — so Scots law applied — and that, although Scots law generally runs directors' duties to the company rather than to shareholders, the pleaded combination of waterfall and drag-along could support an inference of “special circumstances” creating a limited duty to protect the common's interest in the merger consideration; it reinstated the fiduciary-duty claims against the directors and the related aiding-and-abetting claim, noting that the existence and extent of any duty depend on proof.

Questions addressed in the decisions

The decisions address different legal questions. In Cloudflare, the court considered compliance with the committee-approval requirements of amended Section 144 of the Delaware General Corporation Law and whether a preliminary injunction was warranted. In Upstart, the court considered whether the amended complaint adequately pleaded securities claims against the Third Point defendants and Schwartz, including claims arising from the alleged sharing and use of material nonpublic information. In FanDuel, the Court of Appeals considered whether, under Scots law, the pleaded interaction of the waterfall, drag-along rights, and the directors' authority to value and distribute merger consideration could support limited duties to common shareholders. Witmer v. Armistice (Issue No. 1) addressed a different question: whether an investor with a board designee itself had fiduciary status.

Cloudflare — the defendants' trial election and schedule • FanDuel — July 9 ruling largely denying dismissal of the amended complaint and Oct. 9 special-master privilege ruling, as reported (Gambling Insider, July 16; RG.org, Oct. 16); orders not yet reviewed by the Docket • Linqto, Groq — responsive pleadings and related motion practice; Aerosonic v. Joby — post-trial developments (Issue No. 10) • ATP — funding orders and district-court appeal (Issue No. 5) • Musk v. OpenAI — judgment and appeal developments (Issue No. 4) • SEC v. Gao — final-relief proceedings (Issue No. 2) • Corrections and Clarifications (the Cloudflare caption and case number; TSVC v. Foothill) — see vcexpertservices.com/docket.