Chancery Court Grants Declaratory Judgment and Specific Performance to Appoint Stockholders’ Board Nominees Pursuant to an Oral Agreement with the Board

On December 8, 2017, in Sarissa Capital Domestic Fund LP, et al. v. Innoviva, Inc., the Delaware Court of Chancery held that an oral settlement reached between a group of Sarissa stockholders and the Innoviva board was a valid, binding agreement, and that Sarissa was entitled to specific performance requiring the board to appoint two Sarissa nominees. Expecting to lose a proxy contest to Sarissa, the board authorized its vice chairman to make a settlement proposal to Sarissa and the parties agreed to a deal over a phone call, with plans to later memorialize the deal. When Innoviva later learned it actually had enough votes to win the proxy contest, it called off the deal and proceeded to elect all its nominees at the annual meeting. The Court held that the parties formed a valid contract during the call and that the evidence confirmed sufficient oral manifestations of assent despite the parties’ intention to later put the agreement in writing. The Court concluded that specific enforcement was proper because, among other things, money damages would not remedy Sarissa’s lost opportunity for board seats and “Innoviva’s opportunistic maneuvers to escape its contractual obligations offend basic notions of equity.”