The Toll decision preserves a state law claim for stockholders of Delaware corporations whose fiduciaries may have engaged in the trading of the corporation’s securities on the basis of material, nonpublic information. As a result, corporate directors and officers engaging in insider trading may face a derivative action under Brophy as well as federal securities law claims.  More important, this decision illustrates that Delaware courts will not lightly accept an argument that state corporate law is pre-empted by federal law and regulation. It will be interesting to see how this view factors into future debates over whether pending federal financial reform legislation, insofar as it purports to address corporate governance issues, supersedes Delaware corporate law.

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Robert Reder is co-practice group leader of Milbank, Tweed, Hadley & McCloy’s Global Corporate Group.