Government equity goes to court

The Trump administration's extraordinary venture into taking shares of public companies has hit its first legal challenge.

An investor in Intel Corp. has filed a derivative lawsuit against the company's board of directors and the U.S. Department of Commerce, which acquired a 9.9% stake in the chipmaker - as well as a warrant for another 4.9% share - partly in exchange for money previously committed to it under the CHIPS and Science Act.

"No law authorizes the U.S. government to acquire stock in Intel or any publicly held company," wrote Kurt M. Heyman, a partner with Heyman Enerio Gattuso & Hirzel LLP in a complaint that a Delaware federal judge ordered unsealed on June 17. Paisner v. Tan et al., 26-cv-00414 (D. Del., filed April 10, 2026).

"For that same reason, the government had no right to demand shares of Intel stock for any purpose, including through the pretextual advancement of disbursements Intel has already earned or had a right to receive under a November 2024 direct funding agreement with the [Department of Commerce] that emanated from the CHIPS Act," he added.

Sarah Abrams -- an attorney who is a co-author of the D&O diary, which deals with legal issues facing company officers and directors -- said this case is unusual because Intel, while struggling at the time of the August 2025 deal, was not a company in distress.

"This is different," she said. "This was a dilution of shares due to an equity purchase by the federal government. ... This is a novel situation."

A major departure

The U.S. government has taken stakes in public companies in the past, but only during emergencies - such as auto manufacturers, insurance companies, and financial institutions during the Great Recession in 2008.

Trump's industrial policy is creating a new precedent - taking stakes in publicly held companies as well as demanding a 15% cut of sales to the People's Republic of China by chipmakers Nvidia Corp. and Advanced Micro Devices Inc.

Legal observers say the president's approach is common in other countries around the world, including China, but rare in the United States, which has avoided direct government ownership of private companies on the grounds that it interferes with the country's capitalist system.

The Republican-controlled Congress has taken no action to either bless or oppose Trump's actions. None of the companies have challenged them. There is nothing thus far that would limit Trump or future presidents from taking stakes in a wide variety of companies.

Intel stock has soared since the deal was reached. The company's share price has risen from $24.80 when the deal closed last summer to $128.32 at Friday's market close, a point raised by a government attorney in asking U.S. District Judge Richard G. Andrews of the District of Delaware to dismiss the complaint.

Richard D. Paisner, the plaintiff in the Intel derivative case, and the same attorneys - including Alan B. Morrison, an associate dean with George Washington University Law School - have also sued Nvidia in Delaware Chancery Court seeking books and records from the Santa Clara company and arguing that the government is "constitutionally barred from imposing taxes or duties on exports."

The Trump policy has largely focused on taking stakes in companies that mine rare earths and lithium. But the president also has spoken of the government getting a share of profits being made by AI and semiconductor chipmakers.

"There's a concept out there, there's so much money and it's so big that there are concepts where pieces could be given to the American public, where the American public essentially becomes a partner with the companies," Trump told reporters earlier this month.

"We're talking about it where the American people can benefit from the success of AI. And by doing that, they're going to like it better," he added, according to a Politico report.

Skadden's alleged role

The Intel complaint also names Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates - which advised the Santa Clara-based company on the deal - as a non-party, arguing that the firm was conflicted after agreeing to do $100 million of pro bono work for the Trump administration.

"In extraordinary and expedited fashion, the Board, operating under the shadow of the President's threats, and advised by legal counsel that itself was conflicted due to its pro bono promises to the President, caved to the government's extortion," Heyman wrote.

Spokespeople for Skadden did not return phone calls and emails by press time.

Abrams said she was surprised Skadden was mentioned in the complaint, even as a non-party. "There doesn't seem to be proof that [its] work directly affected any part of the terms of this deal," she said.

A tough case to win?

But if the president's approach raises hackles, some legal experts say it may be difficult to establish that agreements like the one with Intel violate the law or that the company's officers and directors violated their fiduciary duties.

David A. Skeel, a professor of corporate law with the University of Pennsylvania Carey Law School, said that while Intel's directors are vulnerable because they gave up 10% of the company for nothing, a judge would likely conclude their actions are defensible under the business judgment rule.

"It doesn't look like there's a real conflict of interest (the allegations about Skadden seem pretty thin), so it will be pretty hard to show that demand is excused on the derivative claims," he said. "The plaintiffs would have to demonstrate that there's a 'substantial likelihood' that the Intel directors will be found to have breached their duties. This is pretty tough to show."

Noting past government intervention to save General Motors Co. and AIG, albeit in emergency situations, Skeel said those analogies suggest that courts "are willing to let the government intervene, especially where the government is doing the kinds of things that a market player would do."

Abrams, however, said it may be difficult for Intel's officers to win a motion to dismiss.

"This is a verified shareholder derivative complaint saying ... it's a breach of fiduciary duty," she said. "That doesn't absolve corporate leadership from responsibilities that are owed to shareholders."

The defense

James R. Powers, a trial attorney with the U.S. Department of Justice, argued in the motion to dismiss that the claim against the Department of Commerce should be barred by sovereign immunity and that the CHIPS Act, signed by President Joe Biden in 2022, "expressly authorizes" the stock deal.

The government's argument relies heavily on a provision of the law that allows the Secretary of Commerce to "enter into agreements, including contracts, grants and cooperative agreements, and other transactions as may be necessary and on such terms as the Secretary considers appropriate."

The provision makes no specific reference to the government taking a stake in a private company, although "transactions" might be broad enough to cover the government's actions.

Attorneys for Intel's directors and officers, led by Munger, Tolles & Olson LLP and Akerman LLP, also asked that the derivative complaint be dismissed.

"Disagreeing with a board's business judgment, and claiming that it should have driven a harder bargain, does not show the directors' bad faith," Akerman LLP attorney Tammy L. Mercer wrote.