In re Anaplan Inc. S’holders Litig., C.A. 2022-1073-NAC (Del. Ch. June 21, 2024)
In this decision, the Court of Chancery held that stockholder-plaintiffs’ claims for breach of fiduciary duty challenging a merger were cleansed under the Corwin doctrine by a disinterested, fully-informed, uncoerced vote of the holders of a majority of the outstanding voting stock. The plaintiff brought a putative stockholder class action against the target company’s directors and officers for breach of fiduciary duties in connection with pre-closing equity grants that the acquirer claimed breached the merger agreement. The parties resolved their differences via an amended merger agreement that provided $400 million less total consideration to the target’s stockholders. The plaintiffs argued that the defendants breached clear and unambiguous provisions of the merger agreement recklessly or in bad faith, and in the alternative violated Revlon duties to obtain and maintain the highest price reasonably available for the company’s public stockholders in a cash-out merger.
The plaintiffs did not assert, however, that the merger was a controlling stockholder transaction subject to the entire fairness standard ab initio. Therefore, Corwin cleansing was available. The Court reasoned that Corwin cleansing applied because disinterested stockholders had the material information they needed—including, most importantly, about the price—to make an informed decision whether to vote in favor of the merger. A supplemental proxy statement also made clear the directors’ reasons for agreeing to the price reduction, which included obtaining greater certainty that the acquirer would close. The Court further explained that the vote was free from situational coercion because the consideration still reflected a substantial premium both to the company’s unaffected share price and to its expected share price if stockholders voted not to approve the merger. Accordingly, the Court found that the plaintiffs’ claims for breach of fiduciary duties in the merger transaction were cleansed under Corwin by a disinterested, fully-informed, uncoerced vote of the holders of a majority of the outstanding voting stock, and granted the motion to dismiss the plaintiff’s claims.
