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Showing 275 posts in M&A.

Chancery Finds that Non-Settling Defendants Waived their Right to Seek a Settlement Credit Under DUCATA


In re Mindbody Inc. S’holder Litig., Consol. C.A. 2019-0442-KSJM (Del. Ch. Nov 15, 2023)
The Delaware Uniform Contribution Among Tortfeasors Act (“DUCATA”) establishes the legal framework applicable when plaintiffs release only some joint tortfeasors through settlement. DUCATA creates a right of contribution among joint tortfeasors and specifies that an ultimate damages award against non-settling defendants can be reduced by amounts received in settlement from other joint tortfeasors. In this fiduciary duty action challenging the fairness of a merger, the Court ruled that, despite a settlement of claims against certain defendants, the non-settling defendants waived their right to seek a damages reduction More ›

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Delaware Supreme Court Affirms Busted-Deal Decision and Attorneys’ Fees for Contingency Fee Based Representation


Energy Transfer LP v. The Williams Companies, Inc., No. 391, 2022 (Del. Oct. 10, 2023)
Busted-deal litigation is commonplace in Delaware and often requires Delaware courts to interpret provisions in merger agreements obligating parties to work towards closing and granting one party or the other fees in the event of a breach and failed deal, e.g., break-up fees or reimbursement fees. Here, in a decade-long busted deal suit, the Court of Chancery had found that the plaintiff had fulfilled its contractual obligations and the defendant, therefore, was not entitled to a break-up fee that would have exceeded $1.5 billion. The trial court also found that the defendant owed the plaintiffs approximately $410 million in reimbursement fees and $85 million in attorneys' fees under the merger agreement. On appeal, the Delaware Supreme Court affirmed each finding, examining the at-issue provisions and the trial court's determinations. Notably, on the attorneys' fees issue, the Supreme Court agreed with the trial court that the contingency fee nature of the plaintiff's representation did not warrant a finding of unreasonableness. While most decisions addressing the reasonableness of contractual fee awards have dealt with hourly fee representations, the Court found nothing inherently unreasonable about enforcing a contractual fee-shifting arrangement to cover a contingent fee award.

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Chancery Declines to Defer to the Deal Price in Appraisal Proceeding Involving a Controller Squeeze-Out Subject to MFW Protections


HBK Master Fund L.P. v. Pivotal Software Inc., C.A. No. 2020-0165-KSJM (Del. Ch. Aug. 14, 2023)
The Delaware Court of Chancery engages in an independent valuation process when determining the fair value of petitioners' stock in appraisal actions. In this case, Chancellor McCormick addresses an interesting question concerning the deal price primacy under Delaware law and ultimately rejects deference to it in controlling stockholder squeeze-out transactions subject to the MFW protections. More ›

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Chancery Finds Defendants Liable for Fraud Based on the Failure to Disclose Internal Billing Practices


NetApp Inc. v. Cinelli, C.A. No. 2020-1000-LWW (Del. Ch. Aug. 2, 2023)
This decision arose out of the sale of the company Cloud Jumper to NetApp, Inc. The seller’s management had been recording internal software use as revenue in its unaudited financial statements but never disclosed this practice to the buyer in the sale’s process. In this post-trial opinion, in addition to breaches of contract, the Court of Chancery held that the defendants were liable for fraud because they failed to disclose internal billing practices that created the appearance of higher company revenue. The Court reasoned that this failure constituted common law fraud because the defendants had a duty to speak regarding the billing practice, there was circumstantial evidence that they had scienter to commit fraud due to their knowledge of the internal billing practice, and the plaintiffs relied on the financial data that reflected the billing practice when considering whether to pursue the deal. The decision also reflects a detailed analysis of damages and expert testimony related to the misrepresentations. 

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Chancery Adopts Heightened Standard for Supplemental Disclosure Mootness Fee Awards in M&A Litigation


Anderson v. Magellan Health, Inc., et al., C.A. No. 2021-0202-KSJM (Del. Ch. July 6, 2023)
This opinion clamps down on mootness fee awards for immaterial supplemental disclosures in connection with M&A transactions. It announces that future mootness fees for supplemental disclosure will only be awarded where such disclosures are “material” not merely “helpful,” and even when such fees are awarded, they may be much lower than those awarded historically. More ›

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Chancery Refuses to Order Specific Performance Due to Inaccurate Representations and Warranties


Restanca, LLC v. House of Lithium, Ltd., C.A. No. 2022-0690-PAF (Del. Ch. Jun. 30, 2023)
The parties seeking specific performance of an agreement must establish a clear right to performance, including that all conditions to closing have been met. In this case, a buyer refused to close on the acquisition of an electric scooter company, and the seller sought specific performance in the Court of Chancery. In its post-trial decision, the Court denied that relief because the sellers inaccurately represented that the seller’s equity holders had executed a secondary sale agreement and that the seller had delivered certain financial statements to the buyer. Because neither of those things had in fact occurred, not all conditions to closing were satisfied and the buyer could walk away from the transaction. Further, because Delaware is a pro-sandbagging jurisdiction, it did not matter whether the buyer knew (as seller argued) that representations were inaccurate, and holding seller to its representations did not create an unjust result.

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Chancery Finds that Acquiror Aided and Abetted Breaches of Fiduciary Duties by Exploiting Management’s Conflicts of Interest


In re Columbia Pipeline Group Merger Litig., Consol. C.A. No. 2018-0484-JTL (Del. Ch. June 30, 2023)
To establish a claim for aiding and abetting a breach of fiduciary duties, a plaintiff must show “i) the existence of a fiduciary relationship giving rise to a duty to the plaintiff, (ii) a breach of that duty by the fiduciary, (iii) knowing participation in the breach by the defendant, and (iv) damages proximately caused by the breach.” Id. at 94. The plaintiffs alleged that TransCanada, the acquirer in the merger transaction, aided and abetted a breach of fiduciary duties in the merger sale process and in disclosures to the stockholders in connection with the merger vote. More ›

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Chancery Provides Additional Analysis of Primedia Claims in MFW Context

Posted In Chancery, Derivative Claims, M&A


City of Dearborn Police and Fire Revised Retirement System (Chapter 23) et al. v. Brookfield Asset Management Inc., C.A. No. 2022-0097-KSJM (Del. Ch. June 21, 2023)
In a short letter decision, Chancellor McCormick supplemented an earlier decision with a more fulsome analysis of plaintiffs’ Primedia claim (a direct claim challenging a merger based on a board’s failure to obtain value for material derivative claims), which the Court had earlier decided was subject to dismissal under MFW. Under Primedia’s three-part test, to bring a derivative claim post-merger, the former stockholder must plead (1) a colorable underlying derivative claim, (2) that the value of the derivative claim was material in the context of the merger, and (3) “that the acquirer would not assert the underlying derivative claim and did not provide value for it.” Here, the Court held that Plaintiffs failed to establish Primedia’s second prong because their claims and calculations were “woefully underdeveloped[.]” Specifically, plaintiffs speculated the defendants could have been liable for the entire lost market capitalization in the years following the merger, but they could not explain how that measure of damages made sense. Other metrics, including comparing the deal price to the trading price at the time of the transaction, showed that the derivative claims were not material to the merger consideration. 

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Chancery Finds that Buyer Breached Purchase Agreement by Denying Sellers’ Rights to Participate in a Defense

Posted In Chancery, M&A, Merger Agreements


LPPAS Representative, LLC v. ATH Holding Co. LLC, C.A. 2020-0241-KSJM / Shareholder Representative Services LLC v. ATH Holding Co. LLC, C.A. No. 2020-0443-KSJM (Del. Ch. May 2, 2023)
Delaware law recognizes parties’ ability to create a contractual right for an indemnifying party to participate in the defense of a claim. In this case, the Purchase Agreement provided the Sellers with such Participation Rights in connection with third-party claims that may give rise to Sellers’ indemnification obligations. The Court determined that the Buyer breached the Purchase Agreement by not allowing the Sellers to participate in the defense of investigations. More ›

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Chancery Denies Sellers’ Claim Against Buyers for Failure to Close, Finds That Sellers’ Award of “Phantom Equity” to Former Employee Breached Merger Agreement Representations

Posted In Chancery, M&A, Merger Agreements


HControl Holdings LLC vs. Antin Infrastructure Partners S.A.S., C.A. 2023-0283-KSJM (Del. Ch. May 29, 2023)
In Delaware, buyers bear the burden of proving by a preponderance of the evidence their claims for breach of a merger agreement, and sellers bear the burden of proving that buyers could not exercise their termination rights because buyers were in breach of their own obligations. In this case, the Court finds for the Buyers and determines that they were entitled to terminate the deal because the Sellers breached representations in the Merger Agreement. More ›

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Following Flawed Business Acquisition, Chancery Dismisses Derivative Complaint for Failure to Plead Demand Futility


City of Coral Springs Police Officers' Pension Plan v. Dorsey, C.A. No. 2022-0091-KSJM (Del. Ch. May 9, 2023)
A terrible business decision does not ensure the Court of Chancery will sustain a derivative claim. A derivative plaintiff still must allege that a board of directors wrongfully refused a stockholder's demand to bring suit or that making a demand on the board would be futile because a majority of the board either was interested in the transaction or would face a substantial likelihood of liability for approving the transaction, or was dependent on someone who was interested or faced a substantial likelihood of liability. More ›

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Entire Fairness Standard Applied to Transaction Benefitting Controllers of Controllers


Tueza v. Lindon, C.A. No. 2022-0130-SG (Del. Ch. Apr. 27, 2023)
Because controlling stockholders of Delaware corporations owe fiduciary duties to both the corporation and to its minority stockholders, the Court of Chancery will subject a transaction involving the company to entire fairness review if a controller receives a non-ratable benefit from a transaction. This case confronts a more nuanced question: Does entire fairness apply if the non-ratable benefit goes not to the controller but to a separate entity controlled by the controller's controllers? More ›

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Chancery Court Again Applies Entire Fairness to Claims Challenging SPAC Transaction

Posted In Chancery, Fiduciary Duty, M&A, SPAC


Laidlaw v. GigAcquisitions2, LLC, C.A. No. 2021-0821-LWW (Del. Ch. Mar. 1, 2023)
In the aftermath of a SPAC merger, the plaintiff (a public stockholder) brought claims for breaches of fiduciary duty against the SPAC's board and sponsor, as controllers, for issuing an allegedly false and misleading proxy statement. According to the plaintiff, the proxy statement failed to disclose the net cash per share that the SPAC would contribute to the merger, which in turn misrepresented the anticipated value of post-merger shares, and that such information was material to the decisions of public stockholders whether to invest in the post-merger company or to redeem their SPAC investments. Plaintiff alleged that the sponsor and board were incentivized to minimize redemptions in order to secure returns for the sponsor, which purchased a 20% stake in the post-merger company at a nominal price. More ›

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Chancery Finds for Defendants in Challenge to Oracle Acquisition of NetSuite


In re Oracle Corporation Derivative Litigation, Consol. C.A. No. 2017-0337-SG (Del. Ch. May 12, 2023)
In this “vigorously litigated” matter, the Plaintiffs argued that Oracle’s founder and current officer and director, Larry Ellison, manipulated a special committee of Oracle’s board to overpay for NetSuite, another company in which Ellison was a substantial investor. Plaintiffs offered two theories to bring the transaction within the entire fairness standard of review: first, that Ellison was a controller who sat on both sides of the transaction, and second, that Ellison, on his own and with Oracle CEO Safra Catz, misled the Oracle board and special committee, and thus the transaction was a product of fraud. Post-trial, the Court of Chancery rejected both theories, applied the business judgment rule, and found for the defendants. More ›

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Director violated Revlon Duties by Tilting the Sales Process in favor of the Buyer


In re Mindbody Inc. Stockholder Litig., C.A. No. 2019-0442-KSJM (Del. Ch. Mar. 15, 2023)
Under Revlon, to demonstrate that they satisfied their fiduciary duties in connection with a sale of control, directors bear the burden of establishing both the reasonableness of their decision-making process and the reasonableness of their actions in light of the circumstances then present. As the Court reasoned in a prior opinion in this action (discussed here), "[t]he paradigmatic Revlon claim involves a conflicted fiduciary who is insufficiently checked by the board and who tilts the sale process toward his own personal interests in ways inconsistent with maximizing stockholder value." More ›

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