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Chancery Addresses Standing Defense And Control Allegations In Abandoned Tender Offer Dispute

In re WeWork Litig., C.A. No. 2020-0258-AGB (Del. Ch. Dec. 14, 2020)

This decision is the companion to another dismissal opinion in same case of the same date and arising out of the same abandoned multi-step tender offer transaction between WeCompany (“WeWork” or the “Company”) and SoftBank Group Corp. and Vision Fund (AIV M1) L.P. (together, “Softbank”). A summary of the companion opinion is available here

Here, the Court of Chancery resolved Softbank’s motion to dismiss for lack of standing and failure to state a claim. The Court first rejected SoftBank’s contention that the Company lacked standing to bring the claims against SoftBank because the tender offer would only benefit the tendering stockholders and not the Company generally. According to the Court, the Company had standing because (1) it was a party to the transaction agreements, (2) it suffered an “injury-in-fact” beyond direct economic harm attributable to defendants’ abandonment of the tender offer sufficient for standing purposes, and (3) it was the only party with standing to enforce the at-issue contract’s terms considering the contract’s disclaimer of third-party beneficiary rights. 

SoftBank’s 12(b)(6) arguments has mixed results. The Court upheld the Company’s breach of contract claim based on the contract’s “reasonable best efforts” provision, dismissed pre-transaction fiduciary duty claims based on insufficient allegations of control, and dismissed post-transaction fiduciary duty claims that were redundant of alleged breaches of contract. In rejecting the Company’s contentions of control by the 27% stockholders, the Court observed statements in the record and took judicial notice of information that attributed control of the company to its former CEO, and not SoftBank, and distinguished the case from those involving other forms of control, like contractual veto or blocking rights to force a particular outcome.

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