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Court of Chancery Denies Request for Permanent Injunction Against Shareholder Seeking to Challenge Merger-After Merger is Consummated

Posted In Injunctions
Examen, Inc. v. VantagePoint Venture Partners 1996, C.A. No. 1142-N, 2005 WL 1653959 (Del. Ch. July 7, 2005). Johnson v. VantagePoint Venture Partners 1996, C.A. No. 1260-N, 2005 WL 1653959 (Del. Ch. July 7, 2005). This case arose out of an earlier dispute in which VantagePoint Venture Partners ("VantagePoint"), an investor holding the majority of a series of preferred stock in Examen, Inc. ("Examen"), a Delaware corporation, sought to veto a merger between Examen and a Delaware subsidiary of Reed Elsevier Inc. VantagePoint argued for a determination that under California law the holders of the series of preferred stock issued by Examen had a right to a class vote in the merger. But the Court of Chancery held that California law did not apply and that all of the stockholders were permitted to vote on the proposed merger. In response to the court's decision, VantagePoint announced that it was going to pursue an order in a second-filed action in California to temporarily enjoin the merger. And in turn, the Court of Chancery entered a temporary restraining order to prevent VantagePoint from proceeding further. VantagePoint, then, moved to dissolve the TRO and to permit it to prosecute its claim in California (seeking a remedy based on its asserted right to a class vote on the merger). Examen sought to permanently enjoin VantagePoint from proceeding in California. In denying plaintiffs' request for permanent injunctive relief, the court noted (1) that since the merger is complete, the only harm to Examen was in having to respond to the California litigation, which did not constitute irreparable harm; (2) VantagePoint's litigation tactics in attempting to get a second bite at the apple by pursuing its later-filed California action did not qualify as harassing; and (3) the proper practice of the court was to rely on a sister state court to respect a first-filed case that proceeded to judgment, rather than order an injunction against such proceedings. The court also dissolved the TRO, as it was no longer necessary to protect Examen's interests after the merger was consummated. Authored by: R. Christian Walker 302-888-6974 rwalker@morrisjames.com