On October 1, 2024, in In re TransUnion Derivative Stockholder Litigation, Vice Chancellor Will in the Delaware Court of Chancery dismissed a derivative suit against the Directors of TransUnion for allegedly breaching their fiduciary duty of oversight in relation to agreements made pursuant to a Consumer Financial Protection Bureau (“CFPB”) consent order. The Court concluded that Plaintiffs failed to establish a breach under both theories presented, one under Caremark and one under In re Massey Energy, because while the TransUnion Directors may have conducted their oversight duty imperfectly, they did so with a good faith effort.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Alexandra Bielerhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAlexandra Bieler2025-01-14 09:03:102025-01-14 09:37:12Chancery Rejects ‘Quibbles’ As The Basis For Caremark Claims, Underscoring The Wide ‘Gulph’ Between Imperfect Compliance and Purposeful Lawbreaking
In 2024, Enhanced Scrutiny provided in-depth and practical insights related to M&A and corporate governance decisions and developments from the Delaware courts and other jurisdictions. Read the most popular posts from the past year below. We look forward to continuing our coverage in 2025.
Earlier this year, in Cantor Fitzgerald v. Ainslie, the Delaware Supreme Court reiterated that “[t]he courts of this State hold freedom of contract in high—some might say, reverential—regard” in interpreting alternative entity agreements. A recent case, Mehra v. Teller, starkly illustrates the court’s strict enforcement of unambiguous contract language. After a full trial, Chancellor Kathaleen McCormick upheld an LLC agreement’s plain language despite a conflict with the extrinsic evidence of the parties’ true intent presented at trial.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Yifei Wanghttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngYifei Wang2024-12-18 09:04:092024-12-16 13:42:54Unambiguous Language Prevails Over Evidence Of The Parties’ Intent—After Full Trial
The doctrine of laches and statutes of limitations both bar claims brought too late. But when does each apply? And how late is too late? A recent case in the Delaware Court of Chancery, MW Gestion v. Sinovac Biotech Ltd., provides insight.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2024/11/MN-24015-Enhanced-Scrutiny-Blog-Imagery-Refresh_2.jpg606833Hille R. Sheppardhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngHille R. Sheppard2024-12-04 09:03:122024-12-04 09:41:24Time Flies: Understanding The Court of Chancery’s Approach To Laches and Statutes of Limitations
Judge Medinilla’s recent opinion in Cytotheryx, Inc. v. Castle Creek Biosciences, Inc. is a reminder for practitioners to carefully consider whether an integration clause in a purchase agreement will be sufficient to bar extra-contractual misrepresentation claims. And although fraud claims arising out of M&A transactions often are brought against sellers, the decision also offers an example of how those claims can be brought against purchasers, particularly in transactions using stock consideration.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jarrett H. Grosshttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJarrett H. Gross2024-11-20 09:04:552024-11-25 12:56:55Court of Chancery Opinion Highlights the Importance of Clear Integration and Non-Reliance Provisions in M&A Agreements
As we have written about in the past, earnout provisions in M&A agreements are often ways to find value and bridge a buyer’s and seller’s differing expectations of the future. But they also are ripe for litigation, especially if the buyer changes the way the business is run or pursues other opportunities that may affect the earnout. Such disputes are highly fact-specific and often turn on the unique issues facing the acquired business. A recent case from the Delaware Court of Chancery illustrates an example of a buyer not having to pay an earnout when its conduct to not enter into new business with a potential customer was influenced by a simultaneous transaction to sell an equity stake in the buyer.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2024/07/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_19.jpg606833Robert S. Velevishttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRobert S. Velevis2024-11-14 12:16:392024-11-14 12:29:13Sale of Buyer’s Equity Provides “Good Faith” Justification for Not Earning Earnout
As this blog has consistently observed, although the well of SPAC mergers substantially dried up a few years ago, the wave of lawsuits stemming from those de-SPAC mergers has not abated. In the latest decision addressing claims for breach of fiduciary duty arising from a de-SPAC merger, Solak v. Mountain Crest Capital LLC, Vice Chancellor Glasscock bemoaned “the bulge of SPAC carcasses [that] continues to be digested in equity.” Yet, despite acknowledging that the allegations were not strong and hewed “close to the line between an adequate and an inadequate claim,” he allowed the claims to proceed past a motion to dismiss.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Heather Benzmiller Sultanianhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngHeather Benzmiller Sultanian2024-11-08 09:04:462024-11-08 09:55:02SPAC Litigation Continues to Churn in the Belly of the Chancery Beast
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Chancery Rejects ‘Quibbles’ As The Basis For Caremark Claims, Underscoring The Wide ‘Gulph’ Between Imperfect Compliance and Purposeful Lawbreaking
On October 1, 2024, in In re TransUnion Derivative Stockholder Litigation, Vice Chancellor Will in the Delaware Court of Chancery dismissed a derivative suit against the Directors of TransUnion for allegedly breaching their fiduciary duty of oversight in relation to agreements made pursuant to a Consumer Financial Protection Bureau (“CFPB”) consent order. The Court concluded that Plaintiffs failed to establish a breach under both theories presented, one under Caremark and one under In re Massey Energy, because while the TransUnion Directors may have conducted their oversight duty imperfectly, they did so with a good faith effort.
(more…)
Alexandra Bieler
New York
abieler@sidley.com
Jim Ducayet
Chicago
jducayet@sidley.com
Top 15 Posts of 2024
In 2024, Enhanced Scrutiny provided in-depth and practical insights related to M&A and corporate governance decisions and developments from the Delaware courts and other jurisdictions. Read the most popular posts from the past year below. We look forward to continuing our coverage in 2025.
(more…)
Enhanced Scrutiny Contributors
delawarelit@sidley.com
Unambiguous Language Prevails Over Evidence Of The Parties’ Intent—After Full Trial
Earlier this year, in Cantor Fitzgerald v. Ainslie, the Delaware Supreme Court reiterated that “[t]he courts of this State hold freedom of contract in high—some might say, reverential—regard” in interpreting alternative entity agreements. A recent case, Mehra v. Teller, starkly illustrates the court’s strict enforcement of unambiguous contract language. After a full trial, Chancellor Kathaleen McCormick upheld an LLC agreement’s plain language despite a conflict with the extrinsic evidence of the parties’ true intent presented at trial.
(more…)
Yifei Wang
Chicago
yifei.wang@sidley.com
Jarrett H. Gross
Chicago
jarrett.gross@sidley.com
Elizabeth Y. Austin
Chicago
laustin@sidley.com
Time Flies: Understanding The Court of Chancery’s Approach To Laches and Statutes of Limitations
The doctrine of laches and statutes of limitations both bar claims brought too late. But when does each apply? And how late is too late? A recent case in the Delaware Court of Chancery, MW Gestion v. Sinovac Biotech Ltd., provides insight.
(more…)
Hille R. Sheppard
Chicago
hsheppard@sidley.com
Daniel Epstein
Chicago
depstein@sidley.com
Court of Chancery Opinion Highlights the Importance of Clear Integration and Non-Reliance Provisions in M&A Agreements
Judge Medinilla’s recent opinion in Cytotheryx, Inc. v. Castle Creek Biosciences, Inc. is a reminder for practitioners to carefully consider whether an integration clause in a purchase agreement will be sufficient to bar extra-contractual misrepresentation claims. And although fraud claims arising out of M&A transactions often are brought against sellers, the decision also offers an example of how those claims can be brought against purchasers, particularly in transactions using stock consideration.
(more…)
Jarrett H. Gross
Chicago
jarrett.gross@sidley.com
Ian M. Ross
Miami
iross@sidley.com
Sale of Buyer’s Equity Provides “Good Faith” Justification for Not Earning Earnout
As we have written about in the past, earnout provisions in M&A agreements are often ways to find value and bridge a buyer’s and seller’s differing expectations of the future. But they also are ripe for litigation, especially if the buyer changes the way the business is run or pursues other opportunities that may affect the earnout. Such disputes are highly fact-specific and often turn on the unique issues facing the acquired business. A recent case from the Delaware Court of Chancery illustrates an example of a buyer not having to pay an earnout when its conduct to not enter into new business with a potential customer was influenced by a simultaneous transaction to sell an equity stake in the buyer.
(more…)
Robert S. Velevis
Dallas
rvelevis@sidley.com
Miranda Cassidy
SPAC Litigation Continues to Churn in the Belly of the Chancery Beast
As this blog has consistently observed, although the well of SPAC mergers substantially dried up a few years ago, the wave of lawsuits stemming from those de-SPAC mergers has not abated. In the latest decision addressing claims for breach of fiduciary duty arising from a de-SPAC merger, Solak v. Mountain Crest Capital LLC, Vice Chancellor Glasscock bemoaned “the bulge of SPAC carcasses [that] continues to be digested in equity.” Yet, despite acknowledging that the allegations were not strong and hewed “close to the line between an adequate and an inadequate claim,” he allowed the claims to proceed past a motion to dismiss.
(more…)
Heather Benzmiller Sultanian
Chicago
hsultanian@sidley.com
Aleena Tariq
Chicago
aleena.tariq@sidley.com
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