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Delaware Governor Announces Two Court of Chancery Nominations to Fill Retiring Chancellor Bouchard’s Seat

Apr 12 2021

On April 9, 2021, Delaware Governor John Carney announced a number of judicial nominations, including two nominations to the Court of Chancery:

Vice Chancellor Kathaleen McCormick has been nominated to become the next Chancellor of the Court of Chancery, replacing Andre Bouchard who previously announced his retirement, effective April 30, 2021. She will be the first woman to serve in that role.
Lori W. Will, a partner at Wilson Sonsini in Delaware, has been nominated to fill McCormick’s seat as a Vice Chancellor.

We wish Chancellor Bouchard well in his retirement and thank him for his service on the Court, and look forward to the tenures of Chancellor McCormick and Vice Chancellor Will.

General

SPAC Litigation Accelerates in Delaware Courts

Apr 08 2021

Julia L. Bensur and James Heyworth

As commented on in this space previously (here, here, and here), 2020 and the beginning of 2021 have seen an explosion in popularity of Special Purpose Acquisition Company (“SPAC”) deals. As readers know, SPACs have become one of the predominant vehicles for raising funds outside of the traditional IPO. Historically, SPACs have been the target of litigation relatively infrequently, but that trend is changing with the recent SPAC boom and the corresponding increase in public awareness and interest (including from regulators, short sellers, and the securities plaintiffs’ bar). Along with the increase in federal securities suits filed against pre- and post-de-SPAC companies, a trend likewise may be emerging in the Delaware Court of Chancery: a handful of stockholder suits alleging breach of fiduciary duties have been filed against SPAC entities and/or their boards of directors recently. We highlight a few below.

Misrepresentations and Omissions; SPACs

Securities Litigation Against Life Sciences Companies: 2020

Apr 07 2021

Sara Brody, Robin Wechkin, Francesca Brody and Sarah Hemmendinger

Securities class actions against life sciences companies are almost always second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class-action attorneys will search the company’s previous public statements and seek to identify inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys will seek to show that any arguable inconsistency amounts to fraud — that is, they will claim that the earlier statement was knowingly or recklessly false or misleading. Where a company makes the challenged statement in a public offering document — a registration statement or prospectus — plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter.

COVID-19; Derivative Litigation; Materiality of Disclosures; Misrepresentations and Omissions

Latest Caremark Dismissal Reinforces High Bar for Alleging Oversight Liability and Import of Exculpatory Provisions for Corporate Directors

Apr 05 2021

Yolanda C. Garcia, Daniel J. Driscoll II and Annabeth L. Reeb

The Court of Chancery’s March 30 decision in LendingClub is another example of the significant difficulty plaintiffs face in adequately alleging demand futility in the context of a derivative corporate oversight claim governed by Caremark, especially so in the face of an applicable exculpatory provision contained in a corporate charter.

Caremark; Derivative Litigation

Delaware Court of Chancery Will Evaluate Third-Party Sales of Controlled Companies Under the Enhanced Scrutiny Standard of Review

Apr 01 2021

Claire Holland

The Delaware Court of Chancery recently held that a stockholder plaintiff pleaded facts sufficient to support a reasonable inference that a target company’s board of directors could have achieved a higher deal price had the company’s financial advisor not, unbeknownst to the board, tipped the buyer about the price of another bid during the sale process.

Corporate Control; Post-Closing Disputes; Revlon

Cornerstone Report Shows Stockholder Settlements (Largely) Return to Trend in 2020

Mar 29 2021

Joshua J. Card and Andrew W. Stern

According to Cornerstone’s 2020 review of securities class action settlements, settlements in 2020 generally kept pace with trends seen in recent years, notwithstanding COVID-19 and brief lulls in March and April 2020.

Cornerstone; Derivative Litigation; M&A

Back to the Future: New Lines Drawn for Poison Pills

Mar 25 2021

Charlotte K. Newell, Beth E. Berg, Kai H.E. Liekefett and Derek Zaba

In a tale of what is old is new again, the Delaware Court of Chancery reviewed the propriety of a poison pill — a bulwark of the 1980s takeover era — but in the context of shareholder activism against the backdrop of the COVID-19 pandemic. Vice Chancellor Kathaleen McCormick’s detailed review of the pertinent case law and fact-specific decision to permanently enjoin The Williams Companies, Inc.’s extraordinary 5% poison pill offers a number of lessons for directors considering the adoption or renewal of a similar device. The Williams Cos. S’holder Litig. (Del. Ch. Feb. 26, 2021).

Best Practices; Corporate Control; Shareholder Activism

Pattern Energy: More Fuel for Pre-litigation 220 Demands

Mar 22 2021

Matthew J. Dolan

A recent decision in the federal securities class action regarding the take-private transaction of Pattern Energy lends further support to plaintiffs invoking an aggressive pre-litigation strategy to pursue discovery through a 220 demand. Plaintiffs in the federal case chose not to make a pre-suit 220 demand. Instead, faced with a motion to dismiss, they sought relief from the discovery stay of the Private Securities Litigation Reform Act (PSLRA) to obtain the same 220 demand discovery obtained by Chancery Court plaintiffs in parallel litigation. The discovery motion was denied, and the motion to dismiss was recently granted. Conversely, for the Chancery Court plaintiffs, the breadth of 220 discovery they were able to obtain became the basis for the Chancery Court’s appointment of a lead plaintiff. These divergent outcomes send a further message to plaintiffs that they face real danger if they fail to aggressively pursue pre-suit 220 discovery.

Section 220/Inspection Rights

Creative Deal Structures: Energizing the M&A Market Post-Crisis

Mar 18 2021

Enhanced Scrutiny Contributors

Sidley and Mergermarket are pleased to present Creative Deal Structures: Energizing the M&A Market Post-Crisis.

Creative structures have become increasingly important in bridging the gap between sellers’ expectations and buyers’ willingness to pay. Based on interviews with 150 respondents from U.S. corporates and private equity firms, this report analyzes the ways in which M&A is moving forward in spite of the pandemic.

COVID-19; M&A; SPACs

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