Even After Multiplan, Pleading Standards Still Have Teeth in SPAC Cases

In 2022, the Delaware Court of Chancery decided In re MultiPlan Corp. S’holders Litig., 268 A.3d 784 (Del. Ch. 2022) (“Multiplan”), a landmark case setting the legal framework for assessing claims that the directors of a Special Purpose Acquisition Company (“SPAC”) breached their fiduciary duties in connection with “de-SPAC” mergers. Given the popularity of de-SPAC mergers, in which the SPAC merges with a private target company and takes it public, the Delaware courts have been faced with a series of cases initiated by public stockholders who did not redeem their shares at the time of the merger but became unhappy when the post-merger public companies underperformed. The focus of those cases is the redemption right: whether stockholders in the SPAC were properly informed when they made the critical decision at the time of the merger to either redeem their shares or remain invested in the newly public company.

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“No Better than a Racket”: Seventh Circuit Cracks Down on Merger Objection Strike Suits

In a recent decision, the United States Court of Appeals for the Seventh Circuit outlined a mechanism by which shareholders can object to mootness fees paid to plaintiffs’ attorneys in merger objection suits. See Alcarez v. Akorn, Inc., 99 F.4th 368 (7th Cir. 2024). By allowing a shareholder to intervene and inviting the district court to scrutinize the propriety of the suit, the Seventh Circuit took a further step in its battle against the frivolous strike suits that have plagued M&A transactions for many years.

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Buyer Beware: What to Know About the DOJ’s Policy on Self-Reporting in M&A

What happens when you buy somebody else’s problems? A new policy from the U.S. Department of Justice (DOJ) is encouraging companies to disclose the misconduct of the companies they buy. The DOJ says it won’t prosecute businesses that voluntarily report wrongdoing found during the mergers and acquisitions process.

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You May Think You Are a Partner, But… Chancery Opinion Reaffirms That Any Agreement, Written or Oral, Must Include All Material Terms

In a recent decision by Vice Chancellor Glasscock of the Delaware Court of Chancery, Handler v. Centerview Partners Holdings, L.P., the Vice Chancellor considered whether a partnership agreement existed based on a purported oral agreement. The Court of Chancery’s decision provides useful guidance to practitioners and reaffirms that, while Delaware law permits oral agreements, including partnership agreements, that agreement must include all material, essential terms – an agreement to agree is insufficient.

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Delaware’s Appealing Interlocutory Review Regime

In a recent case, Palkon v. Maffei (TripAdvisor), the Delaware Supreme Court accepted an interlocutory appeal of the Court of Chancery’s denial of shareholders’ motion to dismiss. Such appeals are not common: Delaware Supreme Court Rule 42(b) expressly provides that “[i]nterlocutory appeals should be exceptional, not routine, because they disrupt the normal procession of litigation, cause delay, and can threaten to exhaust scarce party and judicial resources.” Even more unusually, the Delaware Supreme Court took this step over the Court of Chancery’s refusal to certify the appeal. This decision and others demonstrate the Delaware Supreme Court’s willingness to step in affirmatively, even mid-case, to ensure the coherence and predictability of corporate governance law — particularly when a matter of public concern is at stake. (more…)

An Arbitration by Any Other Name Is Still an Arbitration, Unless It’s an Expert Determination: Recent Cases Apply Delaware’s Authority Test to ADR Provisions

In M&A transaction agreements, contracting parties frequently negotiate a mechanism to make post-closing adjustments to the purchase price — for example, based on calculations of the target company’s working capital at the time of closing or an “earnout” based on the performance of the company for a specified period after closing. Because parties often disagree over these adjustments, the agreement generally will include a framework for resolving disputes. Although the particulars can vary, the parties typically will agree to negotiate in good faith and, if negotiations fail, to submit any remaining disputes to an independent accountant for final resolution. (more…)

Controller’s Ability to Appoint and Remove Directors at Will Insufficient to Establish Demand Futility

In Harrison Metal Capital, an investment fund with an 18% stake in a privately held company called MixMax, Inc. believed the CEO was committing financial improprieties, but found no legal recourse for its complaint.  Although certain features of the case are unusual as a factual matter, the Court of Chancery’s analysis of demand futility in a company with a controlling stockholder will be applicable in more conventional derivative actions as well.

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<a target=‘_blank’ href="https://www.sidley.com/en/people/s/stern-andrew-w">Andrew W. Stern</a>

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Charlotte K. Newell

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Jim Ducayet

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James Heyworth

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Alex J. Kaplan

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Jodi E. Lopez

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Jon Muenz

New York

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Ian M. Ross

Miami
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Hille R. Sheppard

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Heather Benzmiller Sultanian

Chicago
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Robert S. Velevis

Dallas
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Robin E. Wechkin

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