Last month Vice Chancellor Zurn issued a significant, 200+ page decision on a motion to dismiss filed by defendants in the ongoing Pattern Energy transaction litigation, captioned In re Pattern Energy Group Inc. Stockholders Litigation, C.A. No. 2020-0357-MTZ. As we previously reported, class actions had been filed in Chancery Court and Delaware Federal District Court following the $6.1 billion going-private sale of Pattern Energy Group, Inc. to Canada Pension Plan Investment Board (“Canada Pension”). Both cases present overlapping breach of fiduciary duty claims. The Chancery Court case has moved forward faster, with that Court now issuing a decision denying defendants’ motion to dismiss. The decision is a reminder to directors and their advisers that without careful adherence to an independent sales process and transaction structure, directors risk losing the liability protections that Delaware law otherwise provides.
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.