Artificial intelligence and its impact on the practice of law is in the news again. Readers likely have heard about the attorneys that used ChatGPT, an artificial chatbot that synthesizes high volumes of data, to draft a legal brief that they submitted in a civil action in the U.S. District Court for the Southern District of New York. Unfortunately for these practitioners, ChatGPT cited multiple cases that did not exist, and the attorneys recently endured a sanctions hearing before the presiding district judge.
Earlier this month, Vice Chancellor Morgan T. Zurn of the Delaware Court of Chancery issued a decision regarding an unsettled question of Delaware corporate law: whether an uncoerced and fully informed vote of disinterested stockholders may ratify and defeat a post-close claim seeking to enjoin certain governance measures and alleged entrenchment devices negotiated by a company’s board as part of a transaction. The court concluded that such a vote, known commonly as “Corwin cleansing,” does not apply to post-close claims for injunctive relief under Unocal Corp. v. Mesa Petroleum Co. The court’s decision, at least for now, will have immediate significance for company boards and their advisors when negotiating transactions or stockholder agreements that include measures that may be characterized as defensive or entrenching existing management or directors.
The recent Court of Chancery decision in Delman v. GigAcquisitions3 offers some interesting insights into the circumstances in which “entire fairness” review applies, and where “Corwin cleansing” can be used to achieve a lesser review standard.
Sidley is pleased to share the March 2022 issue of Sidley Perspectives on M&A and Corporate Governance, a quarterly newsletter designed to keep you current on what we consider to be the most important legal developments involving M&A and corporate governance matters. (more…)
Since Corwin v. KKR Financial Holdings LLC, Delaware courts have adhered to the proposition that “when a transaction not subject to the entire fairness standard is approved by a fully informed, uncoerced vote of the disinterested stockholders, the business judgment rule applies.” However, The Delaware Court of Chancery recently issued an opinion (available here) clarifying the application of Corwin to the fiduciary duties of interested directors. The Court declined to dismiss a complaint alleging that the defendant directors’ approval of a merger was a breach of the directors’ duty of loyalty and constituted unjust enrichment. Specifically, the Court rejected the defendant directors’ contention that Corwin “cleansed” the transaction, and, as a consequence, explained that a duty of loyalty analysis was still appropriate. In what follows, we describe this case and offer some important takeaways concerning interested directors. (more…)
In M&A litigation, plaintiffs’ lawyers see actual or perceived conflicts of interest as gold. Conflict allegations can take many forms and arise in a variety of contexts: for example, a board member of a target company who is offered employment by the would-be acquirer, or a controlling stockholder who sits on both sides of a transaction. Another common example, and the focus of this post, is a board member or stockholder whose financial interests are alleged to diverge from other stockholders because of a need or desire to quickly liquidate holdings (referred to as a “liquidity-based conflict”). (more…)
As regular readers know, this blog typically covers the latest developments and trends emerging from the Delaware Court of Chancery. For this post, however, we revisit first principles and remind our readers of the bedrock decisions of modern Delaware M&A practice, and highlight 11 key decisions with which every practitioner should be familiar. (more…)
Sidley is pleased to share the June 2021 issue of Sidley Perspectives on M&A and Corporate Governance, a quarterly newsletter designed to keep you current on what we consider to be the most important legal developments involving M&A and corporate governance matters.
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.