Gutterball Claims: Delaware Court Rejects Contract and Fraud Claims in the Face of Fair Disclosures
In a recent post-trial opinion in BBP Holdco, Inc. v. Brunswick Corporation, the Delaware Superior Court addressed an unusual M&A dispute. After a spin off of one of Brunswick’s bowling divisions, the buyers claimed that they had been defrauded not because Brunswick failed to disclose an ongoing regulatory issue, but because Brunswick allegedly failed to disclose enough about the issue, including how it might unfold in the future. The court soundly rejected this theory, holding that Brunswick fulfilled its obligation to fairly disclose the issue in sufficient detail for the buyers to perform their own independent investigation.
With a Fresh Look at the Facts in Columbia Pipeline, the Delaware Supreme Court Continues to Narrow Aiding and Abetting Liability for Acquirers
On June 17, 2025, the Delaware Supreme Court for the second time in six months reversed a post-trial damages award against an acquiring company accused of aiding and abetting breaches of fiduciary duty by target company management. The June 17 decision is In re Columbia Pipeline Group, Inc., Merger Litigation, 2025 WL 1693491 (Del. June 17, 2025). The earlier decision is In re Mindbody, Inc. Stockholder Litigation, 332 A.3d 349 (Del. 2024).
Fourth Circuit Paves a Bumpier Path to Post-Deal D&O Coverage
On May 28, 2025, the Fourth Circuit in Towers Watson & Co. v. National Union Fire Insurance Co. affirmed the denial of D&O liability insurance coverage to Towers Watson in connection with its 2015 merger with Willis Group. This marked the Fourth Circuit’s second opinion in the case since 2023, each time issuing significant rulings on the “bump-up” exclusion in D&O policies. Reflecting the principle that D&O policies are not deal warranty insurance, the bump-up exclusion bars coverage for awards or settlements on claims that a company overpaid or received too little in a merger or similar transaction.
The Final Chapter: Delaware Supreme Court Affirms Ruling in Favor of Larry Ellison and Safra Catz for NetSuite Deal Litigation
On January 21, 2025, the Delaware Supreme Court affirmed the Court of Chancery’s post-trial opinion in favor of the Defendants in In re Oracle Corp. Derivative Litigation.
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.
Words Matter: Different Definitions of “Commercially Reasonable Efforts” Lead to Different Results in Drug-Development Earnout Disputes
Acquisitions of biotech companies with development-stage drug candidates often include earnout agreements. The buyer pays the seller’s stockholders with cash or stock upfront, and the seller’s stockholders are entitled to additional payments if the drug or drugs in development reach certain milestones, often culminating in FDA approval or commercialization. Achieving those milestones can take many years and requires the buyer to make substantial investments in clinical trials and regulatory approval. Because the right to earnout payments depends to a significant degree on a buyer’s actions in developing the asset, a seller will seek a provision in the acquisition agreement requiring the buyer to use commercially reasonable efforts in drug development.
Sidley Perspectives on M&A and Corporate Governance
Sidley is pleased to share the June 2024 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.
“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.
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.
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…)
