Con Ed Uncertainty: Court of Chancery Questions Enforceability of Merger Agreement Provisions Allowing Target to Seek Lost Merger Premium

In an October 31, 2023 decision sure to spook practitioners, the Court of Chancery called into doubt the enforceability of “Con Ed provisions.”  Con Ed provisions, so-named for the 2005 Second Circuit decision prohibiting stockholders from pursuing a $1.2 billion merger premium damages claim, create a path for the target’s recovery of lost merger premium if the buyer breaches and a deal fails.

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Asking For Equity Is Not Enough: Chancery Clarifies Jurisdiction Pleading Requirements

Litigants before the Delaware Court of Chancery appreciate that the court scrutinizes its jurisdiction as a court of equity. One recent example, Buescher v. Landsea Homes Corp., focused on two questions. First, whether an alternative claim for specific performance can support equity jurisdiction when it is duplicative of a statutory claim for declaratory judgment. Second, whether a cause of action for negligent misrepresentation (a form of equitable fraud) can establish jurisdiction when the court believes such a claim to be unviable and likely merely a pretext for jurisdiction. Not surprisingly, the court concluded no to both questions. But it did so in the context of claims to an escrow fund established through an M&A transaction that may be surprising to some practitioners.

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Annual Survey of Judicial Developments Pertaining to Mergers and Acquisitions

The Annual Survey Working Group of the M&A Jurisprudence Subcommittee, Mergers and Acquisitions Committee, of the ABA Business Law Section reports annually on judicial decisions of significance to mergers and acquisitions (“M&A”) practitioners. The topics covered in the 2023 survey include contractual interpretation, fiduciary duties, and statutory constructs.

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Magellan Health: A New North Star for Mootness Fee Disputes May Reduce Payments to Plaintiff’s Counsel

The path to a mootness fee is well-worn.  A stockholder plaintiff sues alleging that a company’s disclosures or other decisions were inadequate or improper.  The company responds by issuing disclosures or taking actions that moot the plaintiff’s claims.  This, laudably, avoids the expense and distraction of litigation.

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The Line Between Speculation and Expectation in Damages: Delaware Court of Chancery Weighs in on Damages for Fraud in M&A Transaction

In a recent decision, Vice Chancellor Will refused to award expectation damages based on a buyer’s “speculative” synergistic cash flow resulting from a merger.  The opinion demonstrates the rigorous approach that the Delaware Court of Chancery takes to calculating damages related to M&A transactions even with strong evidence of fraud, and offers valuable insight to companies calculating damages from lost synergies in M&A transactions.

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Beware “Lite” Reasoning: Delaware Vice Chancellor Refuses to Disturb Arbitration Ruling Despite Concerns About Flawed Reasoning and Outcome

A recent Delaware Court of Chancery decision offers an important lesson on the limits of court review of an arbitration award, particularly when parties forego a fully reasoned award. Even though Vice Chancellor Glasscock found that “[t]he arbitration proceeding and the resulting award [were] flawed,” the court refused to overturn the award that appeared to find a contractual nonparty jointly and severally liable for breaches of the representations and warranties in a purchase agreement. The risk parties sometimes take when they contract for arbitration, the court found, is “receiving an arbitral decision that is questionable under the law and facts, but that is nonetheless—not coming within the narrow window of judicial oversight—not reviewable.”

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Delaware Chancery Court Clarifies What Constitutes a Sale of “Substantially All” Assets

In a recent decision, Chancellor Kathaleen McCormick of the Delaware Chancery Court examined what constitutes a sale of “substantially all” of a selling company’s assets for purposes of Section 271 of the Delaware General Corporation Law (DGCL), granting a company’s motion to dismiss a stockholder’s lawsuit alleging that a sale of the “crown jewel” of the company amounted to a sale of substantially all of its assets and accordingly required stockholder approval. Altieri v. Alexy, No. 2021-0946-KSJM (Del. Ch. May 22, 2023).

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A Small Phantom Is Still a Phantom: Chancery Declines To Imply Materiality Requirement When the Parties Have Not Done So

In a recently issued opinion in HControl Holdings v. Antin Infrastructure Partners, Chancellor McCormick of the Delaware Court of Chancery allowed a buyer to avoid closing on a transaction based on the failure of a closing condition related to the capitalization representation.

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Getting the Deal Through – Corporate Governance 2023

Holly Gregory and Claire Holland have authored the United States chapter of Getting the Deal Through – Corporate Governance 2023, an annual summary of key corporate governance practices in 19 jurisdictions worldwide. Topics addressed in the chapter include: sources of governance rules and practice, shareholders’ rights, duties and liability, anti-takeover devices, board structures, legal duties of the board, and disclosure and reporting requirements. Holly Gregory has served as the contributing editor since 2015.

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Potential Control Does Not Equal Actual Control: Business Judgment Rule Protects Oracle-Netsuite Transaction

In a May 12, 2023 opinion following trial and post-trial argument, the Delaware Court of Chancery found for defendants Oracle founder Larry Ellison and CEO Safra Catz in In re Oracle Derivative Litigation, 2017-0337-SG, a shareholder derivative litigation case arising out of Oracle’s US$9.3 billion acquisition of NetSuite.  The 10-day bench trial took place in July and August 2022 before Vice Chancellor Glasscock, and included two days of testimony by Catz and one day of testimony by Ellison, among other witnesses.  The Court’s decision comes several months after plaintiffs’ voluntary dismissal, following the post-trial argument, of then-defendant Renée James, the Chair of a Special Committee of the Oracle Board overseeing the acquisition.

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