Litigation Trends in Delaware and How Businesses and Boards Can Mitigate Risk
New structures, new rules? Delaware’s Chancery Court provides guidance on disclosure, conflicts, and risk allocation. We take a look at the latest Delaware rulings and what they say about SPAC directors’ fiduciary duty, as well as COVID’s effect on M&A deals, and how corporations and boards can mitigate their liability. Join host and Sidley partner, Sam Gandhi, as he speaks with two of the firm’s thought leaders on these subjects — Jim Ducayet and Charlotte Newell.
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Extraordinary Times May Still Call for Ordinary Measures: Delaware Supreme Court Affirms Buyer’s Termination of $5.8 Billion Transaction
The Delaware Supreme Court recently affirmed Vice Chancellor Laster’s much talked of AB Stable post-trial decision, holding that the buyer of a $5.8 billion hotel portfolio could terminate the transaction due to, among other things, the seller’s breach of an ordinary course covenant by making operational changes in response to the COVID-19 pandemic. The Supreme Court’s affirmance provides critical guidance for the interpretation and navigation of such provisions, particularly in extraordinary times. (more…)
Sidley Perspectives on M&A and Corporate Governance
Sidley is pleased to share the December 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. (more…)
Periodic Reminder: Former Stockholders Have No Standing to Pursue Section 220 Demands
On December 3, 2021, the Delaware Court of Chancery dismissed an action for books and records under Delaware General Corporation Law Section 220, reiterating that when a plaintiff files such an action, they must currently be a stockholder of the company against whom the Section 220 action is filed.
Specifically, a plaintiff must file a books and records action before a merger agreement becomes effective under its own terms; after the merger becomes effective, a plaintiff typically ceases to be a stockholder in the target company, which also precludes their ability to pursue books and records of that company. Companies facing Section 220 demands in the face of a merger agreement should scrutinize the demanding party’s standing to pursue such records. (more…)
Delaware Supreme Court Confirms Appraisal Rights May Be Waived Contractually — Query What Else May Be
On September 13, 2021, over a rare dissent, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a petition for appraisal filed by minority stockholders (the “Petitioners”) of Delaware corporation Authentix Acquisition Company, Inc. (“Authentix”). The high court agreed that the Petitioners could waive the statutory right to an appraisal through provisions in a stockholder agreement (the “Stockholders Agreement”). Significantly, this ruling may open the door for corporations to contractually waive other permissions portions of the Delaware General Corporation Law (“DGCL”). (more…)
Bear Market For Plaintiffs’ Liquidity-Based Conflict Allegations
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…)
SPACs: A New Frontier for Shareholder Activism
In NIRI’s IR Update, Derek Zaba, Kai Liekefett, and Joshua DuClos published an article titled, “SPACs: A New Frontier for Shareholder Activism.” Their article discusses how the SPAC boom has created a new breeding ground for activism targets and how SPACs should prepare for an activist attack. (more…)
A Delaware Corporate and M&A Checklist: 11 Cases That Every Practitioner Should Know
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…)
Stockholder Suits Are Fewer—and Smaller—in 1H 2021
According to Cornerstone’s midyear report on federal and state securities class actions, new securities case filings have continued a substantial downward trend in the first half of 2021.
Plaintiffs filed 112 class action securities cases in the first half of 2021, down 25% from 150 in the second half of 2020 and 38% compared to the 182 cases filed in the first half of 2020, following a marked trend that has emerged since 2019. That trend continues to be animated in large part by significant declines in M&A-related federal filings, which fell to just 12 during the period, a 66% reduction (or 83% relative to the semiannual average of 70 during the last five years). (more…)
In Case of Emergency, Break Glass: Litigation and Drafting Guidance From Delaware Chancery Court Opinion on “Material Adverse Effect” Clauses
The Delaware Chancery Court recently issued an opinion that confirms the difficulty of successfully invoking a “Material Adverse Effect” (“MAE”) clause in a merger agreement. In particular, the decision underscores the challenges of proving up an MAE — particularly when the target company is in a highly regulated industry — and provides useful guidance for drafting disproportionality exclusions in an MAE clause.
