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.
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.
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.
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.”
Chancellor McCormick, of the Delaware Court of Chancery, recently was presented with the following question: If an indemnification provision in a purchase agreement clearly requires that the indemnifying party be permitted to participate in the defense of third party claims, is it a breach not to allow that participation? It turns out that, despite a bit of creative contractual interpretation, the answer is “yes.”
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.
Delaware courts have determined that even quite broad language referencing attorneys’ fees may not be explicit enough to shift fees in first-party litigation.
Delaware law is often selected as governing law by contracting parties, but will Delaware courts automatically accept the parties’ choice-of-law selection?
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…)