The resolution of corporate law disputes has a significant impact on the stockholders, directors, officers, and employees of companies around the world. With more than 60% of the Fortune 500 incorporated in Delaware, decisions of the state’s courts have a direct impact on leading companies worldwide and greatly influence the law of other jurisdictions. The Enhanced Scrutiny blog provides timely updates and thoughtful analysis on M&A and corporate governance matters from the Delaware courts and, on occasion, from other jurisdictions.

Delaware Supreme Court Holds That Appraisal Actions Do Not Constitute “Securities Claims” Covered by D&O Policy

The Delaware Supreme Court reversed a decision of the state’s Superior Court, holding that an appraisal action arising from Vista Equity Partners’ acquisition of Solera Holdings, Inc. (Solera) did not fall within the definition of a “Securities Claim” for the purposes of coverage under Solera’s primary and excess directors’ and officers’ insurance policies (D&O Policies). The decision cautions that such policies should be carefully reviewed on a periodic basis, and that would-be buyers should do the same during diligence.

Read More

EmailShare

Delaware Supreme Court Reaffirms Import of Deal Value in Resolving Appraisal Petitions

The Delaware Supreme Court recently reaffirmed that, absent significant market or process concerns, deal price should be a significant (if not outcome-determinative) factor in the appraisal of Delaware corporations.

In 2017, Sibayne Gold, Ltd. (Sibayne) acquired Stillwater Mining Co. (Stillwater) in a reverse triangular merger that entitled the holder of each Stillwater share to $18 of merger consideration at closing. Petitioners, former Stillwater stockholders, perfected their appraisal rights — a judicial determination of the “fair value” of their holdings — and argued that a flawed deal process made the $18 per share deal price unreliable. This included an increase in commodity prices between signing and closing that increased Stillwater’s value by nine percent.

Read More

EmailShare

Court of Chancery Invokes Rarely Successful “Fraud-on-the-Board” Theory, Permitting Duty of Loyalty Claims to Proceed

The Court of Chancery recently allowed to proceed post-closing claims that a merger was completed at an inadequate price, premised largely on allegations that the Company’s CEO and chairman was conflicted and tilted the process in favor of the buyer. This decision serves as a reminder for fiduciaries considering end stage transactions — including the Court’s reminder that “the sins of just one fiduciary can support a viable Revlon claim.”

Read More

EmailShare

California Court Upholds Delaware Corporation’s Exclusive Federal Forum Charter Provision

The Superior Court of California, County of San Mateo, recently enforced a Delaware corporation’s charter provision mandating that claims brought under the Securities Act of 1933 be filed in a federal court. This marked the first decision outside of Delaware to enforce an exclusive federal forum provision since the Delaware Supreme Court decided in March 2020 that such provisions are valid under Delaware law.

Read More

EmailShare

Vice Chancellor Laster Awards No Damages in Dispute Over Failed Anthem/Cigna Merger

On August 31, 2020, Vice Chancellor J. Travis Laster of the Delaware Chancery Court issued his long-awaited resolution of the prolonged litigation involving the failed merger of Anthem, Inc. and Cigna Corporation — two of the nation’s largest health insurance companies. As Vice Chancellor Laster found and detailed in the 311-page opinion, no party won this protracted battle, no merger was consummated, and no damages were awarded to either side.1 See In re Anthem-Cigna Merger Litigation, Case No. 2017-0114-JTL, at 305-06 (Del. Ch. 2020).

Read More

EmailShare

Delaware Court of Chancery Reaffirms Heightened Standard for Caremark Claims — But Reminds That Outlier Facts Yield Outlier Results

On August 24, 2020, Vice Chancellor Sam Glasscock III issued a rare denial of a motion to dismiss so-called Caremark claims in a case against directors of AmerisourceBergen Corporation (the Company). Although the decision reiterates the significant pleading burden that such oversight claims must meet, and exemplifies that only extraordinary facts typically permit a plaintiff’s claims to proceed to discovery, it is also a useful reminder that board-level best practices can, among other things, help address and limit any such liability.

Read More

EmailShare

Management of a Delaware Corporation Cannot Unilaterally Withhold Privileged Information From Directors

The Delaware Chancery Court recently found that directors serving on a special committee were entitled to privileged communications between management and company counsel because there was no formal board process to wall off those directors or other actions at the board level demonstrating “manifest adversity” between the company and those directors.

Read More

EmailShare

Entire Fairness Standard Applied When Controlling Stockholder Negotiated Economic Terms With a Minority Stockholder Before MFW Protections Were in Place

The Delaware Chancery Court recently held that a going-private transaction was not entitled to the deferential business judgment standard of review because the controlling stockholder failed to condition the transaction on special committee and minority stockholder approval before engaging in substantive economic discussions with a minority stockholder. In re HomeFed Corp. S’holder Litig., C.A. No. 2019-0592-AGB (Del. Ch. July 13, 2020).

Read More

EmailShare
EmailShare