Once in a while, a court decision provides not just guidance for participants in corporate transactions but also can serve as a wakeup call for the players’ legal advisors. Such is the case with the post-trial decision in Bandera Master Fund LP et al v. Boardwalk Pipeline Partners LP, in which Vice Chancellor Laster resolved various disputes regarding a transaction through which Boardwalk Pipeline Partners, LP (“Boardwalk”) was taken private by its controller, Loews Corporation (“Loews”). The resulting $700 million damages award, and sharp criticism of the legal opinions provided in support of the transaction, has garnered headlines, but the decision is also notable for its review of several long-standing principles of Delaware law that provide guidance for contract negotiations and litigation alike. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Andrew W. Sternhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAndrew W. Stern2021-12-13 09:21:002023-09-08 11:33:42Court of Chancery Awards $700M In Opinion Highlighting Opinion Of Counsel Risks And Power Of Contra Proferentem Doctrine
We previously wroteabout the trend of SPAC (special purpose acquisition company) lawsuits filed in the Delaware Court of Chancery, with some combination of the post-merger entity, its board of directors, or the SPAC sponsor named as defendants. Over the course of this year, we have seen this trend continue, with a number of new SPAC lawsuits filed in the Court of Chancery since we last wrote on this topic. Several recent complaints filed in the Court of Chancery exemplify that the same recurring issues discussed in this space previously (e.g., alleged sponsor conflicts of interest, a hasty process to speedily complete a de-SPAC deal, lack of pre-merger diligence) likely will continue to feature prominently in SPAC litigations. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00James Heyworthhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJames Heyworth2021-12-06 10:01:272023-09-08 11:34:20Still in the Crosshairs: Plaintiffs Continue to Take Aim at Post-Merger SPACs
On October 29, 2021, the Delaware Court of Chancery issued a rare opinion holding that plaintiffs had succeeded in pleading that a board of directors wrongfully had refused their demand to pursue certain claims. Following short on its heels on November 8, 2021 was another decision illustrating why such opinions are so rare, and the high burden plaintiffs must meet in order adequately plead wrongful refusal. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Elizabeth Y. Austinhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngElizabeth Y. Austin2021-11-29 09:01:302023-09-08 11:34:54Chancery Court Issues Rare Finding of Wrongful Refusal of Demand – Followed By A Reminder of Why Such Findings Are So Uncommon
In re the Chemours Company Derivative Litigation, Vice Chancellor Glasscock recently wrestled with an apparent conflict between two provisions of the Delaware General Corporation Law (DGCL)—and chose the path that protects directors. Vice Chancellor Glasscock refused to hold directors strictly liable for negligent stock repurchases or dividends—which would be inconsistent with Delaware’s general limitation on director liability solely to damages for gross negligence (unless exculpated) or loyalty breaches—and instead enforced an “incongruent” provision that accords directors protection where they rely on corporate records, officers, or experts with respect to corporate surplus available to repurchase shares or issue dividends. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Hille R. Sheppardhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngHille R. Sheppard2021-11-22 09:00:132023-09-08 11:35:34No Strict Liability for Improper Share Repurchases or Payment of Dividends: Directors Are “Fully Protected” if They Rely in Good Faith upon Corporate Records, Officers, or Experts
On November 17, 2021, the U.S. Securities and Exchange Commission (SEC) adopted new Rule 14a-19 and amendments to existing rules under the Securities Exchange Act of 1934 to require the use of “universal” proxy cards in all nonexempt director election contests at publicly traded companies in the U.S. The new “Universal Proxy Rules” contain only slight modifications from rules the SEC first proposed in October 2016, for which the SEC reopened the public comment period during 2021. The rules will take effect for shareholder meetings after August 31, 2022. We expect a significant increase in proxy contest threats once the Universal Proxy Rules go in effect. (more…)
In a November 9 letter decision, Vice Chancellor Will denied a motion filed by a company’s former directors to obtain its privileged information. The decision highlights an exception to the rules governing a former director’s right to access their former company’s privileged information: access will be denied where the former director is seeking the information to pursue an individual damages claim against the company. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Charlotte K. Newellhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngCharlotte K. Newell2021-11-16 09:12:312023-09-08 11:37:36A Reminder That Former Directors Can Often – But Not Always – Access Their Former Company’s Privileged Records
Life is getting harder for boards of directors of public companies. Increased scrutiny of companies — particularly in heavily regulated industries — has led to greater risk of criminal and civil liability. And recent Delaware cases have ratcheted up the pressure, allowing lawsuits to proceed against boards for failure of oversight. What should directors know about their oversight responsibilities? And what can boards do to mitigate their risk? Our latest episode of The Sidley Podcast grapples with those questions and many others. Join host and Sidley partner, Sam Gandhi, as he speaks with two of the firm’s thought leaders on the subject — Holly Gregory and Dr. Paul Kalb.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Samir A. Gandhihttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngSamir A. Gandhi2021-11-04 12:44:262022-12-05 11:24:19Increased Scrutiny Has Boards of Directors in the Hot Seat
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Court of Chancery Awards $700M In Opinion Highlighting Opinion Of Counsel Risks And Power Of Contra Proferentem Doctrine
Once in a while, a court decision provides not just guidance for participants in corporate transactions but also can serve as a wakeup call for the players’ legal advisors. Such is the case with the post-trial decision in Bandera Master Fund LP et al v. Boardwalk Pipeline Partners LP, in which Vice Chancellor Laster resolved various disputes regarding a transaction through which Boardwalk Pipeline Partners, LP (“Boardwalk”) was taken private by its controller, Loews Corporation (“Loews”). The resulting $700 million damages award, and sharp criticism of the legal opinions provided in support of the transaction, has garnered headlines, but the decision is also notable for its review of several long-standing principles of Delaware law that provide guidance for contract negotiations and litigation alike. (more…)
Andrew W. Stern
New York
astern@sidley.com
Julia L. Bensur
Still in the Crosshairs: Plaintiffs Continue to Take Aim at Post-Merger SPACs
We previously wrote about the trend of SPAC (special purpose acquisition company) lawsuits filed in the Delaware Court of Chancery, with some combination of the post-merger entity, its board of directors, or the SPAC sponsor named as defendants. Over the course of this year, we have seen this trend continue, with a number of new SPAC lawsuits filed in the Court of Chancery since we last wrote on this topic. Several recent complaints filed in the Court of Chancery exemplify that the same recurring issues discussed in this space previously (e.g., alleged sponsor conflicts of interest, a hasty process to speedily complete a de-SPAC deal, lack of pre-merger diligence) likely will continue to feature prominently in SPAC litigations. (more…)
James Heyworth
New York
jheyworth@sidley.com
Julia L. Bensur
Chancery Court Issues Rare Finding of Wrongful Refusal of Demand – Followed By A Reminder of Why Such Findings Are So Uncommon
On October 29, 2021, the Delaware Court of Chancery issued a rare opinion holding that plaintiffs had succeeded in pleading that a board of directors wrongfully had refused their demand to pursue certain claims. Following short on its heels on November 8, 2021 was another decision illustrating why such opinions are so rare, and the high burden plaintiffs must meet in order adequately plead wrongful refusal. (more…)
Elizabeth Y. Austin
Chicago
laustin@sidley.com
No Strict Liability for Improper Share Repurchases or Payment of Dividends: Directors Are “Fully Protected” if They Rely in Good Faith upon Corporate Records, Officers, or Experts
In re the Chemours Company Derivative Litigation, Vice Chancellor Glasscock recently wrestled with an apparent conflict between two provisions of the Delaware General Corporation Law (DGCL)—and chose the path that protects directors. Vice Chancellor Glasscock refused to hold directors strictly liable for negligent stock repurchases or dividends—which would be inconsistent with Delaware’s general limitation on director liability solely to damages for gross negligence (unless exculpated) or loyalty breaches—and instead enforced an “incongruent” provision that accords directors protection where they rely on corporate records, officers, or experts with respect to corporate surplus available to repurchase shares or issue dividends. (more…)
Hille R. Sheppard
Chicago
hsheppard@sidley.com
SEC Dramatically Changes the Rules for Proxy Contests, Adopts Universal Proxy
On November 17, 2021, the U.S. Securities and Exchange Commission (SEC) adopted new Rule 14a-19 and amendments to existing rules under the Securities Exchange Act of 1934 to require the use of “universal” proxy cards in all nonexempt director election contests at publicly traded companies in the U.S. The new “Universal Proxy Rules” contain only slight modifications from rules the SEC first proposed in October 2016, for which the SEC reopened the public comment period during 2021. The rules will take effect for shareholder meetings after August 31, 2022. We expect a significant increase in proxy contest threats once the Universal Proxy Rules go in effect. (more…)
Kai H.E. Liekefett
New York
kliekefett@sidley.com
Derek Zaba
Palo Alto, New York
dzaba@sidley.com
Beth E. Berg
Chicago
bberg@sidley.com
Holly J. Gregory
New York
holly.gregory@sidley.com
Sonia Gupta Barros
Washington, D.C.
sbarros@sidley.com
Leonard Wood
Houston
lwood@sidley.com
A Reminder That Former Directors Can Often – But Not Always – Access Their Former Company’s Privileged Records
In a November 9 letter decision, Vice Chancellor Will denied a motion filed by a company’s former directors to obtain its privileged information. The decision highlights an exception to the rules governing a former director’s right to access their former company’s privileged information: access will be denied where the former director is seeking the information to pursue an individual damages claim against the company. (more…)
Charlotte K. Newell
New York
cnewell@sidley.com
Increased Scrutiny Has Boards of Directors in the Hot Seat
Life is getting harder for boards of directors of public companies. Increased scrutiny of companies — particularly in heavily regulated industries — has led to greater risk of criminal and civil liability. And recent Delaware cases have ratcheted up the pressure, allowing lawsuits to proceed against boards for failure of oversight. What should directors know about their oversight responsibilities? And what can boards do to mitigate their risk? Our latest episode of The Sidley Podcast grapples with those questions and many others. Join host and Sidley partner, Sam Gandhi, as he speaks with two of the firm’s thought leaders on the subject — Holly Gregory and Dr. Paul Kalb.
(more…)
Samir A. Gandhi
New York
sgandhi@sidley.com
Holly J. Gregory
New York
holly.gregory@sidley.com
Paul E. Kalb, M.D.
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Andrew W. Stern
astern@sidley.com
Charlotte K. Newell
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Elizabeth Y. Austin
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Jaime A. Bartlett
jbartlett@sidley.com
Jim Ducayet
jducayet@sidley.com
Yolanda C. Garcia
ygarcia@sidley.com
James Heyworth
jheyworth@sidley.com
Alex J. Kaplan
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Jodi E. Lopez
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Jon Muenz
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Ian M. Ross
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Hille R. Sheppard
hsheppard@sidley.com
Heather Benzmiller Sultanian
hsultanian@sidley.com
Robert S. Velevis
rvelevis@sidley.com
Robin E. Wechkin
rwechkin@sidley.com