Tag: Litigation

Pleading Bad Faith Against Special Committee Members: A New Trend?

Special committees, by design, are created to address conflicts and to insulate the board of directors from liability for the very conflicts that may invite judicial scrutiny of the fairness of the board’s decision. A well-functioning special committee will also mitigate the risk of personal liability for a company’s fiduciaries, […]

Have Your Cake, and Closing Too: Invoking Prevention Doctrine, Delaware Chancery Court Grants Seller’s Request for Specific Performance in COVID-Related M&A Dispute

Chancellor McCormick’s opinion in Snow Phipps Group, LLC, et al. v. KCake Acquisition, Inc., et al. (Del. Ch. April 30, 2021) is 125 pages long, but she helpfully digests the holding in a single sentence on page 3: “Chalking up a victory for deal certainty, this post-trial decision resolves all […]

SPAC Trend Gives Rise to Securities Enforcement and Litigation Risks

What is a SPAC Special purpose acquisition companies (SPACs) are on the rise. A SPAC is a publicly traded shell company with no underlying operating business that seeks to merge with a target operating company. According to Nasdaq, in 2015, SPACs made up approximately 12% of the IPO market, but by […]

Delaware Puts the Conduct of Business Covenant on Center Stage in COVID-Related M&A Dispute

In the months following the onset of the COVID-19 pandemic, a slew of parties filed lawsuits in US courts relating to M&A transactions that were signed prior to March 2020 and that buyers were seeking to terminate as a result of the pandemic. In these lawsuits, buyers commonly alleged one […]

Pandemic-Related Deal Litigation Highlights Buyer Leverage in Transactions Requiring Debt Financing

In a May blog post we discussed several initial observations regarding the dozens of M&A transactions that were signed prior to March 2020 and that were in jeopardy as a result of COVID-19. Since that post, the Delaware Chancery Court has had the opportunity to consider some preliminary issues relating […]

Do We Have a Quorum?

Although its final episode aired more than a decade ago, there is still debate about the ending of HBO’s critically-acclaimed series, the Sopranos. In fact, as one critic notes, “the only objectively true statement that can be made about that ending is that it’s ambiguous.”[1] This ambiguity was embraced and lauded […]

Renegotiating Deal Terms? Delaware Reminds Fiduciaries of Unremitting Duties

In Captain Phillips, a pirate hijacks a ship and turns to the captain and says (in what is an amazing improvised line) “Look at me, I’m the captain now.”[1]  While the comparisons between piracy and M&A will take us only so far, let us start with an observation: boards and […]

Social Distancing From a (Supposed) Life Partner: Early Lessons From Deals Terminated and On the Rocks in the COVID-19 Era

In “La La Land,” Damien Chazelle’s Oscar winning film, the audience thinks it has a formulaic Hollywood love story on its hands: boy and girl meet; boy and girl fall in love; boy and girl break up; and boy and girl get back together. But in a twist on the […]

Whataday for Special Committees: Salladay v. Lev Clarifies Committee Formation Requirements in Non-MFW Scenarios

In late February as the COVID-19 pandemic was accelerating, the Delaware Chancery Court issued an important decision that is likely to impact transactions during the expected recession. In Salladay v. Lev, C.A. No. 2019-0048-SG (Del. Ch. Feb. 27, 2020) (“Salladay”), the court held that a conflicted transaction – not involving […]

Taking a Play out of the Financial Acquirer’s Playbook

As the NFL season gets underway, it is interesting to see how certain plays go from fringe status to near-universal. A recent example is the “run-pass option” that, before finding a home in every NFL team’s playbook, was used only in high school and college football games. [1] Coaches survey plays […]

MAEjor Ruling: Delaware Court of Chancery Finds Target Suffers Material Adverse Effect and Acquirer Could Back Out of Transaction

M&A practitioners have long advised boards of directors that the Delaware courts have never found that the events or circumstances in a particular transaction met the contractual standard of having a material adverse effect (or MAE) as defined in a merger or acquisition agreement. Therefore, the board should have a […]

How much disclosure of deal dirty laundry is necessary in order to fully inform a Corwin/Volcano cleansing vote?

In Elizabeth Morrison v. Ray Berry et. al., (dated July 9, 2018), the Delaware Supreme Court reversed the Delaware Chancery Court’s dismissal of deal litigation based on obtaining a cleansing vote under Corwin/Volcano because the defendants failed to show “as required under Corwin” that the vote was fully informed. The […]

UK Government Introduces Lower National Security Merger Review Thresholds

Under new measures coming into force on 11 June, the UK government will have greater powers to intervene in mergers that potentially raise national security concerns due to the target’s involvement in military and dual-use technologies and certain categories of advanced computer technology. Such transactions will be reviewable by the […]

Ninth Circuit Rules Tender Offer Disclosure Challenges Do Not Require Proof of Intent to Deceive

On April 20, 2018, the Ninth Circuit ruled that shareholder claims for false or misleading tender offer disclosures under Section 14(e) of the Securities Exchange Act of 1934 require a mere showing of negligence, rather than fraudulent intent (scienter). This holding departs from longstanding rulings by five other federal appeals […]

Delaware Supreme Court Reverses Dell’s Merger Appraisal Price Bump

On December 14, 2017, the Delaware Supreme Court reversed and remanded the Court of Chancery’s appraisal of the fair value of Dell Inc. The trial court’s 2016 ruling, which found that a $25 billion management-led buyout undervalued the computer giant by about $7 billion, sent shock waves across the M&A landscape […]

Martha Stewart Decision Draws Roadmap for Controller Sales to Third Parties

A transaction involving a controlling stockholder on both sides of the deal presents a clear conflict of interest that will result in heightened scrutiny under the “entire fairness” standard of review if later challenged. However, there is not always a conflict when the controller stands on just one side of […]

Chicago Bridge Reversal Reiterates Need for Consistent Accounting in Working Capital True-Up

The vast majority of private company acquisitions contain some type of purchase price adjustment to account for any changes in certain financial metrics (including working capital) of the target between a specified reference date (or target) and the closing date. For a variety of reasons (including the inability to predict […]

$2 Billion Purchase Price Dispute Over GAAP Compliance Highlights Need for Careful Drafting

Purchase price adjustments are common features (2015 SRS study: 77% of deals) of private merger agreements that are generally intended to ensure that the acquired company will have the same level of cash or working capital to operate the business post closing that it had at signing. However, if not […]

2017 M&A Trends Series: Delaware Confronts M&A Litigation

So far this year, deal parties are approaching M&A with cautious optimism. This series of Cooley M&A blog posts include some brief observations that offer some M&A highlights over the past year and our thoughts for the year to come. Delaware Confronts M&A Litigation M&A deal litigation continues to plague most […]

Data Points from Recent Appraisal Decisions

As concerns over the potential exercise of appraisal rights are increasingly being factored into deal price, data points from recent Delaware appraisal decisions may help inform a party of its appraisal risks and, if an appraisal claim is filed, may also be useful in deciding whether to settle the claim […]

From Aeroflex to Trulia: A Seismic Shift

On January 22, 2016, Chancellor Bouchard rejected a proposed disclosure-only settlement in In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), marking the culmination of what has been a seismic shift over the past several months in the Delaware Chancery Court’s treatment of disclosure-only settlements in lawsuits challenging […]

What US GCs Should Know About Drafting International Arbitration Clauses

Thinking about what may go wrong with a contract, can be as important as the planning to make it go right.Key issues such as where an arbitration should take place, the level of confidentiality required and what levels of evidential discovery are you likely to require, can all put you in a much better position to deal with a dispute if one should arise in the future.

Exclusive Forum Provisions

Exclusive forum provisions (in a corporation’s bylaws or charter) designate a specific court(s) to serve as the exclusive venue(s) for intra-corporate litigation—e.g., derivative suits; actions (including class actions) asserting breach of fiduciary duty by a director, officer, or other employee to the corporation or its shareholders, and other disputes asserting […]

SEC Issues Guidance on Tweets and Similar Social Media Communications

Recognizing the growing interest in using technologies such as social media to communicate with security holders and potential investors, the Securities and Exchange Commission released a new Compliance and Disclosure Interpretation addressing the use of hyperlinks in Tweets and other social media communications to satisfy the SEC’s legending requirements. Historically, […]

A Series of Proposed Amendments to Delaware Corporate Law

Summarized below are the currently proposed changes to the Delaware General Corporation Law (the “DGCL”) that, if enacted, would become effective on August 1, 2014.

Kahn v. M&F Worldwide

In a much anticipated judicial development, the Delaware Supreme Court affirmed the holding of In re MFW Shareholders Litigation (Del. Ch. 2013) that if certain procedural protections are in place from the outset of a transaction, a controlling stockholder buyout otherwise subject to the entire fairness standard could be subject […]

In re Rural Metro Corporation Stockholders Litigation

In Rural Metro, the Delaware Chancery Court held that RBC Capital Markets, LLC, as financial advisor to the Rural Metro (Target), had aided and abetted Target’s directors in breach of their fiduciary duties in connection with its sale to Warburg Pincus (Buyer). This is the latest in a string of […]

Lengthening the Indemnification Claims Period

Delaware law limits parties’ ability to contractually agree to lengthen the time period for making claims beyond the statute of limitations that would otherwise apply to the underlying claims. A line of Delaware cases (the most well known of which is GRT, Inc. v. Marathon GTF Technology, Ltd.) have held […]

Developments Under Delaware Law in the Enforceability of Non-Reliance Provisions Against Fraud Claims

A series of cases in 2013 refined the law in Delaware relating to the enforceability of non-reliance clauses. Non-Reliance clauses are generally intended to limit a buyer’s ability to make fraud claims based upon representations made outside of the acquisition agreement (e.g., in diligence materials in the data room, spoken […]

Great Hill Equity Partners v. SIG Growth Equity Fund

In Great Hill, the court held that the right to assert the privilege over attorney-client communications and ownership of such communications passes to the acquirer in acquisitions structured as mergers under Delaware law. This case clarifies the law in Delaware mergers by expressly refusing to follow prior New York case […]

In Re Trados Incorporated Shareholder Litigation

In a case involving a common fact pattern, Trados “Part 2” provides a very helpful analysis of a board’s fiduciary obligations when common stockholders receive no consideration in an acquisition. Trados was acquired in 2005 for $60 million in cash and stock. The preferred stockholders received $52.2 million of the […]