Justia Delaware Court of Chancery Opinion SummariesArticles Posted in Mergers & Acquisitions
City of North Miami Beach General Employees’ Retirement Plan v. Dr Pepper Snapple Group, Inc.
At issue was the availability of appraisal rights under section 262 of the Delaware General Corporation Law. Section 262 affords stockholders of Delaware corporations a statutory remedy for appraisal of their shares under certain circumstances. The statute provides that appraisal rights shall be available only for the shares of stock of a “constituent corporation” in a merger or consolidation, and the process for determining a stockholder’s entitlement to appraisal contemplates that the stockholder will relinquish its shares in the merger of consolidation. In the instant case, Dr. Pepper Snapple Group, Inc. and Keurig Green Mountain, Inc. agreed to combine their businesses. Dr Pepper stated that Dr Pepper stockholders would not have appraisal rights under section 262 in connection with the proposed transaction. Two stockholder plaintiffs filed this action challenging that decision. The Court of Chancery held (1) the term “constituent corporation” as used in section 262 means an entity actually being merged or combined and not the parent of such an entity, and therefore, Dr Pepper’s stockholders do not have a statutory right to appraisal under section 262(b) because Dr Pepper is not a constituent corporation; and (2) Dr Pepper stockholders are not entitled to appraisal because they are retaining their shares in connection with the proposed transaction. View "City of North Miami Beach General Employees’ Retirement Plan v. Dr Pepper Snapple Group, Inc." on Justia Law
IRA Trust FBO Bobbie Ahmed v. Crane
In this action arising out of a reclassification of the shares of NRG Yield, Inc. (“Yield”), a stockholder alleged that members of the Yield board breached their fiduciary duties by approving the reclassification and that NRG Energy, Inc. (“NRG”), which managed Yield’s daily affairs, breached its fiduciary duty by causing Yield to undertake the reclassification. The Court of Chancery dismissed the complaint for failure to state a claim for relief, holding (1) the reclassification was a conflicted transaction subject to entire fairness review; (2) the analytical framework articulated in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014), applied to the reclassification; and (3) that framework was satisfied in this case from the face of the pleadings. View "IRA Trust FBO Bobbie Ahmed v. Crane" on Justia Law
Lavin v. West Corp.
Plaintiff filed a verified complaint against West to inspect its books and records under Section 220 of the Delaware General Corporation Law (DGCL). The Delaware Court of Chancery held in this post-trial opinion that plaintiff has demonstrated, by a preponderance of the evidence, a credible basis from which the court can infer that wrongdoing related to the merger may have occurred. The court rejected West's argument that the Corwin doctrine would stand as an impediment to an otherwise properly supported demand for inspection under Section 220. The court explained that any contrary finding would invite defendants improperly to draw the court into adjudicating merits defenses to potential underlying claims in order to defeat otherwise properly supported Section 220 demands. Furthermore, the court should not prematurely adjudicate a Corwin defense when to do so might deprive a putative stockholder plaintiff of the ability to use Section 220 as a means to enhance the quality of his pleading. Therefore, the court ordered a judgment entered in favor of plaintiff and directed West to allow inspection of the books and records at issue. View "Lavin v. West Corp." on Justia Law
Morrison v. Berry
The Court of Chancery dismissed a case brought by Plaintiff, a stockholder in The Fresh Market, alleging a breach of fiduciary duty by the Market’s directors and that Brett Berry, a former CEO and former vice chairman of the company’s board, aided and abetted that breach of fiduciary duty. The Market was acquired by an entity controlled by a private equity firm, and the founder of the Market rolled his equity ownership in the Market into the acquirer as part of the deal. The court held that because there was no coercion applied to the fully informed vote of the common stockholders ratifying the decision of the directors that the merger was in the stockholders’ best interest and the vote was adequately informed so as to serve as a ratification of the board’s decision, the matter must be dismissed. View "Morrison v. Berry" on Justia Law
In Re Merge Healthcare Inc. Stockholder Litigation
IBM's proposed purchase of Merge Healthcare was supported by a vote of close to 80% of Merge stockholders. Former Merge stockholders sought post-closing damages against the company’s directors for what they alleged was an improper sale process. Merge did not have an exculpation clause in its corporate charter, so its directors have potential liability for acts violating their duty of care, in the context of an allegedly less-than-rigorous sales process. The Delaware Court of Chancery dismissed. Demonstrating such a violation of the duty of care is not trivial: it requires a demonstration of gross negligence, but it is less formidable than showing disloyalty. Regardless of that standard, the uncoerced vote of a majority of disinterested shares in favor of the merger cleansed any such violations, raising the presumption that the directors acted within their proper business judgment. View "In Re Merge Healthcare Inc. Stockholder Litigation" on Justia Law
Larkin v. Shah
Plaintiffs, former stockholders of Auspex, filed a putative class action to challenge the propriety of the merger with Teva Pharmaceuticals and seek post-closing damages, alleging that the members of Auspex's board of directors breached their fiduciary duties by permitting senior management to conduct a flawed sales process that ultimately netted stockholders inadequate consideration for their shares. The directors have moved to dismiss plaintiffs’ Complaint under Rule 12(b)(6). The court granted the motion, concluding that, even accepting plaintiffs' well-pled facts as true, defendants are entitled to invoke the irrebuttable business judgment rule. In this case, plaintiffs have not pled facts that would allow a reasonable inference that the merger involved a controlling stockholder, much less that a controlling stockholder pushed Auspex into a conflicted transaction in which the controller received nonratable benefits. They are left, then, to overcome the cleansing effect of stockholder approval, which in this case was disinterested, uncoerced and fully informed. View "Larkin v. Shah" on Justia Law
In re ISN Software Corp. Appraisal Litig.
At issue in this case was the fair value of stock of ISN Software Corp. (Respondent) held by two minority stockholders, Polaris and Ad-Venture, (collectively, Petitioners) at the time of a merger by which the controller cashed out some, but not all, of the stock held by the minority. The Court of Chancery held (1) the method used by the controller to determine the fair value of the stock is unreliable; (2) a discounted cash flow analysis is the most reliable indicator of fair value; and (3) upon consideration of the expert opinions provided by Petitioners and Respondent, the statutory fair value is $98,783 per share. View "In re ISN Software Corp. Appraisal Litig." on Justia Law
In re Volcano Corp. Stockholder Litig.
At issue in this case was a company that was acquired for $18 per share in an all-cash merger. Five months earlier, the target company declined an offer of $24 per share from the same acquiror. Plaintiffs, former public stockholders of the target company, sued the company’s board of directors and financial advisor, alleging that the board breached its fiduciary duties in approving the merger and that the financial advisor aided and abetted the breaches. The Court of Chancery granted Defendants’ motions to dismiss for failure to state a claim, holding that the business judgment rule standard of review applied to Plaintiffs’ allegations and insulated the merger. View "In re Volcano Corp. Stockholder Litig." on Justia Law
In Re: Appraisal of Dell Inc.
In 2013, the Company completed a merger that gave rise to appraisal rights. Petitioners, owners of shares of common stock of the Company, seek appraisal. The court concluded that the fair value of the Company on the closing date was $17.62 per share; the legal rate of interest, compounded quarterly, shall accrue on this amount from the date of closing until the date of payment; the parties shall cooperate on preparing a final order for the court; and, if there are additional issues for the court to resolve before a final order can be entered, the parties shall submit a joint letter within two weeks that identifies them and recommends a schedule for bringing this case to conclusion, at least at the trial court level. View "In Re: Appraisal of Dell Inc." on Justia Law
In re Chelsea Therapeutics Int’l Ltd. Stockholders Litig.
The Company, a developmental biopharmaceutical company, which has researched and developed a drug called NORTHERA, filed a class action alleging breaches of fiduciary duty against defendants in connection with the sale of Chelsea to Lundbeck through a tender offer and short-form merger (the Transaction). Plaintiffs contend that the Board acted in bad faith by instructing its financial advisors to ignore one set of projections in opining on the fairness of the Transaction, and by choosing to disregard a second set of projections before recommending the Transaction to Chelsea’s stockholders. The court granted defendants' motion to dismiss for failure to state a claim under Court of Chancery Rule 12(b)(6). The Board, after deliberation and in consideration of the sale of the Company, instructed its advisors not to consider projections that its assets would increase in value, years in the future, on speculation that the FDA would approve one of its products for currently-prohibited uses, or would remove a competing drug from the market altogether. Both sets of projections involved contingencies over which the Company had no control, and which might never come to pass. Such actions do not, on their face, plead a conceivable breach of the Directors loyalty-based duty to act in good faith. No other grounds conceivably leading to a finding of bad faith are pled. Accordingly, the court affirmed the judgment. View "In re Chelsea Therapeutics Int'l Ltd. Stockholders Litig." on Justia Law