Posts in Contribution Among Joint Tortfeasors

Chancery Addresses Acquirer’s Request For Joint Tortfeasor Settlement Credit

In re Columbia Pipeline Grp. Inc. Merger Litig., Consol. C.A. No. 2018-0484-JTL (Del. Ch. May 15, 2024)
In this post-trial decision, the Court addressed an acquirer’s responsibility for damages suffered by a stockholder class when the acquirer had been found liable for aiding and abetting breaches of fiduciary duties by certain of the target’s officers. The officers had previously settled, and, under the Delaware Uniform Contribution Among Tortfeasors Act, the acquirer was entitled to a credit against its liability equal to the greater of the settlement amount or the proportionate share of the officers’ responsibility. The acquirer blamed the officers for defects in the sale process, arguing that the officers had breached their fiduciary duties and were the primary wrongdoers. The Court disagreed, however, reasoning that both the buyer and officers had committed wrongs causing the damages. The buyer had violated a standstill agreement in several respects and improperly obtained confidential information to secure an advantage over other potential bidders. As a result, the buyer and officers were both equally responsible, and the buyer was entitled to a 50% credit, which was larger than the amount the officers settled for. In regard to responsibility for disclosure violations, the Court noted that the buyer had an affirmative contractual obligation to correct misstatements in the proxy statement. The Court reasoned that, for issues where the buyer knew as much as the sell-side fiduciaries, the buyer’s allocation would be 50%. Where the buyer had no knowledge, it would bear no responsibility. Where the buyer had some knowledge, it would bear one-third of the responsibility. Where the buyer was on inquiry notice, it would bear one-quarter of the responsibility. Ultimately, the Court held that the buyer was entitled to a 58% credit for the disclosure claims, which exceeded the amount paid in settlement. The remedies provided for the sale process and disclosure claims were non-cumulative, so the buyer was only liable for the larger amount.