Posts in M&A

CCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims

Infomedia Group, Inc. v. Orange Health Solutions Inc., C.A. No. N19C-10-212 AML CCLD (Del. Super. Ct. July 31, 2020)

This case is a strong reminder that Delaware will enforce anti-reliance clauses to bar claims for fraud where sophisticated parties voluntarily agree to the anti-reliance clauses. Here, plaintiff Infomedia Group, Inc., d/b/a Carenet Health Services entered into an asset purchase agreement (the “Purchase Agreement”) with defendant Orange Health Solutions, Inc. (“Citra”).  More ›

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Chancery Rejects Implied Covenant Claim for Failure to Prove that, Had the Issue Been Negotiated, Both Parties Would Have Agreed

Roundpoint Mortgage Servicing Corp. v. Freedom Mortgage Corp., C.A. No. 2020-0161-SG (Del. Ch. July 22, 2020)

To establish an implied contractual obligation pursuant to the implied covenant of good faith and fair dealing, a party must prove that, even though the contract does not state the term at issue, the parties would have agreed to it had they thought to negotiate it at the time of contracting. Here, the Court of Chancery post-trial denied an acquirer’s implied covenant claim even though the result arguably resulted in unfairness from a financial point of view to the acquirer. As illustrated by this case, unfairness alone to one party does not necessarily prove that both parties would have agreed to the implied term had they thought to negotiate about it. More ›

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Entire Fairness Standard Applies Where Controller Has Substantive Discussions with Minority Stockholders before Agreeing to MFW Protections

In re HomeFed Corporation Stockholder Litigation, C.A. 2019-0592-AGB (Del. Ch. July 13, 2020)
This case illustrates that the Court of Chancery will apply the entire fairness standard to review a squeeze-out merger by a controller, if the controller engages in substantive economic discussions before the company has enacted the procedural protections outlined in Kahn v. M & F Worldwide Corp, 88 A.3d 635 (Del. 2014) (“MFW”) that would permit business judgment review. In this case, Jefferies Financial Group Inc. (“Jefferies” or the “Controller”), which owned 70% of HomeFed Corporation (“HomeFed”), acquired the remaining shares of HomeFed in a share exchange in which each HomeFed minority shareholder received two Jefferies shares in exchange for one of its HomeFed shares (the “Transaction”). A HomeFed director originally proposed the 2:1 share exchange to Jefferies in September 2017, and Jefferies subsequently discussed the share exchange with HomeFed’s second largest shareholder Beck, Mack and Oliver, LLC (“BMO”). In December 2017, HomeFed’s board of directors (the “Board”) formed a special committee (the “Special Committee”) that had the exclusive power to evaluate and negotiate a potential transaction. When the parties were unable to agree to merger terms, the Special Committee “paused” its process in March 2018. Despite pausing the Special Committee, Jefferies continued to discuss a potential transaction with BMO for the next year.  More ›

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Chancery Orders Trial to Determine Meaning of Ambiguous Post-Closing Covenants in a Stock Purchase Agreement

Schneider Nat’l Carriers, Inc. v. Kuntz, C.A. No. 2017-0711-PAF (Del. Ch. July 16, 2020)

If parties to a contract offer reasonable but conflicting interpretations of ambiguous contractual language, the Court of Chancery may deny summary judgment and order trial for purposes of weighing conflicting extrinsic evidence and witness testimony to interpret the meaning of the contractual language. More ›

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Chancery Interprets Merger Agreement Termination Fee Provision But Denies Summary Judgment to Resolve Questions of Fact in Continuing Busted Deal Litigation Between The Williams Companies and Energy Transfer

The Williams Cos., Inc. v. Energy Transfer LP, C.A. No. 12168-VCG (Del. Ch. July 2, 2020)

The Court of Chancery will enforce a merger agreement’s plain and unambiguous terms, including parties’ agreed-upon conditions for liability of a termination fee. Termination fee litigation, however, often involves critical factual determinations, such as issues of materiality or best efforts that may require a trial to develop the appropriate record to determine liability. More ›

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Chancery Dismisses Challenge to Top Executives’ Stock Awards in Disney-Fox Merger, Finds Plaintiff Lacks Standing to Pursue Derivative Claim

Brokerage Jamie Goldenberg Komen Rev TRU U/A 06/10/08 Jamie L Komen Trustee for the Benefit of Jamie Goldenberg Komen v. Breyer, C.A. No. 2018-0773-AGB (Del. Ch. June 26, 2020)

Following a merger that alters a stockholder’s ownership status, the stockholder may be able to challenge the entirety of the merger as a direct claim, but the stockholder will typically lack standing to challenge the individual aspects of the merger as derivative claims. The instant case, involving the Disney-Fox merger, shows the difficulties a stockholder faces in attempting to mount such a challenge. More ›

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Court of Chancery Dismisses Aiding and Abetting Claim Against NetSuite’s Fiduciaries for Role in Alleged Overpayment by Oracle

In re Oracle Corp. Derivative Litig, Consol. C.A. No. 2017-0337-SG (Del. Ch. June 22, 2020)

At the pleadings stage, a claim for aiding and abetting a breach of fiduciary duty requires that it is reasonably conceivable that the alleged aider and abettor knowingly provided substantial assistance in the breach of fiduciary duty. This decision reflects that substantial assistance in an alleged conspiracy of silence might not meet the reasonably conceivable standard if public statements and securities filings contain sufficient information about the underlying course of conduct. More ›

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In Post-Trial Opinion, Chancery Finds for Defendant, Rejecting Claims Alleging Breach of Purchase Agreement and Right to “Board Packages”

Braga Investment & Advisory, LLC v. Yenni Income Opportunities Fund I, L.P., C.A. No. 2017-0393-AGB (Del. Ch. June 8, 2020)

In this post-trial opinion, the Court of Chancery held in favor of defendant Yenni Income Opportunities Fund I, L.P. (the “Fund”) finding that the Fund was not required to obtain the signature of Braga Investment & Advisory, LLC (“Braga”) as a “Buyer” when it executed a side letter agreement (the “Side Letter”), nor had the Fund breached a co-investment agreement by denying Braga access to certain materials in connection with its position as a board observer. More ›

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Chancery Applies Contract’s Choice of Law to Related Fraud Claims, Declines to Dismiss Fraud Claims Where Contract Lacked Clear Anti-Reliance Language

The Anshutz Corp. v. Brown Robin Cap., LLC, 2019-0710-JRS (Del. Ch. June 11, 2020)

In dealing with what the Court of Chancery called “a version of a [commercial] dispute as old and abiding as commerce itself,” the Court provides insights useful to drafters of both pleadings and contracts. More ›

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Chancery Finds Pre-Closing Privilege Did Not Transfer to Buyer Under Asset Purchase Agreement

DLO Enterprises, Inc. v. Innovative Chemical Products Group, LLC, C.A. No. 2019-0276-MTZ (Del. Ch. June 1, 2020).

Defendants/Counterclaim Plaintiffs (“Buyers”) acquired substantially all of the assets of Arizona Polymer Flooring, Inc., later renamed DLO Enterprises, Inc. (“Sellers”). Sellers filed this action disputing who was financially responsible for certain defective products. During discovery, Sellers produced several pre-closing communications with their counsel that were redacted in part to protect the privilege. Buyers filed a motion to compel unredacted copies of the documents. More ›

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Court of Chancery Sustains Aiding-and-Abetting Breach of Fiduciary Duty Claim Against Financial Advisor Based on its Conflicts of Interest in Going-Private Transaction

Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. June 1, 2020)

Even if fiduciary duty of care claims against a target company’s board of directors are exculpated, an aiding-and-abetting claim against a financial advisor to the board may survive a motion to dismiss when the advisor is alleged to have knowingly misled the board and prevented the board from running a reasonable sales process. More ›

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CCLD Offers Guidance on the Application of Tolling Doctrines to M&A Agreement Clauses Modifying the Statute of Limitations for Representations and Warranties Claims

AssuredPartners of Virginia, LLC v. Sheehan, C.A. No. N19C-02-175 AML CCLD (Del. Super. Ct. May 29, 2020)

A disgruntled buyer brought suit against its seller for breaches of representations and warranties four years after the execution of the applicable asset purchase agreement (“APA”). The APA contained a clause providing that certain representations and warranties survived for two (2) years post-closing except for those fraudulently given, which survived from closing until sixty days after expiration of the applicable statute of limitations. The defendant-sellers sought dismissal of the breach claims as untimely, requiring Judge Abigail M. LeGrow of the Superior Court of Delaware to determine whether the doctrine of tolling applied to the APA’s survival clause and if the parties intended to contractually extend the statute of limitations for fraudulent representation claims under 10 Del. C. § 8106(c). More ›

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Delaware Superior Court CCLD Addresses Claim of Common Interest Privilege over Merger Agreement Parties’ Post-Signing, Pre-Closing Communications

The American Bottling Co. v. Repole, C.A. No. N19C-03-048 AML CCLD (Del. Super. May 12, 2020)

Delaware courts will apply the common interest doctrine when two parties, represented by counsel, exchange privileged information with one another concerning a legal matter in which they have a shared interest. To maintain the privilege, the common interest must involve predominantly legal issues, rather than a common economic interest in a commercial venture. If there is no common interest, a party who shares privileged materials with a third-party will generally waive the privilege.  More ›

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Chancery Dismisses Claims that Minority Stockholders who Rolled Over Equity in a Controlling Stockholder Merger Joined a “Control Group”

Gilbert v. Perlman, C.A. No. 2018-0453-SG (Del. Ch. Apr. 29, 2020)

Delaware law imposes fiduciary duties upon controlling stockholders who use their power to control the corporate machinery. For that reason, determining who comprises a control group affects who may owe fiduciary duties. In some circumstances, where minority stockholders pool their interests to gain majority control and then bind themselves to act together to effectuate a transaction, minority stockholders may take on the duties of a controlling stockholder as members of a control group. But where an already existing controlling stockholder effectuates a cash-out merger, minority stockholders who roll over their shares and enter into a voting agreement to support the transaction will not be deemed part of a control group unless a plaintiff can plead that “the minority-holder’s participation [was] material to the controller’s scheme to exercise control of the entity, leading to the controller ceding some of its control power to the minority-holders.” More ›

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Chancery Finds Corporation Fraudulently Induced Investor into Contract, Acting “Through Concealment and Silence”

Maverick Therapeutics Inc. v. Harpoon Therapeutics, Inc., C.A. No. 2019-0002-SG (Del. Ch. Apr. 3, 2020).

In this post-trial opinion, the Court of Chancery found that Harpoon Therapeutics, Inc., (“Harpoon”), a Delaware corporation in the business of developing novel cancer therapies, fraudulently induced an investor into acquiring an interest in one of its business divisions by intentionally drafting a non-compete narrowly to exclude certain opportunities Harpoon wished to pursue, in contrast with its representations to the investor about its future plans. More ›

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