Posts tagged M&A

Court of Chancery Clarifies Right To Buy Control

Abraham v. Emerson Radio Corp. C.A. No. 1845-N, 2006 WL 1879205 (Del. Ch. July 5, 2006). This decision makes it clear that a controlling stockholder may sell control without fear of liability for the actions of the buyer after the transaction closes, with few exceptions. While it has long been the rule that a stockholder may deal with its shares as it sees fit, case law recognized that a controlling stockholder has a fiduciary duty to its company and the minority owners by virtue of the controller's ability to control what the company does. How that duty applied in the sale of control context is the question addressed in this case. More › Share

Court of Chancery Finds Merger Between Controlling Stockholder and Subsidiary Unfair

Gesoff v. IIC Indus. Inc., C.A. No. 19473, 2006 WL 1458218 (Del. Ch. May 18, 2006). Plaintiff filed a class action, claiming a merger was the subject of unfair dealing and produced an unfair price. Another plaintiff filed a statutory appraisal claim based on the same merger. More › Share

Court of Chancery Awards $4.8 Million, Plus Interest, to Minority Shareholders for Damages Suffered from Director Defendants' Breach of the Fiduciary Duty of Loyalty

Oliver v. Boston University, C.A. No. 16570-NC, 2006 WL 1064169 (Del. Ch. Apr. 14, 2006). Defendant Boston University ("BU") was the controlling shareholder of Seragen, a financially troubled biotechnology company. Plaintiffs, a group of former minority stockholders of Seragen's common stock, challenged certain transactions before Seragen was merged and the process by which the merger proceeds were divvied up. The plaintiffs contended that the BU defendants breached their fiduciary duties to Seragen's common shareholders by approving various financial transactions, which were not fair to the common shareholder as a matter of price and process. The Court of Chancery awarded damages in excess of $4.8 million plus interest for breaches of the fiduciary duty of loyalty. More ›

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District Court Dismisses Class Action Alleging Federal Securities Laws Violations and State Breach of Fiduciary Duty Claim

Hartman v. Pathmark Stores, Inc., C.A. No. 05-403-JJF, 2006 U.S. Dist. LEXIS 9349 (D. Del. Mar. 8, 2006). Plaintiff filed a class action complaint against defendants, alleging violations of Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and breach of the fiduciary duty of loyalty by the directors of Pathmark Stores, Inc. ("Pathmark") in connection with a transaction between Pathmark and The Yucaipa Companies, LLC ("Yucaipa"). Plaintiff also moved for appointment as lead plaintiff, with his counsel as lead counsel. Defendants moved to dismiss the complaint. More ›

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Court of Chancery Grants Expedited Injunction Proceedings In Interested Merger's Disclosure Claim

In re Serena Software, Inc. S'holders Litig., C.A. No. 1777-N, 2006 WL 375599 (Del. Ch. Feb. 09, 2006). This is a motion for expedited proceedings for a preliminary injunction pertaining to certain disclosure claims not made public in SEC-filed proxy statements soliciting shareholder vote for an agreement for sale of the corporation at $24 per share. Class actions were earlier filed in the Delaware Court of Chancery and California's Superior Court challenging the sale transaction as a director-interested one. More › Share

District Court Dismisses Potential Securities Fraud Class Action Involving Only Foreign Parties

Blechner v. Daimler-Benz AG, C.A. No. 04-331-JJF, 2006 WL 167835 (D.Del. Jan. 24, 2005). Plaintiffs, on behalf of themselves and other foreign shareholders who invested in securities of DaimlerChrysler AG, filed a class action complaint alleging securities fraud in connection with the merger of Chrysler Corporation and Daimler-Benz AG. Defendants moved to dismiss the complaint. More › Share

Delaware Supreme Court Reverses Superior Court and Finds that Defendant Became an "Insured" for Purposes of 18 Del. C. § 4211(2)(a) by Operation of Law after Named Insured Merged Into Defendant

Delaware Ins. Guar. Ass'n v. Christiana Care Health Services, Inc., No. 244, 2005, 2006 WL 196382 (Del. Jan. 24, 2006). The Delaware Insurance Guaranty Association ("DIGA") sought reimbursement from Christiana Care Health Services ("CCHS") pursuant to one of the Delaware Insurance Guaranty Association Act's provisions for claims paid on behalf of an insolvent insurer. In this case the insolvent insurer had insured a corporation that merged into CCHS. The Superior Court granted CCHS's motion for summary judgment, finding that CCHS was not an "insured" under the insurance policy. Reversing the lower court, the Delaware Supreme Court found that a court must consider the purpose and intent of 18 Del. C. § 4211 when determining if a company is an "insured." A court may not rely on terms in an insurance policy that are inconsistent with the purpose and intent of Section 4211. The Supreme Court found that CCHS became an insured after the named insured merged into the defendant, and CCHS is obligated to reimburse DIGA pursuant to Section 4211. More › Share

Partial Summary Judgment Denied by Court Of Chancery On "Entire Fairness" And Disclosure Grounds

In re Tele-Communications Inc. Shareholders Litig., C.A. No. 16470, 2005 WL 3547674 (Del. Ch. Dec. 21, 2005), opinion revised and superseded by No. CIV. A. 16470, 2005 WL 3642727 (Del. Ch. Dec. 21, 2005), (revised Jan. 10, 2006)(Westlaw citation not available). This summary judgment action originates from a Consolidated Amended Complaint that alleged nondisclosure of material information <and a lack of fairness of the impugned merger transaction. More › Share

Court Of Chancery Denies Declaratory Judgment And Anticipatory Breach Of Contract On Ripeness Grounds

Ubiquitel Inc. and Ubiquitel Operating Co. v. Sprint Corp, et al., C.A. No. 1489-N, 1518-N, 2006 WL 44424 (Del. Ch. Jan. 04, 2006). and Horizon Personal Communications, Inc. et al. v. Sprint Corp., et al., C.A. No. 1518-N (Del. Ch. Jan. 04, 2006). These cases pertain to summary judgment and a request for declaratory judgment involving an anticipatory breach of a commercial agreement concerning a merger transaction. More › Share

Court of Chancery Substantially Denies Motion to Dismiss Complaint Seeking Release of Escrowed Funds and Other Relief

Bonham v. HBW Holdings, Inc., C.A. No. 820-N, 2005 WL 3589419 (Del. Ch. Dec. 23, 2005). Former stockholders sued acquirer for release of $25 million held in escrow for purpose of indemnification for breach of warranty claims and other relief. The acquirer moved to dismiss the complaint on the grounds that it properly and timely noticed claims for breach of warranty and other issues, Plaintiffs failed to allege that those claims were made in bad faith, and certain of the claims were subject to mandatory arbitration under the terms of the stock purchase agreement. More › Share

Court of Chancery Grants Partial Summary Judgment with Respect to Claims that Former Controlling Stockholder Extracted Excess Compensation from Acquirer in Exchange for Supporting Merger

Crescent/Mach I Partnership, L.P. v. Turner, C.A. No. 17455-NC, 2005 WL 3618279 (Del. Ch. Dec. 23, 2005). Former stockholders who were cashed out in connection with merger sued the corporation's former controlling stockholder and the acquirer for breach of fiduciary duty and aiding and abetting breach of fiduciary duty, respectively. Plaintiffs complained of numerous side deals, allegedly negotiated by the controlling stockholder. Plaintiffs also complained that the controlling stockholder breached his fiduciary duty by supplying growth projections that he knew to be unduly pessimistic and inconsistent with management's view. Defendants moved for summary judgment, which the court granted in part and denied in part. More › Share

Court of Chancery Determines Fair Value Of Stock In Appraisal Action

Henke v. Trilithic Inc., C.A. No. 13155, 2005 WL 2899677 (Del. Ch. Oct. 28, 2005). Plaintiff, who was a stockholder of Trilithic, Inc., brought an appraisal action against Defendant Trilithic under 8 Del. C. §262. More › Share

Court of Chancery Partially Grants Motion For Summary Judgment Based Upon Plaintiffs' Lack Of Standing To Bring Derivative Claims As Result Of Merger

Gentile v. Rossette, C.A. No. 20213-NC, 2005 WL 2810683 (Del. Ch. Oct. 20, 2005). Plaintiffs, former shareholders of SinglePoint Financial, Inc. which merged into a subsidiary of Cofiniti, Inc., alleged that two former directors of SinglePoint breached their fiduciary duties in connection with the issuance of a large number of shares to one of the defendants and the merger. Defendants moved for summary judgment. More › Share

Court Enforces Provision in Merger Agreement Permitting Arbitration of Disputed Representation-and-Warranty and Working-Capital Claims

Mehiel v. Solo Cup Co., C.A. No. 1596-N, 2005 WL 3074723 (Del. Ch. Nov. 3, 2005). Following the closing on a merger, several disputes developed between the shareholder representative of an acquired company and the acquirer involving working-capital-adjustment issues and the accuracy of seller's representations and warranties. The merger agreement contained two separate arbitration provisions for working capital adjustment disputes and disputes regarding the parties' respective representations and warranties. The acquirer first attempted to submit its disputes with the shareholder representative to arbitration as working-capital claims. The arbitrator refused to consider those claims, however, based on the acquirer's failure to comply with certain procedural requirements. In response, the acquirer submitted the same claims to the separate arbitrator for representation-and-warranty claims. The shareholder representative subsequently filed a complaint asking the court to issue an injunction barring the second arbitrator from hearing the disputed claims. More › Share

Superior Court Prevents AT&T From Voluntarily Dismissing the Majority of Defendants

AT&T Wireless Services, Inc. v. Federal Ins. Co., 2005 WL 2155695 (Del. Super. Ct. Aug. 18, 2005). The Plaintiff filed a notice of partial dismissal in an attempt to dismiss certain defendants. The defendants who were purportedly dismissed moved to quash the notice of dismissal. The court found that one defendant insurer could be dismissed because the entire action was being voluntarily dismissed. However, the court granted the motion to quash as to the other defendant because the dismissal only eliminated certain claims as opposed to the entire action. Plaintiff also sought leave of the court to dismiss a second group of defendants pursuant to Rule 41(a)(2). The court denied this motion. More › Share