As the Delaware Supreme Court narrows the avenues for post-closing challenges to mergers (see our discussions of the implications of the Corwin and Cornerstone decisions here, here, here and here), we expect that plaintiffs’ lawyers will increasingly seek to base their merger suits on specific allegations of conflicts that may have tainted the oversight of processes to sell companies in hopes of supporting claims for breaches of the duty of loyalty and the applicability of the enhanced scrutiny of the entire fairness doctrine.  Given that virtually every merger includes some special merger benefits for directors that may be susceptible to an attempt at such a claim, it is timely that the Delaware Court of Chancery issued a decision over the summer of 2016 that provides useful guidance on how to evaluate the most common of special merger benefits to insiders:  protection against exposure to pre-merger claims. Continue Reading When Do Merger Benefits to Directors Constitute Disabling Conflicts?

As discussed in prior posts, recent applications of the Delaware Supreme Court’s decision in Corwin v. KKR Financial Holdings, 125 A.3d 304 (Del. 2015) have emphasized the high bar for surviving a motion to dismiss in damages actions by stockholder plaintiffs after completion of a merger transaction, as “dismissal is typically the result” where informed, disinterested stockholder approval requires application of the business judgment rule to extinguish all claims except for waste.  See Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016).  Two recent Chancery Court decisions have further underscored the claim-extinguishing effect of informed, disinterested stockholder approval. Continue Reading Recent Applications of <em>Corwin v. KKR Financial Holdings LLC</em> Confirm High Bar to Pleading Post-Closing Damages Actions

Since our last blog post on the changing landscape of disclosure-only settlements in the Delaware Court of Chancery, there have been developments in several areas, including the continued lower filing rates for shareholder litigation in Delaware, the adoption of the Trulia “plainly material” standard for supplemental disclosures by the Seventh Circuit, and the lower standard for disclosures required in order for plaintiffs’ lawyers to be awarded a fee in the mootness context.  Continue Reading Update About Disclosure-Only Settlements in M&A Litigation

Theresa May, the new UK Prime Minister, commented that the UK Government should adopt an industrial strategy capable of “stepping in” to defend sectors that are important to the UK economy from acquisition by overseas acquirors.  Linked is an alert memorandum prepared by our Brexit Working Group, which focuses on the existing powers available to the UK Government to prohibit acquisitions of UK companies (or indeed non-UK companies with UK operations) on “public interest” grounds within the confines of EU law and discusses how these might be expanded following Brexit. Continue Reading Industrial Strategy Post-Brexit: The UK’s Power To Block Mergers On Public Interest Grounds

Cleary Gottlieb and PwC’s Governance Insights Center have teamed up to create the Executive Compensation Series, which looks at the factors motivating boards to increasingly engage with shareholders about executive compensation. The first edition of the series is now available and discusses issues such as the impact of Dodd-Frank on executive compensation, elements of effective CD&A design and the influence of proxy advisors on compensation. Continue Reading Boards, Shareholders and Executive Pay

A settlement on July 12, 2016 by the DOJ with ValueAct for violations of the HSR Act’s notification requirements and an interpretation of the Exchange Act’s beneficial ownership reporting rules posted by the SEC staff on July 14, 2016 combine to provide new guidance that will have an immediate impact on shareholder activism and engagement. Continue Reading New Guidance on the Impact of SEC Beneficial Ownership Reporting and HSR Act Notification Regimes on Shareholder Activism and Engagement

On 12 September 2016, the rules of the UK Takeover Code governing the communication and distribution of information during a UK takeover bid will change. The rules and requirements affected are summarized in the attached memo and include the chaperoning requirement for meetings and calls with shareholders and analysts, new rules relating to the use of materials during meetings and calls, and new rules relating to the use of social media and videos during bids.  Continue Reading UK Takeover Code Update: The Communication and Distribution of Information During a UK Takeover Bid

In a recent ruling (Halo Elecs., Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc.[1]), the Supreme Court adopted a relaxed and more plaintiff-friendly standard for determining whether to award enhanced damages in patent infringement litigation.  This ruling should be taken into account when considering allocation of patent infringement risks in M&A transactions, including in connection with representations and warranties and associated indemnities. Continue Reading Halo’s Enhanced Patent Infringement Damages Bring Enhanced M&A Risks

Two months ago, in Singh v. Attenborough, the Delaware Supreme Court clarified the defendant-favorable standards for determining liability of directors and their advisors following change in control transactions, where such transactions are approved by a vote of a majority of disinterested, uncoerced, and informed stockholders of the target company.  Last week, the Delaware Court of Chancery in In re Volcano Corporation Stockholder Litigation[1] extended that protection to transactions “approved” by fully informed, uncoerced stockholders tendering a majority of shares in a two-step merger pursuant to Section 251(h).  The Chancery Court rejected the plaintiffs’ argument that the Recommendation Statement inadequately disclosed the financial advisors’ alleged conflict of interest and applied the irrebuttable business judgment rule standard, extinguishing all claims against the directors for breach of fiduciary duty and all claims against the target’s financial advisor for aiding and abetting that breach.  Given this claim extinguishment and in the absence of any claims of waste the Court dismissed the complaint. Continue Reading Irrebuttable Business Judgment Rule Applied to 251(h) Tender Offer

In a decision with important consequences for merger and acquisition transactions and the litigation resulting from those transactions, a divided New York Court of Appeals held last week that the common interest doctrine applies only to post-signing, pre-closing communications between parties to a merger agreement if they relate to pending or anticipated litigation.  Other communications between separately represented parties to a merger (or other commercial transaction) are not entitled to privilege under New York law. Continue Reading New York’s Highest Court Holds Common Interest Doctrine Inapplicable to Commercial Transactions Absent Litigation