On September 12, 2017, Governance Watch and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on “Recent Whistleblower Issues.”  Participants in the panel discussion included Matthew Solomon, a partner at Cleary Gottlieb and former Chief Litigation Counsel at the SEC’s Division of Enforcement; Emily Pasquinelli, Deputy Chief of the SEC’s Office of the Whistleblower; David Huntley, Chief Compliance Officer of AT&T; and Steven Durham, a Partner at Labaton Sucharow LLP who specializes in plaintiffs-side whistleblower representations.  The panelists discussed issues critical to U.S. public companies and foreign private issuers relating to federal whistleblower programs.  Below are the key takeaways from the discussion. Continue Reading Recent Whistleblower Issues: Key Takeaways from the Conference Board’s Governance Watch Webcast

A recent ruling in the ongoing Lehman Brothers bankruptcy case serves as an important reminder about the risks of deferred compensation.

The ruling, issued by Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York, involved employee claims for payment of deferred compensation under the Lehman Brothers’ (formerly known as Shearson Lehman Brothers) deferred compensation plan.  The plan provided that employee claims would be subordinate to those of all other present and future creditors of the plan sponsor.

Click here, to read the full alert.

On August 1, 2017, the Delaware Supreme Court issued its highly anticipated decision in the appraisal appeal, DFC Global Corp. v. Muirfield Value Partners, L.P.  The Chancery Court’s decision below had garnered substantial attention for its determination that DFC Global’s fair value was approximately 7.5% higher than the deal price, even though the court found a robust and conflict-free sale process.  On appeal from that decision, DFC Global argued that the Delaware Supreme Court should adopt a presumption in appraisal actions that the deal price in arm’s length and competitive mergers equals fair value.  The appeal drew dueling amicus briefs from two groups of prominent professors, one in favor of this presumption,[1] and one opposed to it.[2] Continue Reading Delaware Supreme Court Declines To Establish A Presumption In Favor Of Deal Price In Appraisal Actions—Or Did It?

In a decision issued on Friday that will likely slow the recent spike in appraisal suits, the Delaware Court of Chancery held that the fair value of Clearwire Corp. was $2.13 per share—less than half the merger price of $5 per share.  See ACP Master, Ltd. et al. v. Sprint Corp., et al., C.A. No. 8508-VCL (Del. Ch. July 21, 2017) (“Clearwire”).  The decision by Vice Chancellor Laster also found that Sprint Nextel Corp. (“Sprint”), which owned slightly more than 50% of Clearwire’s voting stock at the time of the merger, did not breach its fiduciary duties in acquiring the Clearwire shares it did not already own because the merger was entirely fair to Clearwire’s minority stockholders. Continue Reading Chancery Finds Fair Value To Be Less Than Half Merger Price

Investors frequently negotiate for a redemption right to ensure at least some return on preferred stock investments in a “sideways situation”—where the target company is neither a huge success nor an abject failure.  Continuing a consistent theme in recent Delaware jurisprudence, the Delaware Court of Chancery declined to dismiss a complaint alleging directors breached their duty of loyalty in taking steps to satisfy an investor’s redemption request.

Continue Reading Between Contractual and Fiduciary Duties: ODN Holding and the Rights of Preferred Stockholders

When a corporation sells corporate assets to its (or an affiliate of its) controlling stockholder, Delaware courts generally will review that transaction under the exacting “entire fairness” standard.[1]  But what if the corporation’s minority stockholders are given the opportunity to participate along with the controlling stockholder in the purchase of the corporate assets pro rata to the extent of their stock ownership? Continue Reading Chancery Court Suggests that Rights Offerings May Limit Liability in Transactions with Controlling Stockholders

On April 27, a civil FCPA litigation against three former executives of a Hungarian telecommunications company officially came to a close after more than five years of contentious litigation in the Southern District of New York when Judge Richard Sullivan approved the settlements of the last two defendants and entered judgment in the matter.  The case alleged that three former executives of Magyar Telekom, Plc., a Hungarian telecommunications company, participated in a scheme between 2004 and 2006 to bribe public officials in Macedonia in order to secure favorable treatment for Magyar’s Macedonian subsidiary.  All three defendants were foreign nationals working for an overseas company; the charged conduct took place exclusively on foreign soil; and the defendants continue to reside overseas. Continue Reading SEC, Hungarian Executives Settle 5-Year FCPA Suit that Generated Government-Friendly Rulings on Threshold Legal Issues

In a recent decision, the Supreme Court eliminated laches as a defense in patent litigation; as a result, defendants are more vulnerable to unexpected claims of patent infringement.[1]  Given this new layer of risk, it is even more important to conduct thorough and nuanced patent infringement diligence on an M&A target, and parties to M&A transactions should take this increased exposure to liability into account when negotiating the relevant representations and warranties and indemnities. Continue Reading No Laches, More Problems: Elimination of Laches in Patent Infringement Suits Increases M&A Risks

Last month, in Vento v. Curry,[1] the Delaware Chancery Court preliminarily enjoined the Consolidated Communication Holding (“Consolidated”) shareholder vote[2] on the company’s all-stock acquisition of FairPoint Communications (“FairPoint”) due to Consolidated’s failure to adequately disclose the compensation its financial advisor would receive for participating in the acquisition financing. The court’s ruling ultimately had very little impact on the transaction – Consolidated subsequently disclosed that its financial advisor would receive $7 million in financing fees and the Consolidated shareholders overwhelmingly approved the transaction without any delay.[3]  Vento nonetheless provides important guidance for principals and financial advisors in evaluating whether disclosure of a financial advisor’s transaction-related compensation is required when seeking shareholder approval of an M&A transaction.    Continue Reading Assessing Financial Advisor Compensation Disclosure Following Vento v. Curry

The Delaware Supreme Court has affirmed the Delaware Court of Chancery’s ruling that Energy Transfer Equity L.P. (“ETE”) did not breach its agreement to merge with The Williams Companies, Inc. when ETE terminated the agreement on the grounds that its counsel was unwilling to deliver a tax opinion that was a condition to closing.

While the court’s decision has been eagerly anticipated, the larger impact of the ETE/Williams matter occurred back in May 2016 when the dispute became public: the dispute highlighted that tax-opinion closing conditions which are intended to protect the parties against tax risks could instead add to deal risks.

This alert memorandum briefly describes the facts in the case and the court’s decision, and then turns to a survey of what deal counterparties have been doing differently to mitigate “ETE/Williams risk”.  We end with a menu of features deal counterparties should consider using in future deals.  These features include:

—  No tax opinion required
—  Tax opinions prepared before signing
—  Closing condition limited to change in tax law
—  Obligation to accept opinion from other party’s counsel or an alternate counsel
—  Obligation to restructure if necessary to obtain tax opinion
—  Termination fee for termination because of inability to obtain opinion

Please click here to read the full alert memorandum.