A recent opinion [1] from the Delaware Superior Court addresses the not uncommon situation of a buyer of a business seeking to pursue remedies against the seller that are not specified in the purchase agreement based on allegations of fraudulent conduct by the seller or its representatives.  Specifically, the buyer acquired the shares of a company that had a liability (an obligation to make an “earn-out” payment to the former owners of a previously acquired company) that became payable after completion of the acquisition.  The buyer sued the seller alleging that the seller (and not the acquired company) should be responsible for satisfying the earn-out liability when it became due.
Continue Reading Yet Another Reminder that “Boilerplate” Matters

For practitioners in the Delaware Court of Chancery, the facts of In re Riverbed Tech., Inc.[1] are all too familiar.  After Thoma Bravo sought to take Riverbed private, a class of stockholders challenged the transaction, claiming that the company had been undervalued, the sales process was undermined by conflicts of interest, and the disclosures in the preliminary proxy statement were inadequate.  As in many other cases—after all, litigation has become a virtual certainty in large merger and acquisition transactions of public companies[2]—Riverbed agreed to make supplemental disclosures before the stockholder vote and pay plaintiffs’ attorney’s fees, in exchange for defendants receiving a broad release from liability for all claims arising from the transaction.  Although Vice Chancellor Glasscock reduced the amount of attorney’s fees awarded due to misgivings about the value of the benefits achieved in light of the broad scope of the release, he approved the settlement.
Continue Reading The Implications of Riverbed for Disclosure-Only Settlements

On March 24, 2015, the U.S. Supreme Court issued Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, in which it clarified the scope of liability for statements of opinion under Section 11 of the Securities Act of 1933. In particular, the Court held that statements of opinion can be actionable as misstatements under Section 11 only if the plaintiff pleads and proves that the speaker did not actually hold the stated belief or if the statement of opinion contains explicit, supporting facts that are untrue.
Continue Reading Supreme Court Clarifies the Scope of Liability for Statements of Opinion Under Section 11 of the Securities Act of 1933