Case Law Developments

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On April 4, 2024, the Delaware Supreme Court issued its decision on a stockholder suit challenging the fairness of IAC/InterActiveCorp’s separation from its controlled subsidiary, Match Group, Inc.[1]  In this decision, the Delaware Supreme Court provided clarity and guidance on two important issues involving the application of the MFW framework.Continue Reading Delaware Supreme Court Provides Important Guidance on Application of MFW Framework to Controlling Stockholder Transactions

In Stoyas v. Toshiba Corp., a securities class action that has produced a number of notable decisions about the application of the federal securities laws to unsponsored ADRs, the Ninth Circuit recently declined to review the district court’s ruling denying to certify a class.  In doing so, the Ninth Circuit let stand the district court’s novel ruling, which found the relevant named plaintiff to be an atypical class representative after determining that it had purchased the unsponsored ADRs in foreign transactions.[1]
Continue Reading Ninth Circuit Denies Class Cert Appeal in Toshiba Securities Litigation Concerning Unsponsored ADRs

In a noteworthy new post-sale appraisal ruling, the Delaware Court of Chancery in BCIM Strategic Value Master Fund, LP v. HFF, Inc.[1] awarded the petitioner additional consideration based on an increase in the value of the target company that arose between signing and closing.  The unique facts of this case, and particularly the sustained outperformance of the target in the interim period before closing, are worth keeping in mind in evaluating the risk that a successful appraisal proceeding can increase the amount of consideration payable in a public company acquisition.  Below we break down the Court’s analysis in determining fair value, how changes in each merger party’s valuation drove the appraisal result, and key takeaways.
Continue Reading Appraisal Update: Post-Signing Value Changes Drive Appraisal Result

In Wei v. Zoox, Inc., the Delaware Court of Chancery found that an appraisal petition had been filed for the sole purpose of gathering discovery to be used in drafting a fiduciary duty complaint challenging a merger where the former stockholders had lost standing to seek books and records under Section 220 due to the rapid closing of the merger.  Nonetheless, in a novel ruling, the court permitted the appraisal petitioners to pursue some discovery in the appraisal action, limited to what would have been available to them under Section 220 had they not lost standing to seek such records.  The court rejected the petitioners’ request for broader discovery that is normally available in an appraisal action in light of its finding that the petitioners’ true purpose in filing the appraisal action was to seek Section 220-like books and records.
Continue Reading A Back-Door Section 220? Chancery Court Limits Appraisal Petitioners’ Demand for Broad Discovery

In a recent opinion addressing the enforcement of trading restrictions (“lock-ups”) that are commonly agreed in connection with a business combination transaction between a special purpose acquisition company (“SPAC”) and a target company (“de-SPAC transaction”), the Delaware Court of Chancery determined that the restrictions at issue did not apply to certain shares held by the…

In September 2021, the Delaware Supreme Court in United Food and Commercial Workers Union v. Zuckerberg revamped the test for pleading “demand futility” in shareholder derivative suits for the first time in decades. At the same time, the court’s decision reinforces Delaware courts’ increasing focus on the independence of directors, not only when the board is sued in a shareholder derivative action but also in other conflict situations in which independent directors are called on to exercise their business judgment on behalf of the company.
Continue Reading The Delaware Courts’ Evolving View of Director Independence

In one of the first opinions addressing fiduciary duty claims in the context of a transaction involving a special purpose acquisition company (“SPAC”), the Delaware Court of Chancery determined that the SPAC shareholders’ right to redeem can be undermined by insufficient disclosures regarding the transaction and allowed class-action claims to continue against a SPAC’s controlling…

The Delaware Supreme Court recently affirmed the Court of Chancery’s 2020 decision in AB Stable VIII LLC v. MAPS Hotels & Resorts One LLC, which blessed a buyer’s termination of a merger agreement on grounds that the target breached its covenant to operate its business in the ordinary course between signing and closing.  In this closely watched appeal, the Delaware Supreme Court held that the ordinary course covenant in this case was breached because of the unprecedented steps the target hotel company took in response to COVID-19, even though the court found those steps to have been reasonable and consistent with the actions of others in the same industry.  This decision provides important guidance both in terms of how such covenants should be drafted but also how to deal with unprecedented crises between signing and closing.[1]
Continue Reading The Delaware Supreme Court Speaks on “Ordinary Course” Covenants

In Snow Phipps v. KCAKE Acquisition, the Delaware Court of Chancery ordered the buyer (Kohlberg) to close on its $550 million agreement to purchase DecoPac, a cake decorations supplier.  In doing so, the court easily rejected the buyer’s claims that the COVID-19 pandemic resulted in a material adverse effect (“MAE”) and that the steps…