Archive: October 2016

Delaware Chancery Court Dismisses Revlon Claims Based on Fully Informed, Uncoerced Stockholder Vote

By Lisa Stark and Jonathan Miner

In In Re OM Group, Inc. Stockholder Litigation, C.A. No. 11216-VCS (Del. Ch. Oct. 12, 2016), the Delaware Court of Chancery dismissed Revlon claims, on the basis that the challenged merger had been approved by a disinterested, uncoerced and fully-informed majority vote of the target’s stockholders and therefore the business judgment rule applied.

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DELAWARE CHANCERY COURT APPLIES MFW FRAMEWORK TO DISMISS SUIT BY MINORITY STOCKHOLDERS IN CONNECTION WITH SQUEEZE-OUT MERGER

By Annette Becker and Joseph Phelps

In In re Books-A-Million, Inc. Stockholders Litigation, No. 11343-VCL (Del. Ch. Oct. 10, 2016), the plaintiffs, minority stockholders of Books-A-Million, Inc. (the “Company”), alleged that the Company’s directors, controlling stockholders and several of its officers breached their fiduciary duties in connection with a squeeze-out merger effected by the controlling stockholders in 2015 to take the Company private.  The Court of Chancery held that the plaintiffs failed to plead facts to take the transaction outside the six-pronged framework approved by the Delaware Supreme Court in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2014) (“MFW”), and, consequently, the business judgment rule, rather than the entire fairness test, applied in reviewing the merger.  Upon application of the business judgment rule, the Court dismissed the case.

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Chancery Court Dismisses Derivative Breach of Fiduciary Duty Claims as Improperly Pled and the Requests for Declaratory Judgment as Not Ripe

By: Annette Becker and Makda Goitom

In Chester County Employees’ Retirement Fund v. New Residential Investment Corp., No. 11058-VCMR (Del. Ch. Oct. 7, 2016), the Court of Chancery granted the motion to dismiss brought by defendants (the members of the board of directors of New Residential Corp. (“New Residential”), its manager, the manager’s owner, and its controlling stockholder: (i) for an improperly pled derivative claim (with leave to replead) brought against the defendants for breach of fiduciary duty by the plaintiff, a stockholder of New Residential, (ii) for plaintiff’s failure to sufficiently plead futility in demanding that the board of New Residential bring the derivative suit, and (iii) as to declaratory judgments sought by plaintiff with respect to the Defendants’ liability under certain documents as not being ripe (with leave to replead).

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DELAWARE CHANCERY COURT DISMISSES CLAIMS DUE TO A PRIOR BROAD SETTLEMENT RELEASE

By Scott Waxman and Thomas Meyer

In Geier v. Mozido, LLC, C.A. No. 10931-VCS (Del. Ch. Sept. 29, 2016) (Slights, V.C.), the Delaware Court of Chancery granted the motion of Mozido LLC (“LLC”) and Mozido, Inc., a subsidiary of LLC (“Inc.” and together with LLC, “Defendants”), to dismiss claims relating to incentive options promised, but not delivered, to a former director of LLC (“Plaintiff”).

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