Author: Dean Brazier

CHANCERY COURT VALIDATES A DEFECTIVE MERGER AND REAFFIRMS RELIANCE ON OUTSIDE LEGAL COUNSEL UNDER DELAWARE LAW

By Holly Hatfield and Dean Brazier

In The Cirillo Family Trust v. Aram Moezinia, Lewis Tepper, Mark Walter, and DAVA Pharmaceuticals, Inc., C.A. No. 10116-CB (Del. Ch. Jul. 11, 2018), the Delaware Chancery Court granted the defendants’ motion dismissing certain claims arising from the 2014 merger between DAVA Pharmaceuticals, Inc. (“DAVA”) and an affiliate of Endo Pharmaceuticals, Inc. (such affiliate, “Endo”).  The Court held that Section 205 of the Delaware General Corporation Law (the “DGCL”) validated deficiencies in the written consents to the merger (the “Written Consents”) and a director’s reasonable, good faith reliance on the advice of legal counsel hired for specific expertise can exculpate the director for a fiduciary duty breach.  The Court also granted part of the plaintiff’s motion to amend the complaint to add a claim against certain directors in their capacities as officers of DAVA.

Read More

CHANCERY COURT DISMISSES BREACH OF FIDUCIARY CLAIMS FOLLOWING THE CLOSING OF A MERGER INVOLVING INSIDER SIDE DEALS

By Joanna Diakos and Dean Brazier

In Alan Kahn v. Michael D. Stern, et al., C.A. No. 12498-VCG (Del. Ch. Aug. 28, 2017), the Delaware Chancery Court granted a motion to dismiss the stockholder plaintiff’s claims that the director defendants breached their fiduciary duties when they approved a merger that included side deals.  The Court noted that the plaintiff had the burden of proving either that the board was not disinterested or that the board acted in bad faith with respect to the disclosures in the information statement released to stockholders.  The Court concluded that the plaintiff failed to state a claim upon which relief could be granted.

Read More

CHANCERY COURT DECLINES TO DISMISS FIDUCIARY CLAIMS ARISING FROM A SELF-TENDER OFFER

By Lisa Stark and Dean Brazier

In Buttonwood Tree Value Partners L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del. Ch. July 24, 2017), the Delaware Chancery Court denied, in part, a motion to dismiss claims for breach of the fiduciary duty of loyalty brought by minority stockholders in R. L. Polk and Co., Inc. (“Polk”) against the directors of Polk and members of the Polk family, who controlled Polk, in connection with a self-tender offer.  In this case, the Court held that it was reasonably conceivable that the Polk directors who were affiliated with the Polk family deliberately caused Polk to conduct a self-tender offer at a low price to enable Polk family insiders to maximize their proceeds from a future sale of Polk.

Read More

Chancery Court Preserves Advancement for Corporate Officers Despite Exclusive Remedies and Seller Release Provisions in Stock Purchase Agreement

By Whitney Smith and Dean Brazier

In Mark S. Davis, et al. v. EMSI Holding Company, C.A. No. 12854-VCS (Del. Ch. May 3, 2017) the Delaware Chancery Court granted a motion for summary judgment brought by former officers of the defendant (“EMSI”) seeking advancement of legal fees for their defense in a related action, EMSI Acquisition, Inc. v. Contrarian Funds, LLC, et al., C.A. No. 12648-VCS (Del. Ch. May 3, 2017).  In granting the motion, the Court considered whether the plaintiffs had waived or released their right to advancement in the exclusive remedies provision or the seller release provision of the Stock Purchase Agreement (“SPA”) entered into in connection with the sale of EMSI.  The Court concluded that the SPA provisions did not waive or release the officers’ right to advancement of defense costs under EMSI’s bylaws and a sufficient nexus existed between the plaintiffs’ role as former officers and the claims in EMSI Acquisition requiring their defense.

Read More

Chancery Court Cites Inelegant Drafting When Allowing an Indemnification Claim to Proceed

By Whitney Smith and Dean Brazier

In EMSI Acquisition, Inc. v. Contrarian Funds, LLC, et al., C.A. No. 12648-VCS (Del. Ch. May 3, 2017) the Delaware Chancery Court denied a motion to dismiss brought by defendants who were sellers (“Sellers”) in the acquisition of EMSI Holding Company (“EMSI”) by an affiliate of private equity firm Beecken Petty O’Keefe & Company where “inelegant drafting” created an ambiguity that may make the Sellers liable for EMSI’s fraudulent representations and warranties.  To reach this conclusion, the Court considered whether the provisions of the Stock Purchase Agreement (“SPA”) permitted the plaintiff (“Buyer”) to seek indemnification beyond the cap on liability and, if so, whether the Sellers could be liable for the allegedly fraudulent representations and warranties from EMSI.  The Court concluded that the SPA contained conflicting provisions with interpretations that could reasonably support either party’s claims and the conflicts could not be resolved on a motion to dismiss.

Read More

Copyright © 2019, K&L Gates LLP. All Rights Reserved.