Author: Zane Madden

Chancery Court Enforces Merger Agreement Milestone Payment Despite Time and Cost to Bring Experimental Drug to Market

By: Scott Waxman and Zane Madden

In Shareholder Representative Services LLC v. Shire US Holdings, Inc. and Shire Pharmaceuticals LLC , C.A. No. 2017-0863-KSJM (Del. Ch. October 12, 2020), the Delaware Court of Chancery (the “Court”) held that Shire US Holdings, Inc.’s (together with Shire Pharmaceuticals LLC, “Shire”) failure to initiate Phase III clinical trials for an experimental drug acquired via merger was improper because said failure was due to a series of development delays routine to the pharmaceutical industry and every-day business decisions, in contravention of the language of the merger agreement.

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Delaware Chancery Court Parses Valuation Methods in Battle of the Experts

By: David L. Forney and Zane A. Madden

In William Richard Kruse (the “stockholder”), v. Synapse Wireless, Inc. (the “Company”), C.A. No. 12392-VCS (Del. Ch. July 14, 2020), the Delaware Court of Chancery (the “Court”) held that, after its review of the evidence as factfinder, the Company had carried its burden of proving a reliable appraisal of its fair value related to its 2016 merger transaction. As is typical in appraisal disputes, each party’s expert presented wildly different valuations. In this lengthy case, the Court nevertheless analyzed each proposed valuation model on its own merits and did not engage in compromise jurisprudence in order to achieve a sense of fairness for one party. In coming to its conclusion, the Court adopted the Company’s discounted cash flow valuation method, eschewing all other methods as unreliable in this case. The Court’s value was almost half of the merger transaction value upon which the stockholder exercised its appraisal rights.

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Chancery Court Reaffirms Delaware Policy of Broad Section 220 Stockholder Inspection Rights

By: Christopher J. Voss and Zane A. Madden

In Lebanon County Employees’ Retirement Fund and Teamsters Local 443 Health Services & Insurance Plan v. AmerisourceBergen Corp., C.A. No 2019-0527-JTL (Del. Ch. Jan. 13, 2020), the Delaware Court of Chancery (the “Court”) granted the plaintiffs’ demand to inspect the defendant’s books and records.  In so doing, the Court upheld the plaintiffs’ stated justifications for seeking review of the books and records as a proper purpose under Delaware law.

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Caremark Claim Dismissed Due to Inadequate Pleading of Demand Futility

By: Michelle McCreery and Zane Madden

In Hubert Owens, Derivatively on Behalf of Esperion Therapeutics, Inc. v. Tim M. Mayleben, et al., C.A. No. 12985-VCS (Del. Ch. February 13, 2020), the Delaware Court of Chancery (the “Court”) granted the defendants’ motion to dismiss the plaintiff’s complaint (the “complaint”) for failure to adequately plead demand futility.  After analyzing the allegations in the complaint, the Court concluded that plaintiff’s claims failed because the facts alleged did not demonstrate at the dismissal stage that a majority of the board of directors (the “board”) could not exercise independent and disinterested judgment with regard to a litigation demand.  The plaintiff was at all relevant times a stockholder of the Company.  The members of the board and the Chief Medical Officer of the Company were the defendants.

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Chancery Court Dismisses Derivative Action Alleging Caremark Claims

By: Scott Waxman and Zane Madden

In In re Lendingclub Corp. Derivative Litigation, C.A. No. 12984-VCM (Del. Ch. October 31, 2019), the Delaware Court of Chancery (the “Court”) granted the defendants’ motion to dismiss the plaintiffs’ consolidated supplemented complaint (the “complaint”) for failure to adequately plead demand futility. After analyzing the allegations in the complaint, the Court concluded that plaintiffs’ claims failed because the facts alleged did not demonstrate at the dismissal stage that a majority of the board of directors (the “Board”) could exercise independent and disinterested judgment with regard to a litigation demand as required under In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996).

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