Tag: Controlling Stockholder

YES, WE HAVE NO ESTOPPEL: CHANCERY COURT RULES DERIVATIVE, DISMISSES DILUTED STOCKHOLDERS’ EX-TEXAS MERGER-RELATED CLAIMS

 By Remsen Kinne and Adrienne Wimberly

In Sheldon v. Pinto Technology Ventures, C.A. No. 2017-0838-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery in a Memorandum Opinion granted a motion to dismiss breach of fiduciary duty claims and other allegations brought by the founder and an early stockholder (“Plaintiffs”) of non-party IDEV Technologies, Inc., a Delaware corporation (“IDEV”). The Court found that Plaintiffs’ primary claims were derivative, rejecting Plaintiffs’ assertion that Defendants were judicially estopped by a Texas state court ruling from arguing for that characterization of the claims, and dismissed the complaint for failure to comply with Chancery Court Rule 23.1’s derivative claims demand or demand futility pleading requirements.

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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.

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Court of Chancery Holds That Structurally Coercive Stockholder Vote Does Not Ratify Fiduciary Actions Related To Shares Issuance and Proxy Grant To Stockholder

By: Remsen Kinne and Tami Mack

In Sciabacucchi v. Liberty Broadband Corporation, C.A. No. 11418-VCG (Del. Ch. May 31, 2017), the Court of Chancery ruled on a motion to dismiss by defendants Liberty Broadband Corporation (“Liberty”), a stockholder of Charter Communications, Inc. (“Charter”) and officers and directors of Charter.  The Court held that facts alleged by plaintiff, a Charter stockholder, supported the inference that a vote by Charter stockholders approving a shares issuance to and voting proxy agreement with Liberty was structurally coercive.  The Court determined that since the vote was coercive, it did not ratify actions by Liberty and Charter’s directors and officers claimed by plaintiff to have breached fiduciary duties of loyalty.  As a result, the Court held, defendants were not entitled to dismissal of plaintiff’s claims solely on the basis that stockholder vote ratification operated to “cleanse” fiduciary duties breaches.

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Chancery Court Clarifies the Cleansing Power of an Uncoerced and Fully Informed Disinterested Majority Stockholder Vote

By:  Annette Becker and Will Smith

In In re Merge Healthcare Inc. Stockholders Litigation, No. 11388-VCG (Del. Ch. Ct. January 30, 2017), the Delaware Court of Chancery granted the defendant directors’ motion to dismiss brought against the plaintiff stockholders, holding that the cleansing effect of an uncoerced and fully informed vote of a majority of disinterested shares shields company directors from liability for alleged fiduciary violations as to an improper merger price and process. The Court found that the business judgment rule applied on review as opposed to the entire fairness standard.

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