Tag: Entire Fairness

A Conflicted Controller Transaction Survives a Motion to Dismiss

By: Lisa R. Stark and Samira F. Torshizi

In In re Hansen Medical, Inc. Stockholders Litigation, C.A. No. 12316-VCMR (Del. Ch. June 18, 2018), the Delaware Court of Chancery found that plaintiffs had stated a reasonably conceivable claim that the acquisition of Hansen Medical, Inc. (“Hansen”) by Auris Surgical Robotics, Inc. (“Auris”) should be reviewed under the entire fairness standard of review because the transaction involved a controlling stockholder group which extracted benefits from the transaction not shared with the minority. The Court denied motions to dismiss filed by the alleged control group and Hansen’s directors and officers.

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MULTI-BILLION DOLLAR INVESTMENT MANAGER AND DIRECTORS REMAIN AT RISK

By: Kevin Stichter and Samira Torshizi

In Cumming v. Edens, et al., C.A. No. 13007-VCS (Del. Ch. Feb. 20, 2018), the Court of Chancery denied a motion to dismiss a derivative suit for breach of fiduciary duties brought by a stockholder of New Senior Investment Group, Inc. (“New Senior”) against New Senior’s board of directors (the “Board”) and related parties in connection with New Senior’s $640 million acquisition of Holiday Acquisition Holdings LLC (“Holiday”). The Court made clear that compliance with Section 144 does not necessarily provide a safe harbor against claims for breach of fiduciary duty and invoke business judgment review of an interested transaction. Because the complaint alleged with specificity “that the Board acted out of self-interest or with allegiance to interest other than the stockholders,” the court applied the entire fairness standard of review and concluded that the transaction was not fair to New Senior stockholders. Read More

Chancery Court Dismisses Claims Against Defendants and Holds that the Transactional Structure in M&F Worldwide Applies to Conflicted One Sided Controller Transactions

By: Annette Becker and Joshua Haft

In In re Martha Stewart Living Omnimedia, Inc. Stockholder Litigation, Consolidated C.A. No. 11202-VC (Ch. Ct  August 18, 2017) former stockholders of Martha Stewart Living Omnimedia, Inc. (“MSLO”) brought a consolidated class action suit against Martha Stewart (“Stewart”), the former controlling stockholder of MSLO, for breach of fiduciary duty and against Sequential Brands Group, Inc. (“Sequential”), the acquirer of MSLO by merger, for aiding and abetting that breach claiming that Stewart leveraged her position as a controller to obtain disparate consideration for herself as compared to the minority stockholders of MSLO in the acquisition of MSLO.  Plaintiffs moved to dismiss, with the Court finding that the complaint failed to state a claim for breach of fiduciary duty against Stewart, and on that basis need not reach the question of whether the complaint adequately pleads the elements of aiding and abetting such a breach, and granted the plaintiffs’ motion to dismiss the complaint.

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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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