As the battle over the acquisition of equity in Universata, Inc. continues, the Court of Chancery, in Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021), resolved two general exceptions asserted by Plaintiffs to the Special Master’s Final Report (“Final Report”). In doing so, the Court decided that an escrow fund was properly created pursuant to the Merger Agreement, and further held that the appropriate standard of review regarding actions of the Stockholders’ Representative is “subjective good faith.” However, the ultimate resolution of all the exceptions awaits further briefing by the parties.Read More
In In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114-JTL (Del. Ch. August 31, 2020), the Delaware Court of Chancery (“Court”) rejected claims for damages by Anthem, Inc. (“Anthem”) and by Cigna Corporation (“Cigna”) for breach of covenants under their Agreement and Plan of Merger entered into on July 23, 2015 (“Merger Agreement”). The Court also ruled against Cigna’s claim for a reverse termination fee.Read More
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.Read More
In Fortis Advisors LLC, v. Allergan W.C. Holding Inc., C.A. No. 2019-0159-NTZ (Del. Ch. May 14, 2020), a shareholder representative appointed pursuant to a merger agreement asserted a claim on behalf of selling stockholders for certain contingent payments. The defendant surviving corporation brought a motion in the Delaware Court of Chancery (the “Court”) to (i) compel the selling stockholders to participate in discovery as parties-in-interest to the action and to be subject to trial subpoenas as parties or (ii) compel the shareholder representative to procure and produce discovery from the selling stockholders. The Court denied the motion in full.Read More
In Channel Medsystems, Inc. v. Boston Scientific Corporation, C.A. No. 2018-0673-AGB (Del. Ch. December 18, 2019), the Delaware Court of Chancery ordered specific performance of a merger agreement, finding that breaches of the representations and warranties arising from the fraud of a key employee of the seller did not rise to the level of a “Material Adverse Effect.” As a result, the buyer was not entitled to terminate the merger agreement and breached the further assurances provision of the merger agreement by failing to meaningfully engage with seller upon seller’s discovery of the fraud.Read More
In the Memorandum Opinion, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 2018-0933-JRS (Del. Ch. Feb. 13, 2020), the Court of Chancery granted Shire US Holdings, Inc.’s motion to dismiss under the doctrine of res judicata because the breach of contract claim brought by Fortis Advisors LLC arises from the same transaction that was the subject of a prior action (the “2016 Action”) between the parties, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 12147-VCS (Del. Ch. Aug. 9, 2017).Read More
In a landmark decision, a Delaware court has, for what is widely believed to be the first time ever, found that a material adverse effect actually occurred in an acquisition transaction, giving the buyer a right to terminate the pending transaction. In Akorn, Inc. v. Fresenius Kabi AG, the Delaware Court of Chancery (the “Court”) held, following a trial, that the buyer properly terminated the parties’ merger agreement, due to such a material adverse effect between signing and closing, under the terms of the agreement and the pertinent Delaware case law. Unlike prior decisions rejecting buyer material adverse effect claims, the Court found that a pre-closing decline in the business of the target – Akorn – was not merely a “cyclical trend” and was likely to have a post-closing, durationally-significant effect that was “material when viewed from the longer-term perspective of a reasonable acquiror.” Although groundbreaking, the Akorn decision reflects that the Delaware courts will still approach the question of whether an MAE has occurred on a case-by-case basis and does not establish a particular “bright line” test.
In Chester Cty. Emp. Ret. Fund v. New Residential Inv. Corp., C.A. No. 11058-VCMR (Del. Ch. Oct. 6, 2017), the Delaware Court of Chancery granted the defendants’ motion to dismiss the stockholder plaintiff’s direct and derivative claims for breach of fiduciary duties under the Court of Chancery Rules 23.1 and 12(b)(6), because the plaintiff failed to make a pre-suit demand or demonstrate that doing so would be futile. The Court found that although the facts alleged gave rise to a derivative claim, the plaintiff failed to make a pre-suit demand or plead particularized facts sufficient to raise a reasonable doubt that a majority of the directors on the New Residential Corp. (“New Residential”) board could have exercised their independent and disinterested business judgment in responding to a demand.