Merger Agreement – Page 2 – Delaware Docket

Chancery Court Clarifies “Constituent Corporation”

Jul 13 2018

By: Stephan H. Coonrod and Stephanie S. Liu

In City of North Miami Beach General Employees’ Retirement Plan, et al. v. Dr Pepper Snapple Group, Inc., et al., (C.A. No. 2018-0227-AGB (Del. Ch. June 1, 2018)), the Court of Chancery held that the term “constituent corporation” as used in Section 262 of the Delaware General Corporation Law means only an entity that actually is being merged or combined with another entity in a merger or consolidation and does not include a parent of such entities. Thus, the Court ruled that the Dr Pepper stockholder plaintiffs are not entitled to appraisal rights because Dr Pepper is not a constituent corporation, but rather the parent of one of two corporations to be merged in connection with the proposed transaction.

CHANCERY COURT DISMISSES BREACH OF CONTRACT CLAIM DUE TO PLAINTIFF’S FAILURE TO PROFFER A REASONABLE CONSTRUCTION OF MERGER AGREEMENT PROVISION

Sep 22 2017

By: Christopher H. Cunningham and Joseph Phelps

In Fortis Advisors LLC v. Shire US Holdings, Inc., No. 12147-VCS (Del. Ch. Aug. 9, 2017), the plaintiff, Fortis Advisors LLC, which was acting as representative (the “Representative”) for the former stockholders of SARcode Bioscience Inc., a private biopharmaceutical company (the “Target”), pursuant to a merger agreement, alleged that the acquiror Shire US Holdings, Inc., a Delaware subsidiary of a global biopharmaceutical company (the “Acquiror”), breached the provisions of a merger agreement by refusing to pay certain milestone payments that were due. The Court of Chancery granted the Acquiror’s motion to dismiss for failure to state a breach of contract claim, concluding that, while the Acquiror’s interpretation of the operative provision at issue was reasonable based on its plain and unambiguous language, the Representative failed to proffer a competing reasonable construction of such provision and thus the Court was required to grant the motion to dismiss.

Chancery Court considers who should decide whether certain disputes are arbitrable — the court or an arbitrator selected by the parties?

Apr 12 2017

By: John Blair & Ernest Simons

In Greenstar IH Rep, LLC and Gary Segal v. Tutor Perini Corporation, Civil Action No. 12885-VCS (Del. Ch. Ct. February 23, 2017), the Delaware Court of Chancery granted in part and denied in part defendant’s motion for preliminary injunction, holding that the Court lacks subject matter jurisdiction to decide the question of substantive arbitrability when an employment agreement contains a broad arbitration provision that evidences the parties intent to arbitrate arbitrability.

Court of Chancery Approves Modifying Merger-Related Class Action Settlement to Distribute Proceeds to Record Stockholders through DTC

Mar 07 2017

In re Dole Food Company, Inc., Stockholders Litigation

By: Remsen Kinne and Eryn Correa

The Court of Chancery granted a motion for leave to modify a settlement agreement in a merger-related class action suit to distribute settlement proceeds through DTC to Dole Food Company, Inc. (“Dole”) common stockholders of record. The Court held that the original stipulation providing for settlement proceeds to be distributed to both record holders and beneficial holders through a traditional notices and claims forms process proved to be too costly and burdensome in practice, which justified modifying the allocation procedure.

Delaware Chancery Court Awards Advancement of Fees in Connection with Post-Merger Indemnification Claims

Apr 12 2016

By: Scott E. Waxman and Sophia Lee Shin

In Joel Z. Hyatt and Albert A. Gore, Jr. v. Al Jazeera America Holdings II, LLC and Al Jazeera International (USA) Inc., the Delaware Court of Chancery reviewed a motion for summary judgment in connection with a dispute regarding the advancement of fees for the litigation of various post-merger indemnification claims. The Chancery Court held that the plaintiffs were entitled to advancement for certain claims, but not for others, depending on whether the underlying facts of each claim required the plaintiffs to defend their actions as former officers or directors.

Chancery Court Finds Non-Reliance Language Insufficient to Bar Extra-Contractual Fraud Claims

Mar 23 2016

By Lisa Stark and Mark Hammes

In FdG Logistics v. A&R Logistics, C.A. No. 9706-CB (Del. Ch. Feb. 23, 2016), the Court of Chancery held that a non-reliance provision contained in a merger agreement was ineffective to bar a buyer’s fraud claims based on extra-contractual statements made during the due diligence and negotiation process because the non-reliance provision was formulated solely as a limitation on the seller’s representations and warranties. According to the Court, for a non-reliance provision to be effective against a buyer, it must be formulated as an affirmative promise by the buyer that it did not rely on any extra-contractual statements made by the seller during the sales process. The decision clarifies the Court of Chancery’s 2015 decision in Prairie Capital III, L.P. v. Double E Holding Corp., C.A. No. 10127-VCL (Del. Ch. Nov. 24, 2015) in which the Court emphasized that “no magic words” are required for a non-reliance provision to be effective.

Chancery Court Grants in Part and Denies in Part a Motion to Dismiss in Fraud and Earnout Dispute

Mar 22 2016

By: Jamie Bruce and John Sun

In Haney v. Blackhawk, C.A. No. 10851-VCN (Del. Ch. Feb. 26, 2016), the Delaware Court of Chancery granted in part and denied in part Blackhawk Network Holdings, Inc.’s (“Blackhawk”) motion to dismiss certain claims brought by Greg Haney (“Haney”) in his capacity as representative of the selling stockholders of CardLab, Inc. (“CardLab”). Haney brought claims against Blackhawk in connection with Blackhawk’s acquisition of CardLab in 2014 including, inter alia, for fraudulent inducement and breach of the implied covenant of good faith and fair dealing.

Chancery Court Confirms Delaware’s Merger Statutes Inapplicable to Options

Aug 25 2015

By Lisa Stark and Eric Jay

In Kurt Fox v. CDX Holdings, Inc. (f/k/a Caris Life Sciences, Inc.), C.A. No. 8031-VCL (Del. Ch. July 28, 2015), the Delaware Court of Chancery confirmed that Delaware’s merger statutes do not effect a statutory conversion of options at the effective time of a merger. Rather, the treatment of stock options in a merger is governed by the underlying stock option plan, which must be amended in connection with a merger if the treatment of options in the merger differs from the treatment contemplated by the plan. The Court also confirmed that a standard qualification in stock option plans, requiring a corporation’s board of directors to determine the fair market value of the option for purposes of cashing out the options, could not be satisfied by informal board action or a delegation to management or a third party.

This class action arose from a 2011 spin-off/merger transaction pursuant to which Miraca Holdings, Inc. (“Miraca”) acquired CDX Holdings, Inc. (formerly known as Caris Life Sciences, Inc.) (“Caris”) for $725 million (the “Merger”). Immediately prior to the Merger, Caris spun off two of its three subsidiaries to its stockholders (the “Spin-Off”). In the Merger, each share of Caris stock was converted into the right to receive $4.46 in cash. Each option was terminated with the right to receive the difference between $5.07 per share and the exercise price of the option, minus 8% of the total option proceeds, which were held back to fund an escrow account from which Miraca could satisfy indemnification claims brought post-closing.

Chancery Court Finds No “Gap” to be Filled, No Implied Covenant Claim in Earn-Out Dispute

Feb 04 2015

By Nick Froio and Lauren Garraux

Chancery Court grants defendant’s motion to dismiss alternative claims of breach of the implied covenant of good faith and fair dealing, fraudulent inducement and negligent misrepresentation in earn-out dispute, holding that merger agreement set the standard to determine whether non-payment of earn-out was improper.

Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. No. 9522-CB (January 30, 2015) involves a dispute over whether earn-out payments are owed to the former equityholders of iWatt, Inc. (“iWatt”) pursuant to an Agreement and Plan of Merger dated as of July 1, 2013 (the “Merger Agreement”) whereby Dialog Semiconductor PLC (“Dialog”) acquired iWatt. Under the Merger Agreement, Dialog was to pay earn-out payments of up to $35 million depending on the post-merger revenues of Dialog’s Power Conversion Business Group, of which iWatt became a part post-closing. In addition, the terms of the Merger Agreement required that Dialog use its “commercially reasonable best efforts” to achieve and pay the earn-out payments in full. Revenues, however, fell short of the threshold amount to trigger the earn-out payments.

Chancery Court Holds Merger Agreement’s Forum Selection Clause Trumps Stockholders Agreement

Feb 03 2015

By Jamie Bruce and Mark Hammes

Chancery Court finds that three individual stockholders, as beneficiaries of a merger agreement, were equitably estopped from challenging the valid forum selection clause contained therein despite the fact that they did not personally sign the merger agreement.

In McWane, Inc. v. Lanier, C.A. No. 9488-VCP (Del. Ch. January 30, 2015) (Parsons, V.C.), the Chancery Court denied a motion to dismiss or stay from three individual defendant stockholders who argued that the Court lacked personal jurisdiction over them in a dispute regarding whether certain representations and warranties in a merger agreement were violated. The court determined that a forum selection clause in a stockholders agreement they had personally signed was trumped by the forum selection clause in the merger agreement that they had not personally signed. The court determined that not only was the clause in the stockholders agreement merely permissive compared to the merger agreement’s mandatory language, but also that the stockholders agreement fundamentally related to the merger agreement, and the defendants, as beneficiaries of the merger agreement, were equitably estopped from challenging the forum selection clause in the merger agreement.

Catagory:Merger Agreement