Post-Merger Claims – Delaware Docket

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

Feb 15 2021

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.

CHANCERY COURT DENIES PURCHASER’S THEORY OF RECOUPMENT WITH TIME-BARRED CLAIMS TO OFFSET POST-MERGER EARN-OUT PAYMENTS

Mar 26 2020

By: David L. Forney and Marissa Leon

The Delaware Court of Chancery (the “Court”) recently rejected a Purchaser’s theory of recoupment with claims of breach of contract and fraudulent inducement that were time-barred by the statute of limitations. Claros Diagnostics, Inc. Shareholders Representative Committee v. OPKO Health, Inc., C.A. No. 2019-0262-SG, 2020 WL 829361 (Del. Ch. February 19, 2020).

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

Mar 04 2019

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.

Activist Stockholder Aided and Abetted a Board’s Breach of Fiduciary Duties but the Court Finds No Damages

Nov 29 2018

By: Jill B. Louis and Alexander J. Chern

In In re PLX Technology, Inc. Stockholders Litigation, C.A. No. 9880-VCL (Del. Ch. October 16, 2018), the Delaware Chancery Court found that the actions of an activist stockholder in the context of a sale transaction aided and abetted the defendant board of directors in a breach of its fiduciary duty of disclosure but that there was insufficient evidence that the breach ultimately resulted in damages.

CHANCERY COURT VALIDATES A DEFECTIVE MERGER AND REAFFIRMS RELIANCE ON OUTSIDE LEGAL COUNSEL UNDER DELAWARE LAW

Sep 20 2018

By Holly Hatfield and Dean Brazier

In The Cirillo Family Trust v. Aram Moezinia, Lewis Tepper, Mark Walter, and DAVA Pharmaceuticals, Inc., C.A. No. 10116-CB (Del. Ch. Jul. 11, 2018), the Delaware Chancery Court granted the defendants’ motion dismissing certain claims arising from the 2014 merger between DAVA Pharmaceuticals, Inc. (“DAVA”) and an affiliate of Endo Pharmaceuticals, Inc. (such affiliate, “Endo”). The Court held that Section 205 of the Delaware General Corporation Law (the “DGCL”) validated deficiencies in the written consents to the merger (the “Written Consents”) and a director’s reasonable, good faith reliance on the advice of legal counsel hired for specific expertise can exculpate the director for a fiduciary duty breach. The Court also granted part of the plaintiff’s motion to amend the complaint to add a claim against certain directors in their capacities as officers of DAVA.

Court of Chancery Dismisses Fraud Claim for Alleged Extra-Contractual Misrepresentations Based on Anti-Reliance Clause

Aug 31 2018

By: Claire S. White and Rachel P. Worth

In ChyronHego Corporation, et al., v. Cliff Wight and CFX Holdings, Inc., C.A. No. 2017-0548-SG (Del. Ch. July 31, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the plaintiffs’ claim for extra-contractual fraud on the basis that the stock purchase agreement contained an effective anti-reliance clause that precluded such claim. The Court found that the anti-reliance clause rebutted the common law fraud element of reliance on any extra-contractual representations, as described further below. At the same time, the Court dismissed the defendants’ motion to dismiss claims for fraud and breaches of express representations and warranties under the stock purchase agreement, finding that the plaintiffs had sufficiently pleaded the elements of these claims.

CHANCERY COURT EVALUATES OBJECTIVE FACTORS TO DETERMINE PARTNERS’ SUBJECTIVE BELIEFS

Apr 05 2018

By: Scott Waxman and Hillary Dawe

Dieckman v. Regency GP LP, et al. came before the Delaware Court of Chancery as a dispute over a merger between Energy Transfer Partners, L.P. (“ETP”) and Regency Energy Partners LP (“Regency”) for an exchange ratio of 0.4066 and a cash payment of $0.32 per common unit of Regency (the “Merger”).

Chancery Court Holds that Express Merger Provisions Prevail Over Alleged Extra-Contractual Misrepresentations

Sep 21 2017

By Josh Gaul and Will Smith

In Sparton Corporation v. Joseph F. O’Neil et al., Civil Action No. 12403-VCMR (Del. Ch. August 9, 2017), the Delaware Court of Chancery granted the defendants’ motion to dismiss in its entirety because the plaintiff failed to state a claim for fraud and breach of contract. Seeking extra-contractual relief from a merger agreement, the plaintiff-buyer claimed, among other losses, $1.8 million in damages caused by the sellers’ misrepresentation of the target company’s working capital. The plaintiff argued that the defendant-sellers’ alleged extra-contractual misrepresentations warranted judicial intervention despite express anti-reliance and exclusive remedy provisions in the merger agreement.

In Statutory Merger Appraisal Proceeding, Chancery Court, Using Discounted Cash Flow Analysis, Finds Fair Value of Shares to be Below Merger Transaction Price

Jul 03 2017

By Eric E. Freedman and H. Corinne Smith

In In Re Appraisal of SWS Group, Inc., C.A. No. 10554-VCG (Del. Ch. May 20, 2017), the Delaware Court of Chancery, applying discounted cash flow analysis in a statutory appraisal proceeding, determined that the fair value of the stock of SWS Group, Inc. (“SWS”) at the time of its January 2015 merger was $6.38 per share. SWS stockholders had received a mix of cash and stock worth $6.92 per share in the merger transaction. As a result, the valuation determined by the Court in the appraisal proceeding represented a significant discount from the price paid in the merger.

Chancery Court Dismisses Inseparable Fraud Claim Based on Derivative Claims That Former Shareholders Lacked Standing To Maintain

Jun 26 2017

By Scott E. Waxman and Russell E. Deutsch

In In re Massey Energy Company Derivative And Class Action Litigation, C.A. No. 5430-CB (Del. Ch. May 4, 2017), the Chancery Court dismissed both the direct class action claim for “inseparable fraud” and the derivative claim brought by the former shareholders of Massey Energy (“Massey” or the “Corporation”) against the former directors and officers of Massey for breaching their fiduciary duties by causing Massey to operate in willful disregard of safety regulations. The court dismissed the derivative claim holding that the plaintiffs were not continuous shareholders, and therefore lacked standing to bring a derivative claim after Massey merged into Alpha Natural Resources, Inc. (Alpha) in June of 2011. The court dismissed the plaintiffs’ direct claim for “inseparable fraud” claim holding that, though pled as a direct claim, it was, in fact, also a derivative claim that the plaintiffs’ lacked the standing to maintain.

Tag:Post-Merger Claims