Topic: DE Case Law

Delaware Court Again Finds Conflicted Transaction Safe Harbors Not So Safe

Limited partnerships and limited liability companies, as creatures of contract, often have in their ‎governing agreements safe harbor provisions for approval of conflicted transactions with ‎interested parties. These are designed to establish as a matter of contract that the actions taken ‎by the general partner or managers met the required standard of conduct.

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Delaware Recognizes Reality of Merger Negotiations in Upholding Application of Business ‎Judgment Rule

In In re Towers Watson & Co. Stockholders Litigation, 2019 WL 3334521 (Del. Ch. July 25, 2019), the Delaware Court of Chancery applied the business judgment rule to dismiss a stockholder suit challenging the $18 billion merger of equals between Towers Watson & Co. and Willis Group despite allegations of imperfections in the merger negotiations.

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Understanding Delaware Appraisal Risk Today

Exposure to claims for appraisal can be a significant risk in merger and acquisition transactions in ‎which dissenter’s appraisal rights are available. This risk has increased in recent years as ‎aggressive investors realized the opportunities presented by appraisal arbitrage, including the high ‎rate of interest payable on appraisal awards, even for shares purchased after announcement of the ‎transaction.‎

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Delaware Court of Chancery Confirms Ability of Stockholders to Assert Third-Party Beneficiary Claims Under Merger Agreements

A common provision in merger agreements is denial of the right of non-parties to the agreement to assert third-party beneficiary claims.  The use of this provision left open the question whether stockholders of a disappearing target company could enforce contractual undertakings of the acquirer following the closing of the merger.

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Attempt to Limit Directors’ Liability for Setting Their Own Compensation is Rejected

A recent Delaware Court of Chancery decision ‎ on a challenge to Goldman Sachs directors’ ‎setting their own compensation is interesting because the court rejected the company’s attempt to ‎make an end run around current law. The stockholder-approved compensation plan included a ‎novel provision limiting the directors’ liability if they acted “in good faith.”‎

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Delaware Court of Chancery Provides Reminder of Importance of Privilege Carve-Out Provision ‎in Merger Agreement

On May 29, 2019 in Shareholder Representative Services, LLC v. RSI Holdco, LLC,‎ ‎ the ‎Delaware Court of Chancery, by giving effect to a merger agreement provision, reemphasized the ‎guidance it gave in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP ‎ that a ‎seller in a private-company merger may use its “contractual freedom” to retain the attorney-client ‎privilege for pre-closing communications by including explicit language to that effect in the ‎merger agreement.‎

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Delaware Supreme Court Reemphasizes Importance of Deal Price in Reversing Aruba ‎Appraisal Decision

On April 16, 2019, the Delaware Supreme Court, in a per curiam decision in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.,[1] reversed the Court of Chancery’s determination that the fair value of Aruba’s stock for appraisal purposes was its unaffected average share price ($17.13 per share) during the 30 days of trading before announcement of its acquisition by Hewlett Packard (H-P).

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