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Recent Delaware Corporate Law Updates

May 25, 2017

In re Saba Software, Inc. S’holder Litig.: Court of Chancery Declines to Find Stockholder Ratification under Corwin
In In re Saba Software, Inc. Stockholder Litigation, 2017 WL 1201108 (Del. Ch. Mar. 31, 2017), the Court of Chancery refused for the first time to apply the cleansing effect available under Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304 (Del. 2015), to a stockholder vote approving a merger, finding that plaintiff pled sufficient facts alleging that the stockholder vote was neither fully informed nor uncoerced.  
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Frechter v. Zier: Bylaw Requiring Supermajority Vote of Stockholders to Remove Directors Held Invalid under 8 Del. C. § 141(k)
In Frechter v. Zier, 2017 WL 345142 (Del. Ch. Jan. 24, 2017), the Court of Chancery denied defendants’ motion to dismiss plaintiff’s declaratory judgment and breach of fiduciary duty action challenging a bylaw of Nutrisystem, Inc. (“Nutrisystem” or the “Company”) that required a supermajority vote of the Company’s stockholders to remove directors.  Also granting plaintiff’s motion for summary judgment in part, the Court held that the bylaw, in requiring greater than a majority vote of the Company’s outstanding shares to remove directors, violated Section 141(k) of the Delaware General Corporation Law (the “DGCL”), which the Court determined “unambiguously confers on a majority the power to remove directors.”
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The Frederick Hsu Living Trust v. ODN Holding Corp.: The Court of Chancery Addresses the Legality and Equity of Preferred Stock Redemption     
In The Frederick Hsu Living Trust v. ODN Holding Corp., 2017 WL 1437308 (Del. Ch. Apr. 25, 2017), the Court of Chancery dismissed claims of unlawful redemption of preferred stock by ODN Holding Corporation (“ODN” or the “Company”), but denied a motion to dismiss claims that ODN’s directors and officers improperly favored the interest of the Company’s controlling stockholder in connection with the Company’s redemption of preferred stock to the detriment of the long-term interests of ODN’s stockholders.
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In re Investors Bancorp, Inc. S’holder Litig.: Stockholder Ratification of Equity Compensation Package
In In re Investors Bancorp, Inc. Stockholder Litigation, 2017 WL 1277672 (Del. Ch. Apr. 5, 2017), the Court of Chancery granted defendants’ motion to dismiss claims challenging the adoption of an equity compensation plan by the board of directors of Investors Bancorp, Inc. (“Investors Bancorp” or the “Company”).  The Court held that because the plan contained discrete limits with respect to director equity awards, the ratifying effect of approval of the plan by a fully informed stockholder vote extended to individual awards made pursuant to the plan.  
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Vento v. Curry: Preliminary Injunction to Remedy Buried Disclosure of Fees to Be Paid to Affiliate of Financial Advisor for Providing Transaction Financing
In Vento v. Curry, 2017 WL 1076725 (Del. Ch. Mar. 22, 2017), the Court of Chancery preliminarily enjoined a special meeting of stockholders of Consolidated Communications Holdings, Inc. (“Consolidated” or the “Company”) to vote on a proposed issuance of the Company’s common stock in connection with a proposed merger.  Finding information concerning the compensation to be received by the Company’s financial advisor and its affiliates in connection with providing a portion of the financing for the merger to be both material and quantifiable, the Court determined that Consolidated had failed to disclose this information “in a clear and transparent manner” to its stockholders.  
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Chicago Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC: Dispute over Post-Closing Purchase Price Adjustment Referred for Resolution to Independent Auditor
In Chicago Bridge & Iron Company N.V. v. Westinghouse Electric Company LLC, 2016 WL 7048031 (Del. Ch. Dec. 5, 2016), the Court of Chancery held, pursuant to the language of a purchase agreement between Chicago Bridge & Iron Company N.V. (“Seller” or the “Company”) and Westinghouse Electric Company LLC (“Buyer”), that a dispute over the post-closing purchase price adjustment was to be submitted to and resolved by an independent auditor.  
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IAC Search, LLC v. Conversant LLC: Fraudulent Inducement Claim Dismissed on the Basis of Anti-Reliance Provisions in Asset Purchase Agreement
In IAC Search, LLC v. Conversant LLC, 2016 WL 6995363 (Del. Ch. Nov. 30, 2016), the Court of Chancery held that certain provisions in an asset purchase agreement collectively constituted a “clear disclaimer of reliance on extra-contractual statements” and barred plaintiff’s claim that defendant had fraudulently induced plaintiff to purchase one of its subsidiaries.  
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