Recent Delaware Corporate Law Updates
March 11, 2013
Publication| Corporate Transactions| Corporate & Chancery Litigation
Kallick v. SandRidge Energy, Inc.: Preliminary Injunction Issued for Board’s Failure to Approve Insurgent Slate for Purposes of Credit Agreement
In Kallick v. SandRidge Energy, Inc., C.A. No. 8182-CS (Del. Ch. Mar. 8, 2013), Chancellor Strine of the Court of Chancery enjoined the board of directors of SandRidge Energy, Inc. (the “Company”) from soliciting consent revocations in connection with the consent solicitation launched by a stockholder to install its own slate of directors on the Company’s board, until the incumbent board of the Company approves the members of the opposing slate for purposes of a change in control provision in the Company’s credit agreement.
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Meso Scale Diagnostics, LLC, v. Roche Diagnostics GMBH: Reverse Triangular Merger Did Not Result in an Assignment by Operation of Law
In Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH, 2013 WL 655021 (Del. Ch. Feb. 22, 2013), Vice Chancellor Parsons of the Court of Chancery, ruling on a motion for summary judgment, held that a reverse triangular merger did not constitute an assignment by operation of law on the part of the surviving corporation. This ruling clarified a question left open in an earlier ruling on a motion to dismiss in the same case, 2011 WL 1348438 (Del. Ch. Apr. 8, 2011).
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In re Novell, Inc. Shareholder Litigation: Allegations that Board Treated Bidders in Materially Different Manner Stated Claim that Board Acted in Bad Faith
In In re Novell, Inc. Shareholder Litigation, 2013 WL 322560 (Del. Ch. Jan. 3, 2013), Vice Chancellor Noble of the Court of Chancery declined to dismiss breach of fiduciary duty claims against the board of directors (the “Board”) of Novell, Inc. (“Novell” or the “Company”), concluding that the plaintiffs’ allegations that the Board had treated a serious bidder in a materially different manner than Novell’s eventual acquiror supported a reasonable inference that the Board had acted in bad faith.
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In re BJ’s Wholesale Club Shareholders Litigation: Court of Chancery Dismisses Claim That Directors Breached Revlon Duties
In In re BJ’s Wholesale Club Shareholders Litigation, 2013 WL 396202 (Del.Ch. Jan. 31, 2013), Vice Chancellor Noble of the Court of Chancery dismissed claims that the board of directors (the “Board”) of BJ’s Wholesale Club, Inc. (“BJ’s”) breached its fiduciary duties in a going-private transaction by consciously disregarding its so-called Revlon duties, and that acquirors Leonard Green & Partners, L.P. (“LGP”) and CVC Capital Partners (“CVC”) (together, the “Buyout Group”) aided and abetted those breaches. In dismissing the claims of former stockholder plaintiffs (the “Plaintiffs”), the Court reiterated the difficulty of adequately pleading a duty of loyalty claim where disinterested and independent directors, with the assistance of independent financial and legal advisors, actively solicit interest from other bidders and establish procedural safeguards and where no other topping bids emerge after a lengthy public sales process.
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Metropolitan Life Insurance Company v. Tremont Group Holdings, Inc.: Plaintiff Did Not Transform Derivative Claims into Direct Claims by Opting Out of Federal Settlement
In Metropolitan Life Insurance Company v. Tremont Group Holdings, Inc., 2012 WL 6632681 (Del. Ch. Dec. 20, 2012), Vice Chancellor Parsons of the Court of Chancery further clarified Delaware law with respect to the distinction between direct and derivative claims in litigation involving Delaware limited partnerships. Plaintiffs, each a limited partner in a Delaware limited partnership which invested in a related fund that, in turn, heavily invested in Bernie Madoff’s now-infamous Ponzi scheme, asserted numerous direct and derivative claims against the limited partnership, its general partner and numerous current and former officers, directors and managers of the parent entities. The defendants moved to dismiss the complaint on various grounds, including that claims for breach of fiduciary duty and unjust enrichment, styled as direct claims, were derivative in nature and thus barred by a prior settlement of Madoff-related individual, class and derivative claims brought against the defendants in an action in the United States District Court for the Southern District of New York (the “Settlement”).
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Court of Chancery Provides Guidance Regarding “Don’t Ask, Don’t Waive” Provisions of Standstill Agreements
In two recent bench rulings in the preliminary injunction context, the Court of Chancery addressed “don’t ask, don’t waive” provisions of standstill agreements in connection with a target company’s auction process. In In re Complete Genomics, Inc. Shareholder Litigation, C.A. No. 7888-VCL (Del. Ch. Nov. 27, 2012), Vice Chancellor Laster questioned the validity under Delaware law of a “don’t ask, don’t waive” provision prohibiting private requests for waiver of a standstill agreement, and enjoined enforcement of the provision in that case. Several weeks later, in In re Ancestry.com Inc. Shareholder Litigation, C.A. No. 7988-CS (Del. Ch. December 17, 2012), Chancellor Strine stated that Delaware has no per se rule against “don’t ask, don’t waive” provisions, but made clear that such provisions will be subject to close scrutiny. Going forward, “don’t ask, don’t waive” provisions will be closely scrutinized on a case-by-case basis.
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Dent v. Ramtron: Disclosure of Management Projections Not Required Where Such Disclosure Would Be Merely Consistent With Other Information in Proxy Statement
In a bench ruling in Dent v. Ramtron International Corporation, C.A. No. 7950-VCP (Del. Ch. Nov. 19, 2012), Vice Chancellor Parsons of the Court of Chancery declined to preliminarily enjoin a stockholder vote on a proposed merger between Cypress Semiconductor Corporation (“Cypress”) and Ramtron International Corporation (“Ramtron” or the “Company”). The Court found that the plaintiff had not demonstrated a reasonable likelihood of success with respect to his claim that the Ramtron board of directors (the “Board”) was required, but failed, to disclose financial projections prepared by management upon which the Board’s financial advisor relied.
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South v. Baker: Court of Chancery Dismisses Caremark Claim with Prejudice to Named Plaintiffs Only
In South v. Baker, 2012 WL 4372538 (Del. Ch. Sept. 25, 2012), Vice Chancellor Laster of the Court of Chancery dismissed a derivative claim for breach of fiduciary duty based on the Caremark theory of liability, finding that because the plaintiffs failed adequately to represent the company, dismissal of their complaint would be with prejudice to the named plaintiffs only and would not preclude the litigation efforts of other stockholders.
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