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07/07/20

[UPDATED] Oracle – Aiding & Abetting

The Delaware Court of Chancery, in In re Oracle Corp. Derivative Litigation, C.A. No. 2017-0337-SG (consol.), memo. op. (Del. Ch. June 22, 2020), dismissed claims alleging that officers of an acquisition target aided and abetted breaches of duty by the acquirer’s directors and officers by failing to disclose information suggesting the acquirer’s deal process was tainted by self-interest, finding that the information was available to the acquirer’s board before the transaction closed.

NEW:  Frank Reynolds discusses the decision in Chancery nixes aiding and abetting liability for execs accused of helping set inflated price for NetSuite.

Shearman & Sterling discusses the decision in Delaware Court Of Chancery Grants Motion To Dismiss Holding That Fiduciaries Of Acquired Entity Did Not Aid And Abet Alleged Fiduciary Breaches By Acquirer.

$$$ Law360 discusses the decision in NetSuite Execs Escape Suit Over $9.3B Oracle Merger. 

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07/06/20

[UPDATED] Dell Class V – Coercion

The Delaware Court of Chancery, in In re Dell Technologies, Inc. Class V Stockholders Litigation, C.A. No. 2018-0816-JTL (consol.), memo. op. (Del. Ch. June 11, 2020), declined to dismiss breach of fiduciary duty claims challenging a transaction purportedly structured in accordance with M&F Worldwide, finding that the special committee formed to consider the transaction was bypassed, and that an aspect of the transaction what would require conversion of shares was coercive.

NEW:  Ann Lipton discusses the decision in Judicial Primacy.

NEW: Freshfields discusses the decision in Chancery Court Denies Motion to Dismiss and Application of MFW Safe Harbor.

Pepper Hamilton discusses the decision in MFW Pitfalls: Bypassing the Special Committee and Pursuing Detrimental Alternatives.

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07/03/20

[UPDATED] Towers Watson: Fraud on the Board

The Delaware Supreme Court, in City of Fort Myers General Employees’ Pension Fund, et al. v. John J. Haley, et al. [Towers Watson], No. 368, 2019, opinion (Del. June 30, 2020), reversed the Court of Chancery’s dismissal of breach of fiduciary duty claims, finding that stockholder plaintiffs adequately pled that target company’s CEO, who the board permitted to negotiate the terms of a merger, failed to disclose a proposed compensation plan that he would receive as CEO of the acquirer that could provide up to five times the compensation that he would receive under target’s compensation scheme.

NEW: Stinson discusses the decision in Director’s Undisclosed Conflict Prevents Application of Business Judgment Rule in Acquisition.

DealLawyers.com discusses the decision at Conflicts of Interest: Undisclosed Comp Discussions Rebut BJR.

[UPDATED] ESG

NEW:  Wachtell discusses proposed Department of Labor rules that would limit Employee Retirement Income Security Act-governed investment based on Environmental, Social, & Governance factors rather than solely on stockholder returns, noting that ESG funds have demonstrated superior performance, and speculating that the proposed rules would increase demand for ESG-related data to support investment decisions in DOL Proposes New Rules Regulating ESG Investments.

Tulane Law’s Professor Ann Lipton notes that the Department of Labor approved inclusion of private equity investments in 401(k) plans and proposed new rules that discourage Employee Retirement Income Security Act-regulated retirement plan investment based on Environmental, Social, & Governance factors by requiring that investments be based “solely on pecuniary factors that have a material effect on the return and risk of an investment” in Private Equity In, ESG Out.

FTI Consulting reports, based on communications with companies and investors, that attempts to address “Social” considerations under an Environmental, Social, & Governance framework have contributed to business risk and caused reputational damage in Time to Rethink the S in ESG.

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[UPDATED] M&A and Antitrust

NEW:  Wachtell discusses the Federal Trade Commission’s updates to guidance on antitrust implications of vertical mergers in U.S. Antitrust Agencies Issue New Vertical Merger Guidelines.

Perkins Coie discusses vague terms in antitrust covenants, noting increases in lawsuits following terminated mergers, in “Reasonableness” Is in the Eye of the Beholder: Vague Contracts Clauses Invite Litigation.

Sidley discusses increasing scrutiny of non-compete provisions in acquisition agreements by antitrust authorities in FTC Targets M&A Agreements in Continued Campaign Against Noncompete and No-Poach Clauses.

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[UPDATED] Stockholder Meetings

NEW:  Soundboard Governance discusses use of remote, virtual platforms to conduct stockholder meetings following recent increases in use in Key Takeaways and Best Practices from Virtual Shareholders Meetings in 2020.

Vorys discusses the use of virtual board meetings, their management, and how mitigate  additional risks they pose in Virtual board meetings and risk mitigation during Covid-19.

Broadridge provides statistics on virtual stockholder meetings it hosted between January 1 and May 22, 2020, representing a more than 6X increase over the same period in 2019, at Broadridge Virtual Shareholder Meetings (“VSMs”): Preliminary Statistics.

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[UPDATED] Board Diversity

NEW:  Keith Bishop discusses a bill introduced in the California legislature that would require domestic and foreign publicly held corporations having their principal place of business in California to include individuals who are African-American, Hispanic, or Native American on their board of directors in Bill Would Impose Minimum Number Of “Directors From An Underrepresented Community”.

The New York City Office of the Comptroller discussed progress of its Boardroom Accountability program in obtaining commitments from companies with which it does business to engage in search processes that ensure that women and people of color are considered for executive and board positions in NYC Comptroller’s Boardroom Accountability 3.0 Results.

Shearman & Sterling reports that a recent amendment to Washington State corporation law require that public companies have a “gender-diverse board” by January 1, 2022 or provide board diversity disclosures in Washington State Becomes Next to Mandate Gender Diversity on Boards.

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07/02/20

[UPDATED] Disclosures

NEW:  Cooley discusses recent research regarding company disclosures regarding business impact of the coronavirus pandemic in Study looks at COVID-19 disclosure.

Reuters reports that a study of corporate disclosures on management of social and environmental risk required under the European Union’s 2018 Non-Financial Reporting Directive revealed “big gaps between many companies’ words and action,” in Sustainability disclosures by European companies generally poor: study.

ESG Performance and Disclosure: A Cross-Country Analysis examines the relationship between ESG factors, disclosure, and financial performance across countries with varying policies imposing ESG disclosure requirements, finding correlation between quantity of disclosures and quality of data, and no relationship between ESG and risk-adjusted returns, but a small effect on volatility.

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[UPDATED] Mergers & Acquisitions

NEW:  Davies Ward Phillips & Vineberg discusses Canadian public M&A activity from 2012-2019, assessing the impact of May 2016 changes to Canadian securities regulations governing takeover bids that increased the power of target boards in The Hostile Bid Is Dead. Long Live the Hostile Bid?

Reuters reports that M&A activity dropped to the lowest level in a decade, but cite accounts that activity may be gradually increasing in Coronavirus strikes down global M&A as companies keep their distance.

Freshfields discusses the potential long-term impact of the coronavirus pandemic on mergers and acquisitions in Beyond the pandemic: the future of M&A.

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[UPDATED] MAE/MAC Clauses

NEW:  Vinson & Elkins discusses current disputes involving Material Adverse Change / Material Adverse Effect clauses, force majeure clauses, and other grounds asserted for terminating or renegotiating contracts in the wake of the coronavirus pandemic in 6 Things To Know About Handling Contract Disputes In The COVID-19 Era.

Williams Mullen discusses recent lawsuits disputing acquirer’s entitlement to terminate mergers by invoking the coronavirus pandemic as having triggered material adverse effect clauses in MAEs and COVID-19: The Latest on Case Law.

Vinson & Elkins notes an anticipated increase in attempts to renegotiate or terminate transactions due to the economic effects of coronavirus, providing an overview of  Material Adverse Change / Material Adverse Effect clauses and Delaware case law interpreting such clauses, in Material Adverse Effect Clauses In An Economic Downdraft.

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06/30/20

[UPDATED] Delaware Courts

The Delaware Court of Chancery issued a March 6, 2020 standing order, Standing Order Concerning COVID-19 Precautionary Measures, order (Del. Ch. Mar. 6, 2020), implementing procedural precautions, particularly the use of telephonic rather than live hearings, to help prevent coronavirus transmission.  On March 11, the Delaware Division of Public Health announced the first case of coronavirus infection in the State, and on March 13, the Delaware Supreme Court issued an Order Declaring a Judicial Emergency, order (Del. Mar. 13, 2020) encouraging telephonic proceedings. The Supreme Court subsequently ordered closure of the State Courthouses to the public effective March 23, and ordered an extension of the closure to June 13, 2020. In re COVID-19 Precautionary Measures, order (Del. May 14, 2020). The Courts have established a designated webpage — The Delaware Judiciary Response to Coronavirus Disease (COVID-19) — to publish the latest developments.

NEW: Fox Rothschild notes the Tenth Anniversary, in May 2020, of the creation of the Delaware Superior Court’s Complex Commercial Litigation Division, and discusses procedural and strategic considerations for litigating business disputes in the CCLD in – Adjudicating Business Disputes in Delaware’s Complex Commercial Division.

Skadden reports that Delaware Supreme Court and Court of Chancery are operational and pending corporate litigation has continued with minimal interruption, and discusses the courts’ current status and procedures in Checking In With Delaware Courts Amid the COVID-19 Crisis.

The News Journal discusses the Delaware Supreme Court’s extension of its prior order closing the state’s courthouses to the public in Delaware courts will continue to operate virtually for now.

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06/29/20

[UPDATED] 77 Charters – Remote Controller

The Delaware Court of Chancery, in 77 Charters, Inc. v. Jonathan D. Gould, et al. and Stonemar Cookeville Partners, LLC, et al., C.A. No. 2019-0127-JRS, memo. op. (Del. Ch. May 18, 2020), found individual defendant, who was neither a member nor a manager of nominal defendant LLCs, conceivably owed fiduciary duties as the controller of the LLCs’ managing entity under In re USACafes.

NEW:  Morris James discusses the decision in Corporate Opportunity Doctrine Waiver Does Not By Itself Also Constitute a Waiver of Default Fiduciary Duties under an LLC Agreement.

Francis Pileggi discusses the decision in Chancery Rules on a Controller’s Fiduciary Duty of Loyalty.

Pepper Hamilton discusses the decision in Delaware Chancery Court Sustains Breach of Fiduciary Duty Claims Against Nonparty to LLC Agreement.

06/26/20

[UPDATED] Securities Litigation

NEW: Cleary Gottlieb discusses the U.S. District Court for the District of Connecticut’s decision in Selwyn Karp v. SI Financial Group, Inc., et al., C.A. No. 19-199-MPS, order (D. Conn. Apr. 16, 2020), dismissing claims under Section 14 of the Securities Exchange Act challenging the sufficiency of disclosures in a preliminary proxy statement issued in connection with a proposed merger, where defendants declined to issue supplemental disclosures in response to plaintiff’s complaint, finding that allegedly omitted information, though helpful to investors, was insufficient to state a claim, in Rare Federal Court Decision Casts Doubt On Merger Disclosure Claims, But Will It Change Anything?

Wilson Sonsini discusses strategies for limiting securities liability in connection with initial public offerings, including direct listings and carve-outs to IPO lock-up agreements, in Carving Out IPO Protections.

[UPDATED] DLO Enterprises – Asset Sale

The Delaware Court of Chancery, in DLO Enterprises, Inc. v. Innovative Chemicals Products Group, LLC, C.A. No. 2019-0276-MTZ, letter op. (Del. Ch. June 1, 2020), finds the rule that a merger target’s attorney-client privilege regarding merger negotiations passes by statute to the surviving corporation absent an express contractual carve out does not apply in the context of an asset sale.

NEW:  McGuireWoods discusses the decision in Delaware Court Clarifies Retention of Privilege in Asset Sales.

$$$ Law360 discusses the decision in Post-Transaction Privilege Lessons From Del. M&A Opinion.

Pepper Hamilton discusses the decision in Attorney-Client Privilege Does Not Pass to the Buyer in Asset Deal.

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06/25/20

[UPDATED] ODN Holding – Redemption Rights

The Delaware Court of Chancery, in The Frederick Hsu Living Trust v. Oak Hill Capital Partners III, LP, et al. and ODN Holding Corp., C.A. No. 12108-VCL, memo. op. (Del. Ch. May 4, 2020), found a controlling stockholder engaged in unfair dealing by causing a company to accumulate cash to satisfy its redemption rights, but that its actions were entirely fair because market conditions made other deployment of cash likely useless.

NEW:  Stinson discusses the decision in Private Equity Firm Proves Strategy was Entirely Fair.

$$$ Law360 discusses the decision in Revisiting The Benefits Of An Efficient Contract Breach.

Shearman & Sterling discusses the decision in Delaware Court of Chancery Finds Controlling Investor’s Cash-Accumulation Strategy in Advance of Preferred Stock Redemption Payments Satisfied Entire Fairness.

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[UPDATED] AmerisourceBergen – Investigate Wrongdoing

The Delaware Court of Chancery, in Lebanon County Employees’ Retirement Fund v. AmerisourceBergen Corp., C.A. No. 2019-0527-JTL, memo. op. (Del. Ch. Jan. 13, 2020), found stockholders entitled to inspection of corporate books and records, relating to defendant pharmaceutical distributor’s monitoring of opioid shipments, for purposes of investigating possible wrongdoing, irrespective of whether the possible wrongdoing would support claims that were actionable or subject to indemnification. The Court certified interlocutory appeal of the prior decision in Lebanon County Employees’ Retirement Fund, et al. v. AmerisourceBergen Corp., C.A. No. 2019-0527-JTL, order (Del. Ch. Feb. 12, 2020).

NEW:  K&L Gates discusses the decision in Chancery Court Reaffirms Delaware Policy of Broad Section 220 Stockholder Inspection Rights.

Market Screener discusses the decision in AmerisourceBergen : Delaware Supreme Court Accepts Interlocutory Appeal Of Court Of Chancery Decision Granting Stockholders’ Request To Inspect Books And Records, And To Conduct A Rule 30(b)(6) Deposition In A Section 220 Action.

Kramer Levin discusses the decision in Delaware Supreme Court Accepts Interlocutory Appeal of Court of Chancery Decision Granting Stockholders’ Request to Inspect Books and Records, and to Conduct a Rule 30(b)(6) Deposition in a Section 220 Action.

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06/24/20

[UPDATED] Appraisal

NEW:  $$$ Law360 discusses the treatment of size premiums when valuing companies under recent Delaware appraisal decisions in It’s Time For Valuation Experts To Let Go Of The Size Premium.

Skadden discusses methods of valuation used in recent decisions of the Delaware Court of Chancery in statutory appraisal proceedings in Court of Chancery Continues To Rely on Market-Based Metrics in Appraisal Decisions.

Ben Lucy discusses the Delaware Supreme Court’s treatment of the Efficient Capital Markets Hypothesis and agency cost reductions for purposes of determining fair value under DFC, Dell, and Aruba, in Defining Appraisal Fair Value.

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[UPDATED] Clovis Oncology – “Mission Critical” Regulatory Compliance

The Delaware Court of Chancery, in In re Clovis Oncology, Inc. Derivative Litigation, C.A. No. 2017-0222-JRS (consol.), memo. op. (Del. Ch. Oct. 1, 2019), declined to dismiss Caremark claims where plaintiffs alleged that the board knowingly ignored red flags warning of “mission critical” regulatory compliance failure.

NEW: Orrick discusses the decision in Board Oversight of Clinical Trials During the Pendency of the COVID-19 Pandemic.

K&L Gates discusses the decision in Another “Well-Pled” Caremark Claim Survives A Motion To Dismiss: Lessons From Recent Cases On Risk Management, Compliance Systems, And Fiduciary Duties.

Cahill discusses the decision in Delaware Court Denies Another Motion to Dismiss a Caremark Claim Against Directors.

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06/23/20

[UPDATED] Ordinary Course

NEW:  Katten examines M&A agreements entered after March 1, 2020, finding “ordinary course of business” a frequently defined term, in contrast to practices before the coronavirus pandemic, and discusses exemplary definitions and the contracting parties’ intent in The Now Not So Ordinary Meaning of “Ordinary Course of Business”.

Mintz Levin discusses recent Delaware case law addressing covenants in acquisition agreements to operate companies in the ordinary course in Pre-Closing Covenants: Operating in the Ordinary Course of Business.

Anschutz – Anti-Reliance Clause

The Delaware Court of Chancery, in The Anschutz Corp., et al. v. Brown Robin Capital, LLC, et al., C.A. No. 2019-0710-JRS, memo. op. (Del. Ch. June 11, 2020), declined to dismiss buyer’s claims challenging seller’s extra-contractual representations in connection with the sale of a business, finding that they were not barred by the purchase agreement anti-reliance clause.

Frank Reynolds discusses the decision in Chancery lets investment firm press claim it was duped into buying I.T. company.

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