Posts Tagged ‘Shareholder suits’

Are Securities Lawyers Stuck in a Time Warp?

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday November 21, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Phillip Goldstein of Bulldog Investors.

“[T]he fact that a federal statute has been violated and some person harmed does not automatically give rise to a private cause of action in favor of that person.”
Touche Ross & Co. v. Redington, 442 U.S. 560, 568, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979).

In June 2008, I posted a short piece on this website entitled A Different Perspective on CSX/TCI: Should Courts Reject a Private Right of Action Under Section 13(d)? In that posting, I questioned whether, after Alexander v. Sandoval, 532 U.S. 275 (2001), a private right of action existed to enforce the Williams Act, in that case, section 13(d) of the 1934 Securities and Exchange Act. It drew a grand total of zero comments.

Let’s fast forward to the lawsuit du jour. Allergan and one of its employees who was a shareholder that sold some shares while Bill Ackman was buying and before Valeant announced its intent to acquire Allergan have sued Ackman in the United States District Court for the Central District of California for allegedly violating Rule 14e-3. Judge David O. Carter concluded that Allergan did not have standing to sue Ackman but that that a selling shareholder did have standing and that there were “serious questions” that need to be decided by a jury to determine whether Ackman violated Rule 14e-3. A number of respected commentators have weighed in on the merits of the case and about a potential class action lawsuit to recoup Ackman’s “illegal” profits.

…continue reading: Are Securities Lawyers Stuck in a Time Warp?

Delaware Court Holds M&A Financial Advisor Liable For $76 Million

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday November 4, 2014 at 9:15 am
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Editor’s Note: The following post comes to us from Jason M. Halper, partner in the Securities Litigation & Regulatory Enforcement Practice Group at Orrick, Herrington & Sutcliffe LLP, and is based on an Orrick publication authored by Mr. Halper, Peter J. Rooney, and Louisa S. Irving. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On October 10, 2014, the Delaware Court of Chancery issued a decision awarding nearly $76 million in damages against a seller’s financial advisor. In an earlier March 7, 2014 opinion in the case, In re Rural/Metro Corp. Stockholders Litigation, Vice Chancellor Laster found RBC Capital Markets, LLC liable for aiding and abetting the board’s breach of fiduciary duty in connection with Rural’s 2011 sale to private equity firm Warburg Pincus for $17.25 a share, a premium of 37% over the pre-announcement market price. The recent decision reinforces lessons from the March 7 decision and provides new guidance for directors and their advisors in M&A transactions and related litigation.

…continue reading: Delaware Court Holds M&A Financial Advisor Liable For $76 Million

Ohio Federal Court Enforces Exclusive Forum Bylaw

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Friday October 3, 2014 at 9:00 am
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Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, David A. Katz, William Savitt, and Ryan A. McLeod. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In a recent decision, the U.S. District Court for the Southern District of Ohio invoked federal procedural law to enforce a board-adopted forum selection bylaw. North v. McNamara, No. 1:13-cv-833 (S.D. Ohio Sept. 19, 2014). In so ruling, the court recognized that such bylaws can promote “cost and efficiency benefits that inure to the corporation and its shareholders by streamlining litigation into a single forum.”

The litigation involves Chemed, a Delaware corporation headquartered in Cincinnati, Ohio. In August 2013, the corporation’s board adopted a bylaw selecting any state or federal court in Delaware as the exclusive forum for intracorporate litigation. Several months later, a stockholder filed a derivative suit in federal court in Delaware on behalf of the corporation challenging certain conduct dating back to 2010. Shortly thereafter, a different stockholder filed substantially similar litigation, also on behalf of the corporation, against the same defendants concerning the same conduct in Ohio federal court. Invoking the bylaw, defendants moved to transfer the case to the Delaware federal district court under the federal venue statute, essentially seeking to consolidate it with the earlier-filed Delaware federal action.

…continue reading: Ohio Federal Court Enforces Exclusive Forum Bylaw

Why Delaware Appraisal Awards Exceed the Merger Price

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 23, 2014 at 9:17 am
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Editor’s Note: The following post comes to us from Philip Richter, partner and co-head of the Mergers and Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP, and is based on a Fried Frank publication by Mr. Richter, Steven Epstein, David Shine, and Gail Weinstein. The complete publication, including footnotes, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

As has been widely noted, the number of post-merger appraisal petitions in Delaware has increased significantly in recent years, due primarily to the rise of appraisal arbitrage as a weapon of shareholder activists seeking alternative methods of influence and value creation in the M&A sphere. The phenomenon of appraisal arbitrage is to a great extent a product of the frequency with which the Delaware Chancery Court has appraised dissenting shares at “fair values” that are higher (often, far higher) than the merger consideration in the transactions from which the shareholders are dissenting. Our analysis of the post-trial appraisal decisions issued in Delaware since 2010 indicates that the court’s appraisal determinations have exceeded the merger price in all but two cases—with the appraisal determinations representing premiums over the merger price ranging from 8.5% to 149% (with an average of 61%).

…continue reading: Why Delaware Appraisal Awards Exceed the Merger Price

Delaware Court of Chancery Upholds Forum Selection Bylaw

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday September 15, 2014 at 9:04 am
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Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On September 8, 2014, Chancellor Andre G. Bouchard issued a notable decision in City of Providence v. First Citizens BancShares, Inc., upholding—as a matter of facial validity and on an “as-applied” basis at the motion to dismiss stage—a forum selection bylaw adopted by a Delaware corporation selecting another jurisdiction (North Carolina, where the company is headquartered) as the forum for intra-corporate disputes. This decision is important not only because it reaffirms the decision last year by then-Chancellor, now Chief Justice, Leo E. Strine, Jr. in Boilermakers Local 154 Retirement Fund v. Chevron Corporation, 73 A.3d 934 (Del. Ch. 2013), upholding the facial validity of forum selection bylaws, but also because it includes notable pronouncements from the current Chancellor on the application of such provisions. [1]

…continue reading: Delaware Court of Chancery Upholds Forum Selection Bylaw

The Battle Against Multiforum Stockholder Litigation

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Monday August 25, 2014 at 12:17 pm
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Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, David A. Katz, William Savitt, and Ryan A. McLeod. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here. Additional posts discussing Roberts v. TriQuint SemiConductors, Inc. are available here

Just over a year ago, the Delaware Court of Chancery upheld the facial validity of exclusive forum bylaws adopted by corporate boards as a means of rationalizing stockholder litigation. In the time since Chancery’s landmark Chevron opinion, numerous corporations have adopted exclusive forum bylaws, and courts in New York, Texas, Illinois, Louisiana, and California have enforced such bylaws against stockholders bringing duplicative lawsuits in violation of their terms. The result, as one commentator recently noted, has been to disincentivize duplicative filings and reduce the concomitant litigation “deal tax” on merging parties. Yet, despite this progress, pernicious multijurisdictional litigation persists. A recent decision from a court in Oregon (Roberts v. TriQuint SemiConductor, Inc., No. 1402-02441 (Or. Cir. Ct. Aug. 14, 2014)) illustrates the potential harm from such litigation and the importance of continued authoritative articulation of the law to ensure the efficacy of exclusive forum bylaws.

…continue reading: The Battle Against Multiforum Stockholder Litigation

Delaware Court Affirms Order Requiring Production of Privileged Documents

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday August 19, 2014 at 9:16 am
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Editor’s Note: The following post comes to us from Lewis R. Clayton, partner in the Litigation Department and co-chair of the Intellectual Property and ERISA Litigation Groups at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, the Delaware Supreme Court formally recognized the “Garner doctrine,” an exception to the attorney-client privilege, in connection with a stockholder’s demand for records under Section 220 of the Delaware General Corporation Law, and confirmed that the exception also applies to other stockholder claims. The decision may allow derivative plaintiffs to obtain certain sensitive privileged communications and attorney work-product in cases involving substantial allegations of serious fiduciary misconduct.

…continue reading: Delaware Court Affirms Order Requiring Production of Privileged Documents

Exclusive Forum Provisions: A New Item for Corporate Governance and M&A Checklists

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday July 14, 2014 at 9:19 am
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Editor’s Note: The following post comes to us from Michael O’Bryan, partner in the Corporate Department at Morrison & Foerster LLP, and is based on a Morrison & Foerster Client Alert by Mr. O’Bryan, Kevin Calia, and James Beha. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Public companies increasingly are adopting “exclusive forum” bylaws and charter provisions that require their stockholders to go to specified courts if they want to make fiduciary duty or other intra-corporate claims against the company and its directors.

Exclusive forum provisions can help companies respond to such litigation more efficiently. Following most public M&A announcements, for example, stockholders file nearly identical claims in multiple jurisdictions, raising the costs required to respond. Buyers also feel the pain, since they typically bear the costs and may even be named in some of the proceedings. Exclusive forum provisions help address the increased costs, while allowing stockholders to bring claims in the specified forum.

…continue reading: Exclusive Forum Provisions: A New Item for Corporate Governance and M&A Checklists

Delaware Court Declines to Dismiss Class Action Challenging Going-Private Transaction

Editor’s Note: Allen M. Terrell, Jr. is a director at Richards, Layton & Finger. This post is based on a Richards, Layton & Finger publication, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Hamilton Partners, L.P. v. Highland Capital Management, L.P., C.A. No. 6547-VCN, 2014 WL 1813340 (Del. Ch. May 7, 2014), the Court of Chancery, by Vice Chancellor Noble, in connection with a challenge to a going-private transaction whereby American HomePatient, Inc. (“AHP”) was acquired by an affiliate of one of its stockholders, Highland Capital Management, L.P. (“Highland”), refused to dismiss breach of fiduciary duty claims against Highland. The Court held that, for purposes of defendants’ motion to dismiss, plaintiff alleged facts sufficient to support an inference that Highland, which owned 48% of AHP’s stock and 82% of AHP’s debt, was the controlling stockholder of AHP and that the merger was not entirely fair.

…continue reading: Delaware Court Declines to Dismiss Class Action Challenging Going-Private Transaction

California Superior Court Enforces Exclusive Forum Bylaw

Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Glen T. Schleyer, Joseph B. Frumkin, John L. Hardiman, and Alexandra D. Korry. The complete publication, including footnotes and annex, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Following the Delaware Court of Chancery’s decision in July 2013 upholding the validity of exclusive forum bylaws, a number of corporations, including over two dozen S&P 500 companies, amended their bylaws to include these provisions, and the provisions were commonly included in the charters or bylaws of companies in initial public offerings. Many public companies, however, determined to take a wait-and-see approach, in order to assess whether non-Delaware courts would enforce the bylaw and whether companies that adopted the bylaw received negative investor feedback in the 2014 proxy season or otherwise.

…continue reading: California Superior Court Enforces Exclusive Forum Bylaw

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