Morris James, Where Is Delaware Corporate Litigation Going?

To begin with, it is clearly a good thing for Delaware to reject disclosure-only settlements when little value has been generated for the stockholders. Trulia is a good decision given the current legal landscape. Under it, clearly meritorious disclosure settlements still will be approved. Other cases can proceed on the merits to a pre-close injunction hearing, and may be resolved through voluntary supplemental disclosures that can benefit stockholders, or through post-close litigation where damages may be pursued. Moreover, Corwin will not affect post-close litigation where the challenged transaction is among the most scrutinized under Delaware law: deals involving a conflicted, controlling stockholder. Nor will Corwin affect post-close litigation in third-party deals where the stockholder vote was uninformed, or coerced. E.g., In re Saba Software, Inc. S’holder Litig., Cons. C.A. No. 10697-VCS (Del. Ch. Mar. 31, 2017).

Antitakeover Statutes: Nevada Considers Rejecting Revlon & Unocal

As introduced, SB 203 includes the following statements of legislative intent:

Except in the limited circumstances set forth in NRS 78.139, an exercise of the respective powers of directors or officers of a domestic corporation, including, without limitation, in circumstances involving a change or potential change in control of a corporation, is not subject to a heightened standard of review.

The standards promulgated by the Supreme Court of Delaware in Unocal Corporation v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), and their progeny have been, and are hereby, rejected by the Legislature.

via DealLawyers

Podcast with Vice Chancellor Laster

In a recent podcast, the Columbia Law School BlueSky Blog features Delaware Vice Chancellor Laster – whose appraisal decisions we have covered repeatedly – discussing the appraisal remedy. While the entire podcast is certainly worth a listen, some important topics include the history of appraisal (~1:30); when markets may depart from fair value (~5:50); how appraisal may act as a reserve price (~9:30); the discovery burden in appraisal (~14:20); interest rates and the relevance of interest (~21:30); how to determine fair value (~23:30); and the future of appraisal (~29:00).

via Columbia

Matthew D. Cain et al., The Shifting Tides of Merger Litigation (2017)

In 2015, Delaware made several important changes to its laws concerning merger litigation. These changes, which were made in response to a perception that levels of merger litigation were too high and that a substantial proportion of merger cases were not providing value, raised the bar, making it more difficult for plaintiffs to win a lawsuit challenging a merger and more difficult for plaintiffs’ counsel to collect a fee award.

We study what has happened in the courts in response to these changes. We find that the initial effect of the changes has been to decrease the volume of merger litigation, to increase the number of cases that are dismissed, and to reduce the size of attorneys’ fee awards. At the same time, we document an adaptive response by the plaintiffs’ bar in which cases are being filed in other state courts or in federal court in an effort to escape the application of the new rules.

This responsive adaptation offers important lessons about the entrepreneurial nature of merger litigation and the limited ability of the courts to reduce the potential for litigation abuse. In particular, we find that plaintiffs’ attorneys respond rationally to these changes by shifting their filing patterns, and that defendants respond in kind. We argue, however, that more expansive efforts to shut down merger litigation, such as through the use of fee-shifting bylaws, are premature and create too great a risk of foreclosing beneficial litigation. We also examine Delaware’s dilemma in maintaining a balance between the rights of managers and shareholders in this area.

株式買取請求権と取引価格

In the last couple of years, at the Chancery Court, chancellors have started moving away from the view that the court will determine fair value without regard to the merger price. Now, in certain circumstances (where the deal price is a product of a competitive or robust sales price) chancellors may consider merger price as one of the relevant factors for purposes of determining fair value.

Now this question has found its way to the Delaware Supreme Court and the parties are lining up on both sides. There are even amici! Two sets of amici have rolled up: on the one side there are law professors arguing that the court should be able to presumptively rely on merger price to determine fair value in an appraisal proceeding unless that price does not result from arm’s length bargaining (DFC Holdings – Bainbridge, et al). On the other are law professors arguing requiring a court to rely on merger price to determine fair value would run counter to the language of the statutory appraisal remedy and also not always reflect fair value (DFC Holdings – Talley, et al.

DFC Globalの件では、既に、amicus breifを紹介しておりますが、引用されているもののうち後者のamicus briefは、次のような書き出しです。こちらのbriefも錚々たる教授陣です。私は、独立当事者間の株式買取請求権の公正な価格が、取引価格に縛られないと思っているので、後者のbriefに親近感を覚えます。

Appellant urges the Court to adopt a rule of law in appraisal proceedings that presumptively requires the Court of Chancery to defer exclusively to the transaction price unless that price does not result from an arm’s-length process. Amici disagree: Doing so would be a trifecta of bad law, bad economics, and bad policy.

via Brian JM Quinn

最近のデラウェア州における企業価値算定手法について

 今日の最終講義には、様々な点で大変感銘を受けました。自分の勉強が足りないことを感じましたし、新しい示唆というものは幾らでもあるものだと感じました。最終講義の中で、最近のデラウェア州における企業価値算定手法について言及がありました。拙著『証券市場における情報開示の理論』80頁注205(弘文堂,2016)では、次の通り言及しています。

デラウェア州の裁判所は,価値評価の方法について,「金融業界で受け入れられていると一般に考えられている方法」と述べた上で,価値評価の技術革新に応じて,違った価値評価の方法を受け入れている。Weinberger v. UOP, Inc., 457 A.2d 701, 713 (Del. 1983); Global GT LP v. Golden Telecom, Inc., 993 A.2d 497, 517 (Del. Ch. 2010) (Strine, V.C.), aff’d, 11 A.3d 214 (Del. 2010) (資本コストの算定に際し,かつて衡平法裁判所が採用した歴史的なエクイティ・リスク・プレミアムではなく,長期的なエクイティ・リスク・プレミアムの期待値を採用した事例。裁判所は,専門家の新たな意見を採用することの意義について言及している).

 より詳しくは、同事件におけるTestimony of Petitioners’ Expert Witness, Paul A. Gompers, 2009 WL 8399149 (Oct. 15, 2009)をご参照下さい。

Sheppard Mullin, Delaware Supreme Court Confirms that Dilution Claims Typically Are Derivative and Are Extinguished After a Merger

Stockholder claims alleging wrongful dilution are typically considered to be derivative in nature. Several decisions out of Delaware, however, have created exceptions to this general rule allowing stockholders to sue directly (rather than derivatively on behalf of the corporation) where, for example, a controlling stockholder authorizes a “disloyal expropriation” which reduces the economic value and voting power of the non-conflicted stockholders. See, e.g., Gentile v. Rossette, 906 A.2d 91, 100 (Del. 2006); Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007); Feldman v. Cutaia, 951 A.2d. 727 (Del. 2008). In El Paso Pipeline GP Company, L.L.C. v. Brinckerhoff, No. 103, 2016, 2016 Del. LEXIS 653 (Del. Dec. 20, 2016), the Delaware Supreme Court declined to add to these exceptions and reaffirmed the general rule that dilution claims must be brought derivatively. As a result, a derivative plaintiff losses his or her standing to pursue a dilution claim if the entity is acquired through a merger.