効率的な契約違反—Leaf Invenergy Co. v. Invenergy Renewables LLC, No. 308, 2018 (Del. May 2, 2019)

Limited Delaware case law exists on the “efficient breach” theory. A new Delaware Supreme Court ruling examines that theory and confirms it is not a bar to recovery or an avenue for modifying damages calculations. Rather, efficient breach is the legal concept that a party might find an intentional breach to be economically advantageous if the breach’s benefits exceed the damages it might owe. Efficient breach aside, the task of Delaware courts is to interpret contracts to fulfill parties’ shared expectations at time of contracting. That is a concept the Supreme Court emphasized when reversing the Court of Chancery’s nominal damages award in this case.

Plaintiff Leaf Invenergy Company invested $30 million in Invenergy Wind LLC. As part of the investment, Leaf secured a Consent Provision that prohibited Invenergy from conducting a “Material Partial Sale” without Leaf’s consent, unless Invenergy acquired Leaf’s interest at a premium, referred to as the “Target Multiple.” Several years into the investment, Invenergy closed a $1.8 billion asset sale without first obtaining Leaf’s consent and without redeeming Leaf’s interest at the Target Multiple. Leaf sued in Delaware.

The Court of Chancery determined Invenergy had breached the Consent Provision but that Leaf was not entitled to the Target Multiple. The Court reasoned that the Consent Provision was not an either-or provision, even though, until late in the litigation, both parties had understood a failure to obtain Leaf’s consent would require redemption at the Target Multiple. Instead, the Court reasoned that Leaf was entitled only to nominal damages, given the Court’s view that Invenergy likely would not have made the Material Partial Sale if it had to pay the Target Multiple and that, in any event, Leaf was no worse off with the transaction. Applying the “efficient breach” theory, the Court of Chancery imagined a hypothetical negotiation exercise in which Leaf would have to show that it would have secured additional consideration if given the opportunity to negotiate for its consent. Ultimately, the Court of Chancery ordered the parties to complete a buyout of Leaf’s interests pursuant to a put-call provision in the operative agreement, which Invenergy exercised during the suit.

On appeal, the Supreme Court reversed, explaining that the Consent Provision was an either-or structure requiring Leaf’s consent or payment, as evidenced by the parties’ own longstanding shared interpretation. The Supreme Court also explained the trial court’s misapplication of the efficient breach theory. Centrally, damages are an issue of contractual expectations. Here, the parties’ expectations were that, for a Material Partial Sale to close, Leaf either would give consent or be redeemed at the Target Multiple. Since Leaf did not give its consent, the appropriate expectation damages were receiving the Target Multiple. Accordingly, the Supreme Court reversed the nominal damages award, substituting an award of the Target Multiple, conditioned on Leaf surrendering its membership interests.

 効率的な契約違反に興味がある方で、この判例の研究をしようと思う研究者は、いらっしゃいませんかね。効率的な契約違反についての理論的な論文は、大掛かりなので難しいとしても、どのような点が現実の事案で問題となったのかを法と経済学の観点から(どの程度、裁判官が法と経済学の議論を理解しているのかを含めて)分析すれば、面白いように思えます。

Regulation S-XのRules 3-05及び Article 11の改正提案

The Securities and Exchange Commission proposed amendments to the financial disclosure requirements in Rules 3-05, 3-14, and Article 11 of Regulation S-X, as well as related rules and forms, for financial statements of businesses acquired or to be acquired and for business dispositions. The Commission also proposed new Rule 6-11 of Regulation S-X and amendments to Form N-14 for financial reporting of acquisitions involving investment companies.

When a registrant acquires a significant business, other than a real estate operation, Rule 3-05 of Regulation S-X generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of that business. The number of years of financial information that must be provided depends on the relative significance of the acquisition to the registrant. Similarly, Rule 3-14 of Regulation S-X addresses the unique nature of real estate operations and requires a registrant that has acquired a significant real estate operation to file financial statements with respect to such acquired operation.

 わが国で米国証券取引委員会への登録が強制されるのは、様式F–4による組織再編に関するものだというワーキング・ペーパーを書いたことがありますが、それとの関係で、今回の規則提案は、実務に影響を与えるように思えます。

株式買取請求権と株価——Verition Partners v. Aruba Networks, 2019 Del. LEXIS 197 (Del. Apr. 16, 2019)

In this statutory appraisal case, the Court of Chancery found that the fair value of Aruba Networks, Inc., as defined by 8 Del. C. § 262, was $17.13 per share, which was the thirty-day average market price at which its shares traded before the media reported news of the transaction that gave rise to the appellants’ appraisal rights. … Because the Court of Chancery’s decision to use Aruba’s stock price instead of the deal price minus synergies was rooted in an erroneous factual finding that lacked record support, we answer that in the positive and reverse the Court of Chancery’s judgment. On remand, the Court of Chancery shall enter a final judgment for the petitioners awarding them $19.10 per share, which reflects the deal price minus the portion of synergies left with the seller as estimated by the respondent in this case, Aruba. …

Likewise, assuming an efficient market, the unaffected market price and that price as adjusted upward by a competitive bidding process leading to a sale of the entire company was likely to be strong evidence of fair value. By asserting that Dell and DFC “indicate[] that Aruba’s unaffected market price is entitled to substantial weight,” the Vice Chancellor seemed to suggest that this Court signaled in both cases that trading prices should be treated as exclusive indicators of fair value. However, Dell and DFC did not imply that the market price of a stock was necessarily the best estimate of the stock’s so-called fundamental value at any particular time. Rather, they did recognize that when a market was informationally efficient in the sense that “the market’s digestion and assessment of all publicly available information concerning [the Company] [is] quickly impounded into the Company’s stock price,” the market price is likely to be more informative of fundamental value. In fact, Dell’s references to market efficiency focused on informational efficiency—the idea that markets quickly reflect publicly available information and can be a proxy for fair value—not the idea that an informationally efficient market price invariably reflects the company’s fair value in an appraisal or fundamental value in economic terms. Nonetheless, to the extent the Court of Chancery read DFC and Dell as reaffirming the traditional Delaware view, which is accepted in corporate finance, that the price a stock trades at in an efficient market is an important indicator of its economic value that should be given weight, it was correct. And to the extent that the Court of Chancery also read DFC and Dell as reaffirming the view that when that market price is further informed by the efforts of arm’s length buyers of the entire company to learn more through due diligence, involving confidential non-public information, and with the keener incentives of someone considering taking the non-diversifiable risk of buying the entire entity, the price that results from that process is even more likely to be indicative of so-called fundamental value, it was correct. …

Under the semi-strong form of the efficient capital markets hypothesis, the unaffected market price is not assumed to factor in nonpublic information. In this case, however, HP had signed a confidentiality agreement, done exclusive due diligence, gotten access to material nonpublic information, and had a much sharper incentive to engage in price discovery than an ordinary trader because it was seeking to acquire all shares. Moreover, its information base was more current as of the time of the deal than the trading price used by the Vice Chancellor. Compounding these issues was the reality that Aruba was set to release strong earnings that HP knew about in the final negotiations, but that the market did not. As previously noted, Aruba’s stock price jumped 9.7% once those earnings were finally reported to the public. None of these issues were illuminated in the traditional way, and none of them were discussed by the Court of Chancery in a reasoned way in giving exclusive weight to a prior trading price that was $7.54 below what HP agreed to pay, and well below what Aruba had previously argued was fair value. (footnotes omitted)

via Steve Hecht, FT, Opinion, DealLawyers, Alison Frankel, Bloomberg Law, Matt Levine, The Chancery Daily, S&C, Potter Anderson, Morris James, CW&T, Ann Lipton, Baker Botts, PLC, Ropes & Gray, WSG&R, WF&G, Fried Frank, PWRW&G, Francis G.X. Pileggi

「草野耕一最高裁判事就任記者会見の概要」(2019年2月13日)

【記者】草野判事はこれまで企業や経済に関わる仕事をされてきたと思いますけれども,そういった経験を最高裁判事の職務にどう生かしていきたいとお考えでしょうか。

【判事】おそらく2点申し上げることができるかと思います。1点目は,企業の世界というのは,いかにパイを大きくするかということが,いかにパイを公平に分配するかという問題と同等かそれ以上に重要な場面が多くございます。最高裁判事としても,そういう2つの面,すなわち,できるだけ分配するパイを大きなものとするということと,それを公平に分配することという2つのことを考えていくという点については,これまでの経験が役立つと思います。それから,もう1点,技術的な問題で恐縮ですけれども,経済の世界というのは,法律あるいは法解釈を変えることによって経済の仕組みが変わるという面がございます。それは程度の差はあれ,あらゆる法理論にいえることです。法解釈を変えるとどのようにそれが社会に影響を与えるのか,ということを帰納的に考えてあるべき法律論を考察するという思考方法,これをこれまでの経験をいかして今後とも使っていきたいと考えた次第であります。

Lorenzo v. Securities and Exchange Commission, 587 U.S. —, 2019 WL 1369839 (Mar. 27, 2019)

In this case, we consider whether those who do not ‘make’ statements (as Janus defined ‘make’), but who disseminate false or misleading statements to potential investors with the intent to defraud, can be found to have violated the other parts of Rule 10b–5, subsections (a) and (c), as well as related provisions of the securities laws, §10(b) of the Securities Exchange Act of 1934, 48Stat. 891, as amended, 15 U.S.C. §78j(b), and §17(a)(1) of the Securities Act of 1933, 48Stat. 84–85, as amended, 15 U.S.C. §77q(a)(1). We believe that they can.

  • Kavanaugh裁判官は、下級審の判決に参加しているため不参加。6対2で、原審を維持。

via Lyle Roberts, Kevin M. LaCroix, Sheppard Mullin, SCOTUSblog, Oyez, Fried Frank, Reuters, Cleary Gottlieb, Ropes & Gray, WSJ, Skadden, Willkie Farr & Gallagher, S&C, GD&C

Barbara A. Bliss et al., Negative Activism, 97 Washington University Law Review (forthcoming)

  • Barbara A. Bliss et al., Negative Activism, 97 Washington University Law Review (forthcoming)

Shareholder activism has become one of the most important and widely studied topics in law and finance. To date, popular and academic accounts have focused on what we call “positive activism,” where activists seek to profit from positive changes in the share prices of targeted firms. In this Article, we undertake the first comprehensive study of positive activism’s mirror image, which we term “negative activism.” Whereas positive activists focus on increasing share prices, negative activists take short positions to profit from decreasing share prices.

via Harvard

Wall St. J., Judge Threatens PG&E Dividend (Apr. 1, 2019)

A federal judge is threatening to prevent PG&E Corp. PCG 3.19% from resuming dividend payments to shareholders until it reduces its role in sparking California wildfires, an action with little precedent that could have big repercussions for other companies put on probation.

William Alsup, a U.S. district court judge in Northern California, began overseeing PG&E’s probation after the utility company was convicted of safety-related violations following a natural-gas explosion that killed eight people in 2010. …

The company, which sought chapter 11 bankruptcy protection in January, pushed back, responding that such an imposition could spook investors and limit its access to capital after it restructures in court. It emphasized that it has taken steps to improve its vegetation management practices in recent years and will continue to do so. …

An avid hiker whose California nature photographs hang in the federal courthouse in San Francisco, Judge Alsup has become a vocal critic of PG&E’s wildfire response.

統計的有意

Let’s be clear about what must stop: we should never conclude there is ‘no difference’ or ‘no association’ just because a P value is larger than a threshold such as 0.05 or, equivalently, because a confidence interval includes zero. Neither should we conclude that two studies conflict because one had a statistically significant result and the other did not. These errors waste research efforts and misinform policy decisions. …

These and similar errors are widespread. Surveys of hundreds of articles have found that statistically non-significant results are interpreted as indicating ‘no difference’ or ‘no effect’ in around half (see ‘Wrong interpretations’ and Supplementary Information).

See also Supplementary Information, American Statistical Association, NPR

デラウェア州会社法の改正案(2019年)

Richards, Layton & Finger, 2019 Proposed Amendments to the General Corporation Law of the State of Delaware (March 27, 2019)

Appraisal Rights. The 2019 Amendments make several technical changes to Section 262(d), which sets forth the provisions for notices to stockholders in circumstances where they are entitled to appraisal rights, to clarify such notice provisions and conform them to amended Section 232(a). The amendments to Section 262(d) will permit a corporation to deliver a notice of appraisal rights by courier or electronic mail (in addition to by U.S. mail). In addition, Section 262(d) is being amended to permit stockholders to deliver demands for appraisal by electronic transmission. …

via Proposed Amendments