Salladay v. Lev, 2020 Del. Ch. LEXIS 78, 2020 WL 954032 (Del. Ch. Feb. 27, 2020) (Glasscock, V.C.)

  • Salladay v. Lev, 2020 Del. Ch. LEXIS 78, 2020 WL 954032 (Del. Ch. Feb. 27, 2020) (Glasscock, V.C.)

The Delaware Court of Chancery recently confirmed in Salladay v. Lev that conditioning a conflicted (but non-controller) transaction upon approval by a fully empowered, disinterested and independent special committee can restore the business judgment standard of review for the transaction (rather than the more burdensome entire fairness standard that would otherwise apply). However, the court (in an opinion by Vice Chancellor Glasscock) found that such special committee “cleansing” works only if the special committee protections are put in place prior to the commencement of discussions about what might constitute an acceptable price. In Salladay, the court held that the company chairman’s discussions with the acquirer regarding price created a price collar before the special committee was formed that set the tone for future negotiations, and therefore, the special committee’s approval of the transaction did not restore the business judgment standard of review.

via Cooley, Potter Anderson, Morris James, GD&C, S&C

Fernan Restrepo, Judicial Deference, Procedural Protections, and Deal Outcomes in Freezeout Transactions: Evidence from the Effect of MFW

This work next explores the effect of MFW on the gains of the target shareholders, as measured by the premium over market prices, the cumulative abnormal returns around the announcement of the transaction, and the change from the buyer’s first offer to the final offer. This part of the analysis considers two hypotheses. The first hypothesis predicts that the gains of the target should be higher after MFW because shareholder voting acts as a check against negligent or captured boards, and even if boards discharged appropriately their fiduciary duties, the target shareholders can still use the threat of a veto to push acquirers to raise their offer (Subramanian, 2005, 15; Edelman and Thomas, 2015, 468; Jiang, Li, and Mei, 2016). As a result, the fact that MFW effectively incentivized MOM conditions should lead to an upward pressure on deal prices. The second hypothesis suggests, in contrast, that the target gains should remain similar after MFW because freezoeuts were already subject to significant scrutiny before 2013, and judicial scrutiny appears to be an effective substitute for procedural protections (Subramanian, 2007; Restrepo, 2013; Restrepo and Subramanian, 2015). As discussed in Section 4, the results generally support this hypothesis.


Francis Pileggi writes:

A recent Delaware Supreme Court decision, in a one-page Order, affirmed a decision by the Court of Chancery that appears to have been the first application of a deferential standard announced by Delaware’s high court in the case of Kahn v. M & F Worldwide Corp., Del. Supr., No. 334, 2013 (March 14, 2014), highlighted on these pages. The one-page en banc Order of affirmance was entered in the matter of Swomley v. Schlecht, et al., [SynQor], No. 180, 2015, Order (Del. Nov. 19, 2015).

Kahn v. M&F Worldwide Corp., 2014 Del. LEXIS 115 (Del. 2014)

Kahn v. M&F Worldwide Corp.判決は,2014年3月14日に下された,MacAndrews & ForbesによるMFWの少数株主排除の最高裁判決です。これによって,2013年5月19日に下された,衡平法裁判所のIn re MFW Shareholders Litigation, 67 A.3d 496 (Del. Ch. 2013)が維持されました1


〔2014年3月19日追記〕M&A Law Prof Blogに次の指摘があります。参考になると思います。

But here’s a wrinkle…footnote 14. In footnote 14, the Supreme Court notes that MFW could not have decided on the pleadings and would have survived a motion to dismiss even under the new standard. The pleadings, the court noted were sufficient to require discovery on all the new prerequisiting in the application of the standard…

Ultimately we’ll see to what degree footnote 14 matters. But, it does seem a little disconcerting that Strine’s project to provide a pathway to early dismissal of these kinds of cases might just move the locus of the argument to the functioning of the special committee.

Sure, that’s obviously better, but it’s not yet clear that MFW and footnote 14 will dramatically reduce incentives to bring these cases. Perhaps we will just be battling the same fight on new ground. Of course, the Chancery Court is likely to want to find ways to rule on the pleadings and my guess is that now that Chief Justice Strine is in a place to influence how the MFW standard is going to roll out that he won’t be looking to increase incentives for plaintiffs to bring these cases.


The Verified Consolidated Class Action Complaint would have survived a motion to dismiss under this new standard. First, the complaint alleged that Perelman’s offer “value[d] the company at just four times” MFW’s profits per share and “five times 2010 pre-tax cash flow,” and that these ratios were “well below” those calculated for recent similar transactions. Second, the complaint alleged that the final Merger price was two dollars per share lower than the trading price only about two months earlier. Third, the complaint alleged particularized facts indicating that MWF’s share price was depressed at the times of Perelman’s offer and the Merger announcement due to short-term factors such as MFW’s acquisition of other entities and Standard & Poor’s downgrading of the United States’ creditworthiness. Fourth, the complaint alleged that commentators viewed both Perelman’s initial \$24 per share offer and the final \$25 per share Merger price as being surprisingly low. These allegations about the sufficiency of the price call into question the adequacy of the Special Committee’s negotiations, thereby necessitating discovery on all of the new prerequisites to the application of the business judgment rule.

via M&A Law Prof Blog

  1. 原審判決については,例えば,金融商品取引法ブログに「MFW判決(1)」および「MFW判決(2)」という記事があります。 []


Kevin F. Brady氏およびFrancis G.X. Pileggi氏によるまとめです。次の判例が紹介されています。

  • In Re MFW Shareholder Litigation, C.A. No. 6566-CS (Del. Ch. May 29, 2013)

  • Boilermakers Local 154 Retirement Fund v. Chevron Corp., C.A. No. 7220-CS and ICLUB Investment Partnership v. Fedex Corp., C.A. No. 7238-CS (Del. Ch. June 25, 2013)

  • Gerber v. Enterprise Products Holdings, LLC, Del. Supr., No. 46, 2012 (June 10, 2013)

via ABA

In re MFW Shareholders Litigation, 67 A.3d 496 (Del. Ch. 2013)

デラウェア州衡平法裁判所のStrine首席裁判官が,2013年5月29日のIn re MFW Shareholders Litigation, 67 A.3d 496 (Del. Ch. 2013) (Strine, C.)において,合併を用いた審査基準で,business judgment ruleを用いるための次の6つの条件を示しました。

(i) the controller conditions the procession of the transaction on the approval of both a special committee and a majority of the minority stockholders, (ii) the special committee is independent, (iii) the special committee is empowered to freely select its own advisors and to say no definitively, (iv) the special committee meets its duty of care, (v) the vote of the minority is informed, and (vi) there is no coercion of the minority.


via The CLS Blue Sky Blog, Delaware Business Litigation Report,,, M&A Law Prof Blog, DP&W, RL&F, Delaware Corporate & Commercial Litigation Blog, ST&B, PWRWG, S&C, L&W, WSGR, SASMF