Justia Mergers & Acquisitions Opinion Summaries

The Eighth Circuit affirmed the district court's dismissal of a complaint brought by plaintiff against Employers Mutual and Defendant Kelley, asserting a claim for breach of fiduciary duty. Plaintiff was a minority shareholder of EMC, a spin-off from Employers Mutual. Defendant Kelley was the CEO and director of both EMCI and Employers Mutual. Plaintiff alleges that Employers Mutual structured EMCI as a shell company, preventing it from becoming a valuable company or acting independently from Employers Mutual. Plaintiff alleged in the complaint that, in the years leading up to the squeeze-out merger initiated by Employers to purchase EMCI's remaining shares, defendants breached fiduciary duties owed to him as a minority shareholder of EMCI.The court concluded that plaintiff's claim did not arise in the context of a contractual relationship; his alleged injury arose only from his status as a shareholder of EMCI; and this was insufficient under Iowa law to plausibly plead a special duty arising out of a contractual relationship. Furthermore, plaintiff did not adequately plead that his injury arose from a special duty. The court also concluded that plaintiff did not allege that his voting rights were ever affected by Employers Mutual and Kelley's alleged mismanagement. Even if this were Iowa law, plaintiff would not meet this exception.Accordingly, because plaintiff's claim is derivative in nature, he must satisfy federal and Iowa requirements for a filing a derivative action, which he has failed to do so. In this case, the complaint did not state with particularity plaintiff's efforts to enforce minority shareholder rights in the years leading up to the squeeze out. Furthermore, the complaint did not allege that he petitioned the directors or other shareholders in writing, or that 90 days have expired since delivery of the demand and EMCI rejected his request, or irreparable injury would result by waiting for the expiration of the ninety days. View "Shepard v. Employers Mutual Casualty Co." on Justia Law

Azarax filed suit against defendant and his law firm, alleging legal malpractice and breach of fiduciary duty. Azarax claimed that defendant and his firm were negligent in their representation of Convey Mexico and that Azarax had claims against defendant and his firm as a successor by merger to Convey Mexico.The Eighth Circuit affirmed the district court's dismissal of the complaint and agreed with the district court that Azarax was not a valid successor in interest to Convey Mexico. In this case, the summary judgment record established that the shareholders of Convey Mexico did not unanimously provide written consent for the merger with Azarax Holding, so the merger was not valid. Therefore, Azarax lacked standing to sue defendant and his law firm. The court modified the judgment to dismiss the complaint without prejudice. View "Azarax, Inc. v. Syverson" on Justia Law

The Eighth Circuit affirmed the district court's dismissal of plaintiffs' putative class action against First Federal and former directors of Inter-State. Plaintiffs alleged that Inter-State's merger with First Federal was inequitable because Inter-State had $25 million more than First Federal in excess capital. Plaintiffs claimed that the surplus should have been distributed to Inter-State's members instead of becoming part of the merged entity, and that the decision to merge should have been decided by a vote of Intra-State's members.The court held that the district court correctly concluded, based on long-standing Supreme Court precedent, that Inter-State's members did not have an ownership interest in its surplus. Even assuming a provision in Inter-State's charter was unique and that this was a case of first impression, the court held that Inter-State's members would not have an ownership interest in the $25 million surplus based on the provision's plain language. Therefore, without an ownership interest, plaintiffs have not stated a claim against defendants and the district court properly dismissed their claims expressly premised on an ownership interest in the surplus. View "Chase v. First Federal Bank of Kansas City" on Justia Law

The FTC and the State of North Dakota moved to enjoin Sanford Bismarck's acquisition of Mid Dakota, alleging that the merger violated section 7 of the Clayton Act. The district court determined that plaintiffs would likely succeed in showing the acquisition would substantially lessen competition in four types of physician services in the Bismarck-Mandan area.The Eighth Circuit affirmed the district court's grant of a preliminary injunction, holding that the district court did not improperly shift the ultimate burden of persuasion to defendants and properly followed the analytical framework in U.S. v. Baker Hughes, Inc., 908 F.ed 981 (D.C. Cir. 1990); the district court did not clearly err in defining the relevant market; and the district court's finding on merger-specific efficiencies was not clear error. View "Federal Trade Commission v. Sanford Health" on Justia Law