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Plaintiffs, former stockholders of Auspex, filed a putative class action to challenge the propriety of the merger with Teva Pharmaceuticals and seek post-closing damages, alleging that the members of Auspex's board of directors breached their fiduciary duties by permitting senior management to conduct a flawed sales process that ultimately netted stockholders inadequate consideration for their shares. The directors have moved to dismiss plaintiffs’ Complaint under Rule 12(b)(6). The court granted the motion, concluding that, even accepting plaintiffs' well-pled facts as true, defendants are entitled to invoke the irrebuttable business judgment rule. In this case, plaintiffs have not pled facts that would allow a reasonable inference that the merger involved a controlling stockholder, much less that a controlling stockholder pushed Auspex into a conflicted transaction in which the controller received nonratable benefits. They are left, then, to overcome the cleansing effect of stockholder approval, which in this case was disinterested, uncoerced and fully informed. View "Larkin v. Shah" on Justia Law

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At issue in this case was the fair value of stock of ISN Software Corp. (Respondent) held by two minority stockholders, Polaris and Ad-Venture, (collectively, Petitioners) at the time of a merger by which the controller cashed out some, but not all, of the stock held by the minority. The Court of Chancery held (1) the method used by the controller to determine the fair value of the stock is unreliable; (2) a discounted cash flow analysis is the most reliable indicator of fair value; and (3) upon consideration of the expert opinions provided by Petitioners and Respondent, the statutory fair value is $98,783 per share. View "In re ISN Software Corp. Appraisal Litig." on Justia Law

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In 2012 Walgreens acquired a 45 percent equity stake in Alliance, plus an option to acquire the rest of Alliance’s equity for a mixture of cash and Walgreens stock. Walgreens later announced its intent to purchase the remainder of Alliance and engineer a reorganization whereby Walgreens would become a wholly-owned subsidiary of a new corporation, Walgreens Boots Alliance. Within two weeks after Walgreens filed a proxy statement seeking shareholder approval, a class action was filed; 18 days later, less than a week before the shareholder vote, the parties agreed to settle. The settlement required Walgreens to issue several requested disclosures and authorized class counsel to request $370,000 in attorneys’ fees, without opposition from Walgreens. The Seventh Circuit reversed approval of the settlement, calling the supplemental disclosures “a trivial addition to the extensive disclosures already made in the proxy statement.” “The oddity of this case is the absence of any indication that members of the class have an interest in challenging the reorganization.... The only concrete interest suggested … is an interest in attorneys’ fees.... Certainly class counsel, if one may judge from their performance in this litigation, can’t be trusted to represent the interests of the class.” View "Hays v. Berlau" on Justia Law

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At issue in this case was a company that was acquired for $18 per share in an all-cash merger. Five months earlier, the target company declined an offer of $24 per share from the same acquiror. Plaintiffs, former public stockholders of the target company, sued the company’s board of directors and financial advisor, alleging that the board breached its fiduciary duties in approving the merger and that the financial advisor aided and abetted the breaches. The Court of Chancery granted Defendants’ motions to dismiss for failure to state a claim, holding that the business judgment rule standard of review applied to Plaintiffs’ allegations and insulated the merger. View "In re Volcano Corp. Stockholder Litig." on Justia Law

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In 2013, the Company completed a merger that gave rise to appraisal rights. Petitioners, owners of shares of common stock of the Company, seek appraisal. The court concluded that the fair value of the Company on the closing date was $17.62 per share; the legal rate of interest, compounded quarterly, shall accrue on this amount from the date of closing until the date of payment; the parties shall cooperate on preparing a final order for the court; and, if there are additional issues for the court to resolve before a final order can be entered, the parties shall submit a joint letter within two weeks that identifies them and recommends a schedule for bringing this case to conclusion, at least at the trial court level. View "In Re: Appraisal of Dell Inc." on Justia Law

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The Company, a developmental biopharmaceutical company, which has researched and developed a drug called NORTHERA, filed a class action alleging breaches of fiduciary duty against defendants in connection with the sale of Chelsea to Lundbeck through a tender offer and short-form merger (the Transaction). Plaintiffs contend that the Board acted in bad faith by instructing its financial advisors to ignore one set of projections in opining on the fairness of the Transaction, and by choosing to disregard a second set of projections before recommending the Transaction to Chelsea’s stockholders. The court granted defendants' motion to dismiss for failure to state a claim under Court of Chancery Rule 12(b)(6). The Board, after deliberation and in consideration of the sale of the Company, instructed its advisors not to consider projections that its assets would increase in value, years in the future, on speculation that the FDA would approve one of its products for currently-prohibited uses, or would remove a competing drug from the market altogether. Both sets of projections involved contingencies over which the Company had no control, and which might never come to pass. Such actions do not, on their face, plead a conceivable breach of the Directors loyalty-based duty to act in good faith. No other grounds conceivably leading to a finding of bad faith are pled. Accordingly, the court affirmed the judgment. View "In re Chelsea Therapeutics Int'l Ltd. Stockholders Litig." on Justia Law

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Dell Inc. completed a merger that gave rise to appraisal rights. Fourteen appraisal petitioners were mutual funds sponsored by T. Rowe Price & Associates, Inc. (T. Rowe) or institutions that relied on T. Rowe to direct the voting of their shares (collectively, Petitioners). Petitioners held their shares through a custodial bank, which was a participant member in a trust company, which held Petitioners’ shares in the name of Cede & Co., which, for purposes of Delaware law, was the holder of record. Cede was constrained to vote Petitioners’ shares as T. Rowe directed and fulfilled its obligation through a chain of authorizations. Although T. Rowe opposed the merger, its voting system generated instructions to vote Petitioners’ shares in favor of it. Ultimately, Cede voted Petitioners’ shares in favor of the merger. Petitioners sought appraisal in favor of the merger. The Court of Chancery held (1) because the holder of record did not dissent as to the shares for which Petitioners sought appraisal, the dissenter requirement was not met of these shares; and (2) therefore, Petitioners’ shares did not qualify for appraisal, and Petitioners remained entitled to the merger consideration without an award of interest. View "In re Appraisal of Dell Inc." on Justia Law

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Google Inc. and On2 Technologies, Inc. entered into a merger agreement in 2009. Thereafter, Plaintiff brought a class action on behalf of himself and other similarly situated On2 shareholders, alleging that On2’s board of directors had breached its fiduciary duty to its shareholders. Plaintiffs subsequently agreed with One2 and its directors to settle all claims with respect to the merger. After a hearing, Supreme Court found the settlement to be fair and in the best interest of the class members but refused to approve the settlement because it did not afford out-of-state class members of the opportunity to opt out, thereby prohibiting class members from pursuing any individual claims that are separate and apart from the class settlement. The Appellate Division affirmed. The Court of Appeals affirmed, holding that the lower courts properly refused to approve the proposed settlement because the settlement would deprive out-of-state class members of a cognizable property interest. View "Jiannaras v. Alfant" on Justia Law

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In 2012, Defendant Kenneth Cole proposed a going-private merger of Kenneth Cole Productions, Inc. that was subject to approval by both a special committee of independent directors and a majority of the minority shareholders. Several shareholders, including Plaintiff, commenced separate class actions alleging breach of fiduciary duty by Cole and the directors. Although the shareholder vote occurred after an amended complaint was filed, 99.8 percent of the minority shareholders voted in favor of the merger. In the amended complaint, Plaintiff sought a judgment declaring that Cole and the directors had breached the fiduciary duties they owed to the minority shareholders, an award of damages to the class, and a judgment enjoining the merger. Supreme Court granted Defendants’ motion to dismiss. The Court of Appeals affirmed, holding (1) in reviewing challenges to going-private mergers, New York courts should apply the business judgment rule as long as certain shareholder-protective conditions are present; (2) if those measures are not present, the entire fairness standard should be applied; and (3) applying that standard to this case, the courts below properly determined that Plaintiff’s allegations did not withstand Defendants’ motions to dismiss. View "In re Kenneth Cole Prods., Inc." on Justia Law

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Pursuant to a merger agreement, Sellers agreed to indemnity Buyer for the tax liabilities of the company being sold. The tax bills for indemnification purposes, however, were to be calculated as if certain deductions were not going be taken when both parties knew they would be. These deductions reduced the company’s tax liability to zero. After the merger, the company’s tax prepayments and credits were refunded in their entirety, thus benefitting Buyer. Because the calculation of the indemnity obligation was based on a counterfactual measure of tax liability, that calculation resulted in Sellers’ owing Buyer a substantial amount of liability. Buyer filed this complaint asserting claims for declaratory relief and breach of contract. At issue in this case was whether the prepayments and credits affected the tax indemnification obligation of Sellers. The district court entered judgment on the pleadings in favor of Sellers, concluding that the indemnification provision unambiguously required that the indemnity obligation be offset by the amount of the refunded prepayments and credits. The First Circuit vacated the judgment of the district court, holding that the indemnification provision was ambiguous as to how the tax refunds affect the indemnification obligation of Sellers. Remanded. View "Mercury Sys., Inc. v. S’holder Representative Servs., Inc." on Justia Law