Justia Mergers & Acquisitions Opinion Summaries

After Occam Networks, Inc. merged with Calix, Inc., Plaintiffs filed an action contending that Defendants, Occam directors and others, breached their fiduciary duties by making decisions during Occam’s sale process that fell outside the range of reasonableness and by issuing a proxy statement for Occam’s stockholder vote on the merger that contained materially misleading disclosures and material omissions. Defendants moved for summary judgment. The Court of Chancery (1) granted the director defendants’ motion for summary judgment, holding that a provision in Occam’s certificate of incorporation exculpated them from liability; and (2) denied summary judgment as to the disclosure claims because genuine issues of material fact existed as to these claims. View "Chen v. Anderson" on Justia Law

Since 2007, Dimensional Associates, LLC, a private equity fund, had controlled Orchard Enterprises, Inc., a Delaware corporation. In 2010, Dimensional squeezed out the minority stockholders of Orchard. The merger consideration was $2.05 per share, but in 2012, the then-Chancellor determined that the fair value of the common stock at the time of the merger was $4.76 per share. Plaintiffs subsequently filed this breach of fiduciary action, contending that Dimensional and the directors who approved the merger should be held liable for damages. Plaintiffs also named Orchard as a defendant. Plaintiffs and Defendants filed cross motions for summary judgment. The Court of Chancery (1) denied Plaintiffs’ motion except in two respects: one of Plaintiffs’ claimed violations of Defendants' duty of disclosure was a material misrepresentation, and entire fairness was the operative standard of review with the burden of persuasion on Defendants; and (2) denied Defendants’ motions except in two respects: one of the alleged disclosure violations was factually accurate, and Orchard could not be held liable for breach of fiduciary duty or for aiding and abetting. View "In Re Orchard Enters., Inc. Stockholder Litig." on Justia Law

Plaintiffs in this case were former shareholders of McMoRan Exploration Company (MMR). Plaintiffs challenged MMR’s acquisition by Freeport-McMoRan Copper & Gold, Inc. The case settled, and the only remaining issue was an award to Plaintiff of their attorneys’ fees and expenses upon the Court of Chancery’s discretion. After a consideration of numerous factors, the most important of which was the benefits achieved by Plaintiffs for the shareholder class, the Court of Chancery concluded that the appropriate award of fees and expenses for the efforts of Plaintiffs’ attorneys was $2.4 million. View "In re McMoRan Exploration Co. Stockholder Litig." on Justia Law

Petitioner and Ajmal Khan, principal of Verus Investment Holdings, purchased securities in a company to arbitrage a merger between that company and another company (the trade). Petitioner and Khal used Verus' account at Jefferies & Co. and Winton Capital Holding to complete the purchase. After the merger, Jefferies wired to Verus the original investment and profits attributable to the Winton funds. Verus wired the investment money to Winton and the profits to Doris Lindbergh, a friend of Petitioner. Tax authorities later informed Jefferies it owed withholding tax on the trade. Pursuant to an arbitration clause in an agreement between Jefferies and Verus, Jefferies commenced an arbitration against Verus for the unpaid taxes. Verus, in turn, asserted thirty-party arbitration claims against Petitioner, Lindbergh, and others for their share of the taxes. After a hearing, Supreme Court determined that nonsignatories Petitioner and Lindbergh could not be compelled to arbitrate. The Appellate Division reversed, concluding that Petitioner should be estopped from avoiding arbitration because he knowingly exploited and received direct benefits from the agreement between Jefferies and Verus. The Court of Appeals reversed, holding that Petitioner did not receive a direct benefit from the arbitration agreement and could not be compelled to arbitrate. View "Belzberg v. Verus Invs. Holdings Inc." on Justia Law

This matter involved the acquisition of R&S by KBR from ENI pursuant to a stock purchase agreement (SPA). At issue was whether the entire escrow fund should be released to ENI or whether it was entitled to a portion of this fund. KBR sought a preliminary injunction of any further proceedings before the arbitrator. The court denied the motion for a preliminary injunction because the issues involved in this request were largely mooted by clarification of the parties' positions during briefing and by clarification of the law by the Supreme Court in Viacom International v. Winchell, which was decided while this matter was being briefed. View "ENI Holdings, LLC v. KBR Group Holdings, LLC" on Justia Law

Plaintiff, an Iowa citizen with a home health care business, merged his business with other home health care providers to form Auxi, Inc., a Delaware corporation. After the merger, ACS acquired control of Auxi and then sold Auxi to HHC. Auxi did not inform plaintiff of the sale and plaintiff received no compensation for his shares of Auxi stock. Plaintiff filed suit against ACS claiming breach of fiduciary duty and breach of contract. The court concluded that plaintiff pleaded insufficient facts to support a claim that ACS breached its fiduciary duties as a majority shareholder; although plaintiff's complaint alleged damages, it contained no facts identifying the existence of a contract between ACS and plaintiff or its terms; and plaintiff pleaded no facts suggesting that the alleged contract between ACS and HHC manifested an intent to benefit him. Accordingly, the court affirmed the district court's dismissal of both claims. The court also concluded that the district court did not abuse its "considerable discretion," in concluding that it was not required to allow plaintiff to amend the post-judgment complaint where plaintiff never sought to amend until after dismissal, despite being on notice of the need to amend. View "Horras v. American Capital Strategies, Ltd." on Justia Law

In 2000, Trados Inc. obtained venture capital (VC) to support a growth strategy that could lead to an initial public offering. The VC firms received preferred stock and placed representatives on the Trados board of directors (the Board). Trados, however, failed to satisfy its VC backers. The Board subsequently adopted a management incentive plan (MIP) that compensated management for achieving a sale even if the sale yielded nothing for the common stock. In 2005, SDL plc acquired Trados for $60 million. The merger constituted a liquidation that entitled the preferred stockholders to a liquidation preference of $57.9 million. Without the MIP, the common stockholders would have received $2.1 million. With the MIP, the common stockholders received nothing. Plaintiff contended that instead of selling to SDL, the board had a fiduciary duty to continue operating Trados independently to generate value for the common stock. The Court of Chancery held that Defendants proved the decision to approve the merger was fair, as the common stock had no economic value before the merger, making it fair for its holders to receive in the merger the substantial equivalent of what they had before. Likewise, the fair value of the common stock for purposes of appraisal was zero. View "In re Trados Inc. S'holders Litig." on Justia Law

After Hermann Hospital merged with Memorial Hospital System, creating the Memorial Herman Hospital System (MHHS), the Administrator denied MHHS's request for a Medicare loss payment under 42 C.F.R. 413.134(l). The court joined all other circuits that have ruled on the issue by holding that statutory mergers must be bona fide sales in order to be eligible for a depreciation adjustment under 42 U.S.C. 413.134(l). The court found that substantial evidence supported the Administrator's conclusion that the merger at issue failed to constitute a bona fide sale and, therefore, affirmed the judgment of the district court. View "Memorial Hermann Hospital v. Sebelius" on Justia Law

Plaintiffs appealed from the district court's grant of judgment in favor of defendants. Plaintiffs brought claims of fraudulent misrepresentation, negligent misrepresentation, fraudulent concealment, and tortious interference with prospective economic advantage against defendants related to the auction of a company plaintiffs purchased. The court concluded that the district court, in its instructions to the jury, erred in its description of the English burden-shifting rule. Accordingly, the district court's order granting judgment for defendants on the fraudulent misrepresentation claim was vacated and the case was remanded for a new trial. The district court's dismissal of the negligent misrepresentation claim at summary judgment and of the fraudulent concealment claim as a matter of law were affirmed. View "Terra Firma Investments v. Citigroup" on Justia Law

A holding company (Company) whose equity was solely owned by Defendant owned forty-three percent of M&F Worldwide (MFW). Company offered to purchase the rest of the corporation's equity in a going private merger. The merger was conditioned on both independent committee approval and a majority-of-the-minority vote. A special committee was formed, which picked its own legal and financial advisors. After the committee successfully negotiated with Company to raise its bid by $1 per share, the merger was approved by the majority of the stockholders unaffiliated with the controlling stockholder (the minority stockholders). Company, Defendant, and other directors of MFW were sued by stockholders, who alleged that the merger was unfair. The Court of Chancery granted Defendants' motion for summary judgment, holding that when a controlling stockholder merger has, from the time of the controller's first overture, been subject to (i) negotiation and approval by a special committee of independent directors empowered to say no, and (ii) approval by an uncoerced, fully informed vote of majority of the minority investors, the business judgment rule standard of review applies, under which the Court was required to dismiss the challenge to the merger in this case. View "In re MFW S'holders Litig." on Justia Law