Q4 2022 Quarterly Corporate / M&A decisions updates

Below is our Corporate / M&A decisions update covering decisions in the fourth quarter of 2022. This update is designed to highlight selected important M&A, corporate, and commercial court decisions on a quarterly basis.

To close out 2022, the Delaware courts issued a number of notable opinions on important shareholder and corporate governance issues. Among others, the Delaware Court of Chancery used its equitable powers to divest an entity of shares, an unprecedented remedy; addressed whether arbitration provisions in employment agreements of a pre-SPAC company were binding on the new, post-SPAC company; and found the fairest way to reach a share valuation was to weight and average each party’s expert valuation.

Brief summaries of these key decisions appear below with links to more robust discussions.

Buzzfeed, Inc. v. Hannah Anderson: Buzzfeed not bound by pre-SPAC employment arbitration provisions

In Buzzfeed, Inc. v. Hannah Anderson, C.A. No. 2022-0357-MTZ (Del. Ch. Oct. 29, 2022), the Delaware Court of Chancery held that “New Buzzfeed,” the company that emerged following Buzzfeed’s SPAC transaction and subsequent IPO, was not bound by arbitration provisions contained in the employment agreements of employees of pre-SPAC Buzzfeed. A group of employees filed mass arbitration claims against New Buzzfeed in connection with the IPO, alleging that they were damaged when they could not participate in the IPO because they held a different class of stock than was offered in the IPO. Because New Buzzfeed was not a party to the pre-SPAC Buzzfeed’s employment agreements, the arbitration provisions contained within them did not require New Buzzfeed to arbitrate the claims.

Please click HERE for a more detailed discussion of this case.

Joseph Lawrence Ligos v. Isramco, Inc.: Court dismisses breach of fiduciary duty claims

In Joseph Lawrence Ligos v. Isramco, Inc., et al., C.A. No. 2020-0435-SG (Del. Ch. Nov. 30, 2022), the Delaware Court of Chancery granted a motion to dismiss a shareholder class action complaint alleging that the members of the Special Committee of Isramco, Inc. breached their duties of loyalty in connection with a cash-out merger subject to entire fairness review. The plaintiff alleged that the Special Committee members were conflicted because they were selected by the company’s controlling stockholder, who also was alleged to control the buyer, Naptha. In a prior ruling, the court denied the controlling stockholder’s motion to dismiss based on the MFW framework, finding there was a plausible inference that the stockholder vote was not fully informed. In this ruling, the court granted the Special Committee defendants’ motion to dismiss, finding that even though the transaction's outcome was "not great," the complaint failed to adequately plead a lack of independence or bad faith to support a non-exculpated claim.

Please click HERE for a more detailed discussion of this case.

In re Stream TV Networks: Delaware imposes unprecedent remedy for coordinated stock transfer

In Re Stream TV Networks, No. 2020-0766-JTL (Oct. 3, 2022), the Delaware Court of Chancery exercised its broad equitable powers to provide a unprecedented remedy. Stream TV Networks (Stream) had transferred its assets to its secured creditors, including shares of another company, Technoactive, in order to extinguish its secured debt. Through a coordinated process, the secured creditors then transferred Technoactive shares away from Stream. The Delaware Supreme Court declared that transfer invalid and, on remand, the court ordered the secured creditors to return the assets to Stream. The court acknowledged that this unprecedent use of Chancery Rule 70(a) was an extraordinary remedy, but found it necessary to ensure an equitable result.

Please click HERE for a more detailed discussion of this case.

Lebanon County Employees’ Retirement Fund v. Collis: Guidance into timeliness of derivative claims

In Lebanon County Employees’ Retirement Fund v. Collis, C.A. No. 2021-1118-JTL (Del. Ch. Dec. 15, 2022), the Delaware Court of Chancery denied a motion to dismiss as untimely a derivative action against a pharmaceutical distributor’s officers and directors. Noting that the timeliness principles governing Caremark red-flags claims and Massey claims alleging that a fiduciary acted disloyally by causing a company to seek profit by violating the law was an issue of first impression, the court decided on a “separate accrual approach” that views “a series of related decisions and conscious nondecisions as a sequence of wrongful acts” each giving rise “to a separate limitations period.”  Therefore, the court concluded that the plaintiffs could assert claims for conduct that occurred within the three-year period prior to their books and records request.

Please click HERE for a more detailed discussion of this case.

Ramcell, Inc. v. Alltel: DE Court averages valuation models to arrive at fair market value of shares

In Ramcell, Inc. v. Alltel Corp., C.A. No. 2019-0601-PAF (Del. Ch. July 1, 2022), the Court of Chancery reviewed a 2019 short-form merger between Alltel Corporation (Alltel) and Jackson Cellular Telephone Co. (Jackson), that resulted in the cancellation of Jackson’s stock in exchange for US$2,963 per share. Ramcell, Inc. (Ramcell), a holder of approximately 155 shares of Jackson stock, dissented and exercised its statutory appraisal rights. At trial, Ramcell’s expert valued the shares as high as US$36,016 per share while Alltel’s expert testified valued the shares as low as US$5,690.92 per share. The Court chose to weight and average the models of both experts. Thus the court adopted a valuation of US$11,464.57 per share. The Court further held that because petitioner received a fair value judgment that was higher than the merger consideration, there was no bad faith conduct, and did not incur excessive costs, all costs should be paid by respondent Alltel.

Please click HERE for a more detailed discussion of this case.



Authored by:  Allison Wuertz, Jason Chohonis, Elizabeth Cochrane, Jocelyn Hassel, Tyler Waywell, and Shannon Zhang.


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