M & A Law Prof Blog

3Com-HP Lawsuit

You know what they say ... it's not a real deal unless there's a lawsuit.  Well, the 3Com/HP deal has its first lawsuit.  The $2.7 billion all cash deal was announced last week.  Here's the merger agreement.  Given that it's an all cash deal, the complaint alleges that the board failed to meet its fiduciary duties by not getting the highest price reasonably available to shareholders when it agreed to sell the company to HP.  That's a Revlon complaint.  I used to think that meant something, but following Lyondell, I now know that unless there's a claim of fraud or misrepresentation, short of an "utter failure" by the board to attempt to meet its duties, this kind of complaint is going nowhere.  Since the only question is price, then it appears the only available remedy for those who think the company got sold for less than its fair value is appraisal under Sec 262 of the DGCL.

Here's the appraisal language from the merger agreement (Section 2.7(c)): 

(c) Statutory Rights of Appraisal.

 

(i) Notwithstanding anything to the contrary set forth in this Agreement, all shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and held by Company Stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have properly and validly perfected their statutory rights of appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the DGCL (collectively, “Dissenting Company Shares”) shall not be converted into, or represent the right to receive, the Per Share Price pursuant to Section 2.7(a). Such Company Stockholders shall be entitled to receive payment of the consideration that is deemed to be due for such Dissenting Company Shares in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Company Shares held by Company Stockholders who shall have failed to perfect or who shall have effectively withdrawn or lost their rights to appraisal of such Dissenting Company Shares under such Section 262 of the DGCL shall no longer be considered to be Dissenting Shares and shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Price, without interest thereon, upon surrender of the certificate or certificates that formerly evidenced such shares of Company Common Stock in the manner provided in Section 2.8.

 

(ii) The Company shall give Parent (A) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments received by the Company in respect of Dissenting Company Shares and (B) the opportunity to control all negotiations and proceedings with respect to demands for appraisal in respect of Dissenting Company Shares. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal, or settle or offer to settle any such demands for payment, in respect of Dissenting Company Shares.

I wonder if this lawsuit even has a nuisance value.

-bjmq

Reimbursement Policies for Shareholder Proxy Nominations

HealthSouth Corp. recently announced a policy to reimburse shareholder initiatives relating to shareholder nominations for the election of directors:

Board of Directors has authorized the Company to amend its bylaws to adopt procedures relating to shareholder nominations for the election of directors. At its October 22, 2009 regular meeting, the Board approved the general terms of an amendment to the Company's Bylaws that will provide for reimbursement of shareholder expenses in connection with a proxy solicitation campaign, subject to certain conditions including the Board's determination that reimbursement is consistent with its fiduciary duties. The Board expects to adopt the final form of this Bylaw amendment this week. The final amendment will be included in a Form 8-K to be filed with the Securities and Exchange Commission when approved.

HealthSouth's move is one of the first following Delaware's adoption of the new section 113 that permits bylaws to be amended to provide for reimbursement a successful shareholder proxy with respect to the election of directors.   Movement in this area, combined with Delaware's new section 112 relating to shareholder proxy access shows how Delaware is highly sensitive to Federal competition.  

-bjmq

Bad Faith, Not in Good Faith...Tomato, Tomahto

In Amirsaleh v. Board of Trade of The City of New York, Inc, Chancellor Chandler takes up the heavy burden of politely explaining the Delaware corporate law to the Supreme Court.  I apologize for posting such a long quotation, but it's well worth reading.  The issue here is whether in "bad faith" is the same as "not in good faith."  The Supreme Court thinks the two are different.  The Chancery Court begs to disagree.   

According to plaintiff, all that need be shown is an absence of good faith. I must note that, in support of plaintiff’s argument, there are two known instances where the Delaware Supreme Court has suggested that there may be a difference between “bad faith” and “conduct not in good faith” in the context of the implied covenant [of good faith].

 The first suggestion was made in Dunlap v. State Farm Fire and Casualty Insurance Co.when the Supreme Court stated “the case law frequently (and unfortunately) equates a lack of good faith with the presence of bad faith . . . .”  But in the same case the Supreme Court explains that “[d]espite its evolution, the term ‘good faith’ has no set meaning, serving only to exclude a wide range of heterogeneous forms of bad faith.” This latter statement teaches that a party fulfills its obligation to act in “good faith” when it does not engage in any of the heterogeneous forms of “bad faith.” Put another way, “good faith” conduct can only be understood by reference to “bad faith” conduct. If no stand-alone definition of “good faith” exists, I admit my inability to understand how the phrase “a lack of good faith” has any ascertainable meaning. How can the plaintiff prove the absence of something that is undefined? In the Dunlap opinion the Supreme Court does not develop its suggestion that there might be a substantive difference between “a lack of good faith” and “bad faith.” Moreover, it does not appear to base its decision in Dunlap on that distinction (i.e., it did not find that the defendant’s actions “lacked good faith” without rising to the level of “bad faith”).  Accordingly, I conclude that the Dunlap opinion did not hold that a breach of the implied covenant can be established by “a lack of good faith.”

 The second suggestion was made in 25 Massachusetts Avenue Property L.L.C. v. Liberty Property Ltd. Partnership when the Supreme Court stated “[a]lthough the Vice Chancellor determined that Republic did not act in bad faith, he did not expressly address [defendant’s] liability for breach of the implied duty of good faith and fair dealing . . . . The two concepts—bad faith and conduct not in good faith are not necessarily identical. Accordingly, we must remand for the Court of Chancery to consider this claimed breach . . . .” On remand, Vice Chancellor Strine could not find a meaningful distinction between the two concepts and declined to reverse his previous ruling because he had already found that the defendant did not act in bad. Analyzing whether there was any meaningful distinction between the concepts, the Vice Chancellor observed: “Given the longstanding  use of the concept of good faith to articulate the state of mind appropriate for various actors . . . and the use of the concept of bad faith to label someone whose state of mind is violative of the appropriate standard, one would think this concept of ‘neutral faith’ would have been embraced in American law before now if it had any logic or utility. I do note that in our corporate law, this court has firmly rejected the notion that the words ‘not in good faith’ means something different than ‘bad faith,’ and has done so on sensible policy, logical, and linguistic grounds.”

Based on all of the foregoing, I agree with Vice Chancellor Strine that there is no meaningful difference between “a lack of good faith” and “bad faith.” Accordingly, to prove a breach of the implied covenant plaintiff must demonstrate that defendants acted in “bad faith.” 

-bjmq

Simple Theory of Takovers

Continuing the theme of comparative takeover regulation: here's a new paper, A Simple Theory of Takeover Regulation in the United States and Europe, from Ferrarini and Miller forthcoming in the Cornell International Law Journal investigating a federal approach to takeover regulation in teh US and Europe.    

Abstract: This paper presents a simple model of takeover regulation in a federal system. The theory has two parts. First, the model predicts that the rules applicable at more general political levels will be more favorable to takeover bids than will the rules applicable at local levels. The reason is that unlike bidders, who do not know ex ante where they will find targets, targets can concentrate their political activities knowing that the law of their jurisdiction will apply to any attempt to take them over. On the other hand, at more general political levels this advantage for target firms disappears, so the rules are expected to be less target-friendly. This is in fact the pattern we observe both in the United States and the European Union. Second, the model predicts that rules on takeovers will reflect the degree of concern that targets have about potential hostile bids. Where firms are well-protected against unfriendly takeovers – for example, in jurisdictions where companies are under family control – takeover regulation is likely to be less target-friendly than in jurisdictions where potential targets are more exposed to a hostile acquisition. This pattern is also observed in takeover regulation.

-bjmq

Mandatory Rules in the Takeover Market, A Lesson from Down Under

The UK-styled approach to takeover regulation relies heavily (although not exclusively) on brightline rules for delimiting what is permitted in the context of an offer and a response to an offer.   The upside of this structure is that it leaves the decision whether to accept or reject an offer in the hands of the shareholders. 

Contrast this approach with Delaware where the corporate code and the courts leave directors with a high degree of discretion whether to accept or reject offers.  To the sometimes chagrin of academics (myself included) Delaware courts are loathe to set out brightline rules governing the takeover process.   One of the selling points of the Delaware approach is that the fact-intensive approach allows for directors and courts reviewing directors actions to recognize that there may not be a one-size-fits-all solution and to take into account the specific issues in every case.

In Australia today we have an example why Delaware might be right to eschew many mandatory rules.  Australia's Takeovers Panel is modeled on the UK Takeover Panel.  EWC, a private Australian company in the process of going public, announced a bid for NewSat, publicly-traded Australian company.  The details of the back-and-forth between the two companies can by found here care of The Brisbane Times newspaper.   In any event, the talk of a take-over triggered a required Bidder's Statement to be filed by EWC.  After some delay, EWC just filed its statement along with a surprising recommendation: 

On behalf of the directors of EWC Payments Pty Ltd (EWC), I am pleased to enclose an offer by EWC to acquire all of your shares in NewSat Ltd (NewSat). 

However, in light of unexpected action taken by the Commonwealth Bank AFTER the Takeover Offer was made, and which the Commonwealth Bank set aside prior to a Court Hearing, I very sadly recommend that your do NOT accept this offer from EWC ...

The details of the bidder's dispute with the Commonwealth Bank are laid out in Section 10.8 (or, reasons why you should not accept the offer I just made you).  It's kind of odd.  The offer itself is bookended with exhortations by the offerer for shareholders not to make the mistake of taking the offerer up on his own offer.   For their part, management of NewSat called the offer a "sham" and dug the knife in a bit further:  

While this is certainly a very good reason for NewSat shareholders to reject the EWC offer, there are many other equally good reasons...

This episode points out a shortcoming, though not disabling, of the mandatory rules approach to takeover regulation. When facts on the ground change such that it makes no sense for an offer to go forward, why should parties -- a reluctant seller and a now-incapable buyer --be forced to go forward with the offer once its clear to both sides that it's a bad idea.  It seems an unnecessary expense at that point.   

-bjmq

Subramanian, et al on Delaware's Antitakeover Statute

Some of you might have been recently been on the receiving end of a surprisingly caustic "Marty-gram" attacking an academic paper.  Let's see, if I remember correctly, it started something like this: 

Academic empirical legal analysis, when not coupled with a clear understanding of both fundamental corporate law principles and practical takeover market dynamics, can lead to meaningless data and misleading conclusions.

Hmm.  That certainly caught my attention when it landed in my inbox.  But then again, it's nice to know that attorneys are Wachtell are reading academic papers.  At least we're not just writing them for ourselves.  Anyway, the authors, Subramanian, Hersocvici, and Barbetta, have now posted their paper, Is Delaware's Antitakeover Statute Unconstitutional: Evidence from 1988-2008, so you can read it and judge for yourselves.  Here's the abstract:

Abstract: Delaware’s antitakeover statute, codified at Section 203 of the Delaware corporate code, is by far the most important antitakeover statute in the United States. When it was first enacted in 1988, three bidders challenged its constitutionality under the Commerce Clause and the Supremacy Clause of the U.S. Constitution. All three federal district court decisions upheld the constitutionality of Section 203 at the time, relying on empirical evidence indicating that Section 203 gave bidders a “meaningful opportunity for success,” but leaving open the possibility that future empirical evidence might change this constitutional conclusion. This Article presents the first systematic empirical evidence since 1988 on whether Section 203 gives bidders a meaningful opportunity for success. The question has become more important in recent years because Section 203’s substantive bite has increased, as Exelon’s recent hostile bid for NRG illustrates. Using a new sample of all hostile takeover bids against Delaware targets that were announced between 1988 and 2008 that were subject to Section 203 (n=60), we find that no hostile bidder in the past nineteen years has been able to avoid the restrictions imposed by Section 203 by going from less than 15% to more than 85% in its tender offer. At the very least, this finding indicates that the empirical proposition that the federal courts relied upon to uphold Section 203’s constitutionality is no longer valid. While it remains possible that courts would nevertheless uphold Section 203’s constitutionality on different grounds, the evidence would seem to suggest that the constitutionality of Section 203 is up for grabs. This Article offers specific changes to the Delaware statute that would preempt the constitutional challenge. If instead Section 203 were to fall on constitutional grounds, as Delaware’s prior antitakeover statute did in 1986, it would also have implications for similar antitakeover statutes in thirty-two other U.S. states, which along with Delaware collectively cover 92% of all U.S. corporations.

-bjmq

Choice of Forum and State Competition

Prof. Faith Stevelman's paper, Regulatory Competition, Choice of Forum and Delaware's Stake in Corporate Law, now appearing in the Delaware Journal of Corporate Law takes on a version of the state competition argument.  Her take on it is focuses on the role of choice of forum for disputes.  Interesting argument. 

Abstract:  As Delaware corporate law confronts the twenty-first-century global economy, the state's legislators and jurists are becoming sensitive to increased threats to the law's sustained preeminence. The increased presence of federal laws and regulations in areas of corporate governance traditionally allocated to the states has been widely noted. The growth of federal corporate law standards may be undermining Delaware's confidence in the sustained prosperity of its chartering business - which has been a vital source of revenues and prestige for Delaware, its equity courts, and especially its corporate bar. The Delaware Court of Chancery appears to be concerned about the emigration of corporate law cases to other states' courtrooms, and is exercising its discretionary jurisdiction more expansively in parallel proceedings to deny defendants' motions to stay. There are even more aggressive measures that Delaware companies and lawmakers could take to restrict Delaware shareholders' choice of forum and keep these cases in Delaware. But Delaware has much to lose from trying to gain monopoly power over the adjudication of its corporate law. Indeed, in a system where corporate managers (or founders/controlling shareholders) select the state of incorporation - and hence effectuate the choice of Delaware corporate law - it is likely that allowing shareholder-plaintiffs freedom in forum selection has a salutary, modulating effect on Delaware corporate law. The ability of Delaware shareholder-plaintiffs to litigate elsewhere most likely plays a key role in preventing Delaware corporate law from becoming hostage to corporate defendants' interests.

-bjmq

VC Laster's First Days

Vice Chancellor Laster's first days on the job and an informative backgrounder of the Chancery's newest vice chancellor:

Vice Chancellor J. Travis Laster strode down the hallway used by judges in Delaware's Court of Chancery like an old hand on the bench.

But when it came time to enter the courtroom, he couldn't get the door open. Turns out, Laster was pushing the door instead of pulling it.

"That shows how new I am," Laster, 39, said on his third day on the job last month.

-bjmq

Reuters Interview with Vice Chancellor Laster

Reuters sat down with the newest Vice Chancellor.  His thoughts on the financial crisis:

"With the crash in the banking system still ringing loud in everyone's ears," said Laster. "If there was ever a moment where a politically sensitive Delaware judiciary might have reached out to change Delaware law, that was it. Oversight law is not going to change for a moment-specific reason."

...

"I don't think it's fair to say about the financial crisis that directors weren't trying to do a good job. Directors were trying to do a good job," he said.

"Now it is always nice after the fact to try to find someone else to hold the bag, but I think it critically important we not to judge these things in hindsight. The core question for us is always: At the time the decision was made, what were the directors thinking?"

-bjmq

Triggering Revlon Duties

It's a recurring question.  We know that an all cash transaction will constitute a change of control and thus require directors attempt to get the highest price reasonably available for the benefit of target shareholders. A stock-for-stock deal where the shareholders of the target remain in the fluid aggregate doesn't constitute a change of control, so directors are free to take into considerations other issues when deciding whether to accept an offer.  But what if you are taking a combination of stock and cash - how much cash will result in Revlon duties being triggered?

Delaware courts have been helpfully ambiguous in answering this question.  On the one hand, In In re Santa Fe Pacific Corp Shareholder Litigation the Supreme Court held that Revlon duties are not triggered when the target accepts consideration of 33% cash and 67% stock.  On the other hand, accepting 60% cash and 40% stock will trigger Revlon duties (In re Lukens Inc. Shareholders Litigation).

In In re NYMEX Shareholder Litigation, the chancery court had chance to slap down another data-point to help narrow the band of when Revlon duties might be triggered.  In the NYMEX-CME transaction, at the time the board initially approved the transaction, NYMEX shareholders were to receive 36% cash and 64% CME stock.  Whether Revlon was triggered by this consideration mix was an issue of some debate between the parties when they were before the court.  

Vice Chancellor Noble declined to rule on the question.  He could have moved the needle just a little bit by finding that 36% cash was insufficient to trigger Revlon.  But, I suppose he felt that discretion was the better part of valor and decided the case on other grounds.

So to the question, how much cash will trigger Revlon duties, the answer remains: "It depends."

-bjmq

Vice Chancellor Laster Interview

Francis Pileggi at the Delaware Corporate and Commercial Litigation blog posted an interview with Vice Chancellor Travis Laster.  Drop by and get to know the new Vice Chancellor. 

-bjmq

Hamermesh and Wachter on Rationalizing Appraisal Standards

Now appearing in the current issue of the Boston College Law Review:

How does one measure the fair value of a corporation when a controlling shareholder squeezes out the minority interest? Professor Lawrence A. Hamermesh, of Widener University, and Professor Michael L. Wachter of University of Pennsylvania Law School, answer that question in "Rationalizing Appraisal Standards in Compulsory Buyouts" by suggesting that the “going concern value” standard—currently adopted by the Delaware courts—is more fair and efficient than other valuation methodologies. Where a merger creates corporate control by aggregating dispersed shares, any increase in corporate value rightly belongs to the controlling shareholder. But where the merger merely squeezes out a minority interest, no aggregation of control takes place and therefore no premium should be awarded. In such situations, if the controlling shareholder fails to present a discounted cash flow analysis to facilitate the valuation of the company, the minority shareholders risk undervaluation of their shares. To guard against this, Professors Hamermesh and Wachter advocate a default presumption based on comparable company valuations. Such a presumption puts the burden on the controlling shareholder to come forward with accurate projections for the future value of the company or risk having the courts award the control value to minority shareholders.

-bjmq

Travis Laster Confirmation Hearing

From yesterday's confirmation hearing as reported by the Sussex Countian:

   “For the past 13 years the vast majority of my practice has been before the Court of Chancery,” he said, adding that he understands not only the legal precepts that guide the court, but also the procedures and practices under which it operates.

    “What the Court of Chancery does is very different from other courts, the legal questions are of a particular nature,” he said. “There is not a lot of correspondence between other courts and the Court of Chancery.”

    The court, which has jurisdiction over cases involving businesses, contracts, trusts and other financial matters, is often cited as the leading authority on corporate law worldwide.

    In response to a question from Senate President Pro Tem Anthony J. DeLuca, D-Varlano, Laster said he would work to preserve the court’s status as a model, even when its decisions conflict with trends in the federal judiciary.

    Laster told the committee that, even in light of the bad feelings the public and politicians may have towards corporate America and its conduct before and during the recession, the Court of Chancery must hold its ground and remain fair and reasonable. 

    “A lot of people are hurting and are angry, they’ve lost a lot of money, it’s justifiable,” he said. “I think there’s a culture in Washington that says, whatever happens we have to change something.”

    While some are quick to accuse Delaware and the Court of Chancery of leaning on the side of corporate interests, Laster said the court must prove that it is and has always been fair.

    “We have to stick to what got us to a point of preeminence,” he said. “We have to make sure that we’re not labeled a pro-management state, we are a balanced state.”

-bjmq

Travis Laster Confirmed to Chancery Court

Congratulations to Vice Chancellor J. Travis Laster on his confirmation this afternoon. 

-bjmq

Update:  Here are the reports from Bloomberg and the Delaware News Journal.

Laster Hearing Set

The Senate Executive Committee will meet to consider the nomination of Travis Laster at 1 p.m. hearing on September 22.   At 4:00pm following the nomination hearings, the full Senate will be called into session, presumably to vote on the nominations.  Now that's quick!

-bjmq

 

Update:  Link to Senate Executive Committee.

              Link to full Senate agenda for the 22nd.

Tinker Bell has her Say on SEC Shareholder Access Proposal

On Friday, The Dealbook helpfully linked to some of the comments submitted in response to the SEC's "shareholder access" proposal.  There are lots of comments and they cover a wide variety of issues related to the access proposal.  A general line of argument submitted by many is one, I think, that makes a lot of sense.  While more shareholder access is good, the SEC's proposal may be moving too quickly.  

OK, I know that's hard to imagine that an issue like this that has been floating around for years in one form or another is "moving too quickly", but Delaware just amended its code to permit shareholders to adopt bylaws requiring the corporation to include sharheolder nominees on the ballot and bylaws requiring reimbursement of shareholder expenses in connection with such nominations.  

The comments from the Delaware Bar Association provide a nice summary of the issues related to DGCL 112 and 113 and the proposed rule 14a-11.  As the comments from Wachtell and O'Melveny point out, after 2006 when Delaware adopted amendments permitting the adoption of majority voting proviions, there has been a flood of private ordering in that area.  My sense is that while O'Melveny is neutral on that outcome, Wachtell is predictably less happy.  

In any event, rather than move forward now on a "one-size-fits-all" shareholder access proposal, why not wait some more and see what the impact of the DGCL amendments is?  The response by shareholders following the majority voting amendments has been significant. There's no reason to believe that there won't a similar response by shareholders in the wake of the 2009 DGCL amendments with respect to shareholder access - all that without additional moves by the SEC.  If the SEC is serious about allowing shareholders more power, then it seems obvious that they should sit back and wait before adopting 14a-11. 

OK, let's put the serious issues aside during this holiday weekend.  What I find most intriguing are some of the other commenters.  I mean, who knew that Tinker Bell had an opinion on shareholder access?  Or that she's got a 401(k) with Disney?!  I'm also impressed that Thomas Paine made his way back to give an opinion on latter-day tyrranny. 

-bjmq

Laster Nomination Goes to Senate

The Delaware Senate will meet on September 22 to vote to approve the nomination of J. Travis Laster to take up the Vice Chancellor's position vacated following the retirement of Vice Chancellor Lamb.

-bjmq

Travis Laster Nominated to Delaware Chancery Court

Governor Markell's nominating statement follows below:

Markell Announces He Will Nominate J. Travis Laster To Serve On The Court of Chancery Wilmington Lawyer Spent His Career Litigating High-Stakes Disputes Before the Court WILMINGTON – Governor Jack Markell announced Tuesday that he will nominate J. Travis Laster, a Wilmington attorney, to serve as Vice Chancellor on Delaware’s Court of Chancery. “Travis Laster has spent his career litigating in front of the Court of Chancery, and has developed an outstanding reputation for his intelligence and integrity,” said Markell.  “If confirmed, I think he will be a great addition to a court known for its professionalism, its hard work, and its leadership in matters of corporate law.”  Laster, a graduate of Princeton University and the University of Virginia Law School, currently practices with Abrams & Laster, a law firm he helped create in 2005.  Before founding Abrams & Laster, Laster practiced with Richards, Layton & Finger.  Laster will be nominated to fill the Vice Chancellor seat vacated by the Honorable Stephen P. Lamb upon his retirement.    “I am honored to be nominated by Governor Markell,” Laster said.  “I have profound respect for the Court of Chancery and for the many jurists who have given that court its national reputation for excellence.  If confirmed, I hope to contribute to the court’s tradition.”

Update:  Hamermesh calls the nomination of Travis Laster "a true merit choice."

9/22/09 Update:  Laster confirmed.

Vice Chancellor Lamb and his replacement

A found farewell to Vice Chancellor Lamb and then some scuttlebutt on a potential replacement in the Delaware papers: 

Those who confirmed they applied for the post are: Delaware Superior Court Judge Mary Miller Johnston; J. Travis Laster, a partner with Abrams & Laster in Wilmington; Joel Friedlander, a partner with Bouchard Margules & Friedlander in Wilmington; and Bruce Silverstein, a partner with Young Conaway Stargatt & Taylor in Wilmington. Richard Forsten, who is a partner with Saul Ewing in Wilmington, declined to comment on speculation that he applied. Robert Saunders, a partner at Skadden, Arps, Slate, Meagher & Flom in Wilmington, whose name had been suggested earlier this month, said he did not apply.

The paper says to expect things to move on a nomination by mid-August.

-bjmq

Activision Litigation – Game Over

Last week Chancellor Chandler dismissed Wayne County Employees’ Retirement System v Corti (the Activision litigation).  The plaintiffs in the case made a number of claims – you can probably guess what they were.  What caught my eye in the opinion was how the court dealt with the Revlon claims against the board.  FYI: The business combination agreement in question is here.  The opinion can be found over at AmLawDaily.com along with commentary. 

 The court dismissed claims that the directors of Activision failed in the obligations under Revlon by not conducting an independent market check before agreeing to a sale of control.  By the way, the transaction is slightly out of the ordinary in that it’s a two step deal.  In the first step, Activision issued new shares to Vivendi giving them 52% control of the stock, then Vivendi engaged in a tender offer for the outstanding shares of Activision that it did not control.

 In dismissing the claims against Activision’s board, the court reiterates what is by now settled Delaware law – directors are not liable for failing to carry out a perfect process during in a sale of control.  There is “no blueprint” for meeting one’s duties under Revlon.  Indeed, citingthe Delaware Supreme Court's decision in Lyondell v. Ryan, the court noted that “the relevant question is whether the Director Defendants ‘utterly failed to attempt to obtain the best sale price’” and not whether the process was perfect. 

 “Utterly failed to attempt” now that’s not an active auction or even much of a market check.  In fact, that’s a pretty low bar when it comes to assessing whether directors have met their obligations under Revlon.  Whatever happened to the board as auctioneer.  If that’s not low enough, the court offers up Lyondell’s “knowingly and completely failed to undertake their responsibilities” language. 

 It’s hard to imagine what kind of inaction by directors can be the product of ‘utterly failing to attempt’ and ‘knowingly and completely failing’.  I mean, it's really got to be bad.  I imagine that if the facts of Revlon re-appeared in 2009 post-Lyondell that the case might even come out a different way given these standards.  In Revlon, court struck down a lock-up granted to a favored bidder.  That’s hardly an utter failure to attempt to obtain the best sale price.   

-bjmq