Wednesday, December 4, 2013
OK, so here is the probably the first of what might ultimately be a handful of appraisal pettions filed with the Delaware Chancery Court. This one was was entered at the end of October. OK, so the thing that strikes me immediately is that the petitioner holds only 100 shares. Really?! 100 shares?! Definitely someone was drinking the Icahn appraisal kool-aid. The petitioner looks to get their attorney fees paid for by Dell. I should hope so. With 100 shares at stake, the fees just to file the peition have probably wiped out the economic value of the petitioner's position. The only way this petition makes a lick of sense is if there is a large class of petitioners that this one can join.
Turns out that the class of shareholders who are seeking appraisal is 47,529,513. Here's the list of petitioners (verified list of petitioners). Of those shareholders seeking appraisal, 14% failed to perfect their rights (either by not holding continuously, or by not signing their demand letter, or by submitting the demand letter too late). That leaves almost 41 million shares seeking appraisal. Sounds like a lot!
Actually, it turns out that the 41 million who have perfected their rights represent only 2% of the outstanding shares of Dell. In many states (but not Delaware), the appraisal statutes require that a minimum percentage (typically 5%) of shareholders seek appraisal before the court will entertain an appraisal petition.
Icahn himself held over 156 million shares of Dell. When he decided to take the merger consideration that really took the steam out of appraisal push.
Tuesday, December 3, 2013
OK, so it's that time of year for students all over the country...you're starting to study for exams. I know, I know, if you are my students you have been more than diligent. You've read ahead, you've come to office hours, etc. You can walk through a merger agreement with your eyes closed by now. I'm not worried about you. I'm worried about all those other students... For their edification, here's the latest in Rick Climan's 5 minute series on merger agreements. This one - part 1 of 2 deals with negotiating the Material Adverse Change/Material Adverse Effect clause.
AMR and US Air recently settled the lawsuit brought against them by the DOJ's antitrust division. The DOJ was using litigation to prevent the proposed merger of the two airline giants. As the two sides stood staring across at each other, one side sent a letter offering up a settlement. Here's the tick-tock of how the settlement of that antitrust litigation went down.
Friday, November 29, 2013
Back in the Summer, Carl Icahn was pushing shareholders to pursue an appraisal claim in connection with the Dell going private transaction. At the time, it seemed like a transparent attempt to get a majority of the minority to vote 'no'. In that sense, Icahn's call for shareholders to take an 'appraisal option' by voting no and preserving their right to perfect their appraisal rights was successful. A majority of the minority voted no. In the end, that wasn't enough to stop the deal - the special committee waived that majority of the minority requirement and closed the deal anyway. Not long after, Icahn decided not to opt for the appraisal remedy - taking the cash and moving on.
Now, it seems that not everyone has moved on. Apparently, a number of shareholders listened to the siren song of the appraisal option and have gone all-in:
T. Rowe Price Group Inc. and more than 100 other Dell Inc. shareholders who control a combined 47.5 million shares spurned the company’s buyout offer to seek a potentially higher payout through the Delaware court system.
While the shareholders haven't filed an appraisal action in the Chancery Court yet, they haven't accepted payment for their shares and according to Bloomberg they intend to file. This is all very interesting because while Icahn proposed as much as $14/share for the company, the final deal price was $13.75. So, presumably, shareholders seeking appraisal are looking for a price somewhere between $13.75 -$14/share? Seems like a lot of work for an extra $11 million.
Tuesday, November 19, 2013
WHYY reports that the Delaware Supreme Court has begun to post mp4/video recordings of all arguments. Right now, video recordings are available back to October 9. You can find them at the Delaware Supreme Court's website. Going forward the video recordings will be posted as a matter of course, although they will be one or two days delayed. Nevertheless, they will be a great resource for lawyers, students, and others interested in the corporate law.
Even though, one can now watch the arguments from afar, I'm still likely going to find myself going to Dover for the arugments in the pending MFW and Cooper appeals (December 18/19). Corporate geek.
Monday, November 18, 2013
Surprising almost nobody, Chancellor Strine issued an opinion in Great Hill Equity Partners vs SIG Growth Equity Fund providing a statutory interpretation of DGCL Sec. 259. You'll remember that 259 reads in relevant part as follows:
§ 259. Status, rights, liabilities, of constituent and surviving or resulting corporations following merger or consolidation.
(a) When any merger ... shall have become effective ... the separate existence of all the constituent corporations, or of all such constituent corporations except the one into which the other or others of such constituent corporations have been merged ... shall cease and the constituent corporations shall ... be merged into 1 of such corporations ... possessing all the rights, privileges, powers and franchises as well of a public as of a private nature, and being subject to all the restrictions, disabilities and duties of each of such corporations so merged or consolidated; and all and singular, the rights, privileges, powers and franchises of each of said corporations, and all property, real, personal and mixed, and all debts due to any of said constituent corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the corporation surviving or resulting from such merger...
The question for the court was whether the attorney client privilege of the seller passes to the buyer upon the closing. You can imagine why this might be of interest to buyers. You know, a successful buyer of a certain kind might want to use privileged information to seek undemnification for a breach of a representation post-closing, etc. In Great Hill, the seller was seeking to prevent the buyer from getting post-closing access to privileged attorney-client communications of the seller. Great Hill asked the court to rule that when 259 says all "privileges" it doesn't mean the seller's attorney-client privilege. Chancellor Strine wasn't having any of that:
To indulge the Seller‟s argument would conflict with the only reasonable interpretation of
the statute, which is that all means all as to the enumerated categories, and that this
includes all privileges, including the attorney-client privilege.
So, sellers ... remember to box up all that legal work and leave it for the buyers when they wander in to take over. It's theirs.
Wednesday, November 13, 2013
According to the Delaware Law Weekly, it's down to two:
Tuesday, November 12, 2013
So, notwithstanding statements that Delaware was considering filing an appeal of the third circuit's opinion declaring the Chancery Court's arbitration procedure unconstitutional, it has allowed the first deadline to pass:
Attorneys for Delaware and the Chancery Court could have demanded that all the judges on the U.S. Third Circuit Court of Appeals review the case, a procedure called an “en banc” review, but the deadline to make that request expired Nov. 6, leaving only a possible appeal to the U.S. Supreme Court, which must be done by January 21.
We'll see. My personal opinion: Delaware should permit the arbitration procedure to go forward, but require the proceedings to remain open to the public.
Friday, November 8, 2013
So a couple of days ago, I noted another challenge to an exclusive forum provision (this one in a corporate charter) in connection with the acquisition of Edgen Group by Sumitomo. So, Edgen had its day in Chancery Court where it argued that the Vice Chancellor should issued an injunction against the plaintiff stockholder to prohibit him from purusing a law suit outside of Delaware. In considering the whether to issue the order, Vice Chancellor Laster made it clear that Delaware believes exclusive forum provisions are binding on stockholders. There are no issues for the court with respect to the legality of these provisions. But...no injunction for Edgen. Why? Well, on the balance of the equities analysis, the court felt that it wasn't the court's place to tell a court in Louisiana what to do. Edgen can raise the forum provision in front of the Louisiana court and the court - if fairly applying Delaware law - should toss the case out. Ahem...we shall see...
Now, what I thought was really interesting about Vice Chancellor Laster's hearing in Edgen was his statements about the nature of plaintiff shareholders. To get the context, Edgen and their counsel appeared before Laster for the hearing. Genoud, the plaintiff, however did not appear. Genoud's counsel was in fact there, but without authorization to speak on behalf of his client in the Delaware action. There was a lot of 'we love to appear, but our client hasn't authorized us to appear in Delaware' etc. To that, Laster had this to say (Transcript Hearing):
Now, Mr. Genoud has not responded to the complaint. Extraordinary efforts have been made by Mr. Slights and his colleagues to track down Mr. Genoud, including the hiring of two process servers and the hiring of a private investigator. His residential address cannot be found.
The Louisiana counsel who represent Mr. Genoud for purposes of that action have declined to accept service. And the Robbins Geller firm, a firm that I generally have great respect for, has engaged in unsatisfying and, dare I say, pathetic representational contortions in which they have maintained that although they represent Mr. Genoud for purposes of challenging the merger and bringing the lawsuit in Louisiana, they do not represent Mr. Genoud for the clearly-related subject matter of this proceeding.
Now, anyone remotely familiar with this type of stockholder litigation understands that Robbins Geller is not taking its direction from a nominal client on these issues but rather is calling the shots itself. And the idea that Robbins Geller and Louisiana counsel have not been able to reach their client, even though they sued in Louisiana and sought expedited proceedings and have a status conference tomorrow, is either, one, not credible, or two, confirmatory that Robbins Geller is not taking direction from its client about how to handle this litigation.
Frankly, it's quite disappointing behavior from a firm that otherwise has done a great deal to build up reputational capital and credibility with the Delaware courts. It would not have been, I think, any impairment at all to enter an appearance and reserve the ability to fight the jurisdictional issue. It is much more credibility-straining to claim that you can't contact your client, and that although you have been engaged to handle a broad and expedited attack on a merger and to sue in a jurisdiction internationally removed from your client's residence, you have nevertheless not been retained to handle a related proceeding in another court that, although I haven't done the math, is probably equidistant, if not closer, to the plaintiff's residence.
The Louisiana court held a hearing in this case yesterday. I'm assuming the plaintiff (or his counsel) turned up for that hearing. No word yet on the outcome of that hearing.
Wednesday, November 6, 2013
I started a paper like this once. After a colleague warned me that I might want to hire legal counsel before I published it I thought better of finishing it. I'm happy to say, however, the world is full of brave people. Jessica Erickson has published The New Professional Plaintiffs in Shareholder Litigation:
In 1995, Congress solved the problem of professional plaintiffs in shareholder litigation — or so it thought. The Private Securities Litigation Reform Act (PSLRA) was designed to end the influence of shareholder plaintiffs who had little or no connection to the underlying suit. Yet it may have failed to accomplish its goal. In the wake of the PSLRA, many professional plaintiffs simply moved into other types of corporate lawsuits. In shareholder derivative suits and acquisition class actions across the country, professional plaintiffs are back. They are repeat filers involved in dozens of lawsuits. They are the attorneys’ spouses, parents, and children. They may even be entities created for the primary purpose of filing litigation. These new professional plaintiffs have flown almost entirely under the radar of corporate law scholarship. This Article pulls back the curtain on professional plaintiffs, examining court filings and other public records in the first comprehensive study of professional plaintiffs’ role in corporate law. In most instances, professionalism is a good thing — but not when it comes to choosing plaintiffs.
Download the paper and meet the "mythical" Alan Kahn, as well as Doris & Steven Staehr among others!
So, the Delaware Law Weekly broke news last night with a report that four people had applied for the job of Chief Justice of the Delaware Supreme Court. According to the Delaware Law Weekly, those four are:
The conventional wisdom has it that Leo Strine is going to get the job. Why? Well, because the conventional wisdom hangs around mid-town Manhattan. Delaware is clearly concerned about its corporate law brand and certainly Chancellor Strine has a clear advantage in that area over the rest. But the Chief's job isn't entirely about corporate law. So, while the CW says Strine, we immediately shouldn't discount any of the others. They are all intriging and equally plausible. Let's give them a look.
Justice Berger would ensure continuity as she is already sitting on the court. She is a respected jurist. She would also be the first woman appointed to the job. That's a big statement if the Governor wants to make it. In addition, moving Justice Berger over to Chief would open up an associate justice job for one of the other candidates if the Governor is hestitant to appoint someone straight into the Chief's job. Moving Justice Berger over would also make room for a second woman to join the Delaware bench. That's an even bigger statement with lots of political upside if Markell wants to make it.
However, if the Governor were going to appoint someone right into the Chief's job, perhaps Judge Vaughn is the right one. He is already President of the Superior Court so is familiar with the administrative duties that come along with being a chief judicial officer. He is a criminal lawyer by training and profession, so he would also be able to represent the other (non-corporate) aspects of Delaware's jurisprudunce.
On the other hand, there is my favorite dark horse - Judge Jan Jurden. She is a judge on the Superior Court and a military verteran, so she wouldn't be likely to take any gruff from sitting justices were she to be appointed. She also has had a broad set of experiences. She has held a number of judicial administrative positions over the years - overseeing the Mental Health Court, the Conflict Attorney Program. She was previously both a Civil and Criminal Adaministrative Judge. And, she is presently a member of the Superior Court's Complex Commercial Litigation Division. To top it off, in 1989 she was on the legal team that represented Paramount before the Delaware Supreme Court in Paramount v Time. She ultimately had a 13 year career as a litigator at Young, Conway before departing for the bench.
Anyway, don't believe anything you hear. Nobody knows nothing for now.
Tuesday, November 5, 2013
For those of you in the Boston area -- of maybe for those of you looking for an excuse to be in the Boston area -- the Boston Bar is putting on what looks to be an excellent day-long conference on M&A. Info here:
First Annual Mergers & Acquisitions Conference
Wednesday, November 13, 2013 8:30
AM to 12:45 PM
Boston Bar Association - 16 Beacon Street, Boston, MA
Drafting and Negotiating Acquisition Agreements – The Words Really Matter
C. Stephen Bigler - Richards, Layton & Finger, P.A.
Laurie A. Cerveny - Bingham McCutchen LLP
Richard E. Climan - Weil, Gotshal & Manges LLP
Hon. Leo Strine, Jr. - Chancellor of the Delaware Court of Chancery
Everything Tender Offers
Frederick H. Alexander - Morris, Nichols, Arsht & Tunnell LLP
Margaret A. Brown, Skadden, Arps, Slate, Meagher & Flom LLP
James R. Griffin - Weil, Gotshal & Manges LLP
Hal J. Leibowitz - Wilmer Cutler Pickering Hale and Dorr LLP
The Evolving Standards of Judicial Review for M&A Transactions and Recent Developments in M&A Litigation
Kevin R. Shannon - Potter, Anderson & Corroon LLP
Jane Goldstein – Ropes & Gray LLP
James P. Smith, III – Winston & Strawn LLP
The BBA has put together quite a group. Make time to be there!
Edgen Group recently announced that it would be acquired by Sumitomo Corp. No surprise, there is transaction related litigation. A stockholder brought a case in Louisiana, the state of Edgen Group's headquarters (Edgen Complaint-LA). You know the argument...the board has obligations under Revlon, yadayada, the board sold at too low a price, yadayada... Well, turns out that Edgen is a Delaware Corp with an exclusive forum provision in its charter. The provision reads as follows:
Exclusive forum provisions in corporate bylaws, you'll remember, were ruled to be legal by Chancellor Strine and the pending appeal of that ruling before the Delaware Supreme Court was later dropped. Here, Edgen's argument to have the exclusive forum provision enforced is even stronger than in Chevron because the provision is found in the certificate of incorporation rather than the bylaws. Now, Edgen has sued in Delaware to have the Chancery Court force stockholder plaintiffs to bring their case to Delaware (Complaint - Edgen- Delaware). Although, it's all very interesting, what matters most in this case is whether the judge in Louisiana cares about the forum provision and whether that judge is going to enforce the provision. He should, but there's no telling...
Thursday, October 31, 2013
This just coming in....
The buyout passed with the support of 50.9% of the shares not held by CEO David Murdock, who owns 39.5 percent of Dole and is trying to take it private for the second time in 20 years.
Like Dell, unaffiliated stockholders in Dole seem to be just a little less than enthusiastic about the buyout. Also like Dell, there's talk of appraisal. Of course, with Dell all that talk was for naught after Carl Icahn took his money and moved on. No clear sense yet whether the hedge funds in Dole are serious about hanging around.
P.S. Duck boats on Saturday morning ... Go Sawx!!
In case you missed it, Dell completed its going private transation on Wednesday. On Thursday it requested deregistration of its securities and so...poof. It's gone. Now there's a lengthy blow-by-blow offered up by Bloomberg on the deal went down. I guess it's appropriate that they publish it on Halloween, cause this is how investment banker Jimmy Lee described Dell's going private journey:
“This is a guy from Austin who founded his own technology company and now he is on Wall Street trying to buy it out and he is entering an unknown world,” Lee, 61, said.
“It’s like going into a haunted house,” he said, “and every time you go around a corner some ghost pops up, and then a witch flies down on a broom, and then you go into another room and some devil tries to stab you with a pitchfork.”
Boo! Happy Halloween to the kiddies.
P.S. Go Sawx!
Wednesday, October 23, 2013
So there you have it. Just hit PACER today (h/t KWC). Here's the opinion (DCOGvStrine). Lengthy exploration of civil trials and arbitrations in the opinion. I'm reading now...
From the opinion:
Finally, Appellants argue that opening the proceeding would effectively end Delaware’s arbitration program. This argument assumes that confidentiality is the sole advantage of Delaware’s proceeding over regular Chancery Court proceedings. But if that were true—if Delaware’s arbitration were just a secret civil trial—it would clearly contravene the First Amendment right of access. On the contrary: as the Appellants point out in the rest of their brief, there are other differences between Delaware’s government-sponsored arbitration and regular Chancery Court proceedings. Arbitrations are entered into with the parties’ consent, the parties have procedural flexibility, and the arbitrator’s award is subject to more limited review. Thus, disputants might still opt for arbitration if they would like access to Chancery Court judges in a proceeding that can be faster and more flexible than regular Chancery Court trials.
Funny, I think someone I know argued just that same argument not long ago.... More from the opinion:
Delaware’s proceedings are conducted by Chancery Court judges, in Chancery Court during ordinary court hours, and yield judgments that are enforceable in the same way as judgments resulting from ordinary Chancery Court proceedings. Delaware’s proceedings derive a great deal of legitimacy and authority from the state. They would be far less attractive without their association with the state. Therefore, the interests of the state and the public in openness must be given weight, not just the interests of rich businesspersons in confidentiality.
Like history, logic weighs in favor of granting access to Delaware’s government-sponsored arbitration proceedings. The benefits of access are significant. It would ensure accountability and allow the public to maintain faith in the Delaware judicial system. A possible decrease in the appeal of the proceeding and a reduction in its conciliatory potential are comparatively less weighty, and they fall far short of the “profound” security concerns we found compelling in North Jersey Media Group. See 308 F.3d at 220.
Because there has been a tradition of accessibility to proceedings like Delaware’s government-sponsored arbitration, and because access plays an important role in such proceedings, we find that there is a First Amendment right of access to Delaware’s government-sponsored arbitrations. We will therefore affirm the order of the District Court.
Boom. There you have it. A resounding victory for my profession...in that there will continue to be a corporate law for me to teach going forward...
Tuesday, October 22, 2013
Uh-oh... a crisis just a day before the World Series! As you may remember, the NY Times agreed to sell its Boston Globe division to John Henry, the principal owner of the Red Sox. Owning the local newspapers, obviously, makes for excellent coverage when it comes October and your team IS PLAYING IN THE WORLD SERIES. So, you'd think everybody in Massachusetts would be on board. Apparently, there are some Yankee fans in central Mass who disagree. A judge today issued a TRO halting the sale:
"The defendant ... is hereby enjoined and restrained from transferring ownership or interest in any of its assets... until further order of this court," Judge Frison wrote in her temporary restraining order. "The court retains the prerogative to inspect the financial documents of the defendant in order to resolve any disputes."
In her temporary restraining order, Judge Frison put the "maximum end" of a settlement in the case at $60 million. In essence, the entire sale price of The New England Media Group could be set aside in an escrow account until the case is completed. The case has been in litigation since 2009.
The New York Times Co. and Mr. Henry had scheduled to close their reported $70 million sale of The New England Media Group — which includes the Globe, the Telegram, boston.com, and telegram.com — to Mr. Henry on Friday, according to Judge Frison's restraining order.
The issue here is who will be liable for the costs in a potential settlement of litigation against the Worcester Telegram and Gazette and independent newspaper carriers that has been ongoing since 2009. The carriers are seeking to be treated as employees and not independent contractors. The carriers want access to the NY Times' assets in the event they get a judgment or settlement. They fear that following the sale to John Henry, one of the richest men in America, that Worcester Telegram and its parent will be left without sufficient assets to pay a settlement should it be reached. The Times, obviously, wants to leave this particular liability with its Worcester subsidiary.
Although the question of which assets and liabilities will move in an asset purchase is often a difficult one, this one seems a little more straightforward. The Times sold its New England Media Group entity to Henry. That holding company includes the T&G as well as the Globe entitities. The present suit against the T&G corporate entity gets transferred along with entity. Absent facts that might suggest T&G has been deliberated undercapitalized to perpetuate a fraud against the carriers why does the TRO issue? In any event, does anyone really believe that the Times is in a better financial condition to make good on any judgment than John Henry?
Last month, I posted a little blurb on Vice Chancellor Laster's denial of a motion to consolidate based in part entirely on the fact that plaintiffs had captioned the consolidated case "shareholder litigation" and not "stockholder" litigation. The Vice Chancellor's comments were succinct, "Under whose law do you think you are litigating?"
Me? I find that kind of thing entertaining and on the whole not troublesome. Afterall, I remember my brief experience as an associate. In my first drafting project, I used shareholder and stockholder interchangeably. Using the same word all the time seemed so ... boring. Of course, there was a sea of red ink on the document when it came back. OK, lesson learned - consistency in drafting. The next version of the document went up and came back in another sea of red ink! Stockholder, not shareholder.... grumbles among the associate ranks, but okay. In a later assignment, I decided to show how much I learned, so I was consistent and only used 'stockholder'. The joke was on me, though. More red ink ... it's shareholder for California corporations!
What? You've never had an experience like this? I find that odd. Of course you have. Who instructs their associates to draft in any which way they please? No one, that's who.
In any event, the whole tomato/tomahto thing generated a little bit of a kerfluffle in ways that my regular posts of insider trading or LBOs just don't.
My take? This is an internal affair of the State of Delaware. If the courts of Delaware have decided that plaintiffs should caption their litigation "stockholder litigation" and not "shareholder litigation", so be it. Who am I to complain? No substantive rights are affected either way, so let Delaware have its way.
It's not like last month's denial was the first time Vice Chancellor Laster has been tilting at this particular windmill. Last year, he observed in a settlement hearing in Adams Shareholder Litigation:
"Today's hearing is so that I can consider the proposed class action settlement in In re Adams Golf Shareholder Litigation, C.A. No. 7354. I note, for the benefit of everyone who captions these cases, that with the 2010 amendments to the Delaware General Corporation Law, there are no longer any stray references in the DGCL that use the term 'shareholder.' The DGCL uniformly uses the term 'stockholder.' 'Shareholder' is a model act concept, although it did slip in in Section 203 for a few years. And certainly our decisions are not always scrupulous in observing the distinction. Nevertheless, I will humor myself, if no one else, by thinking of this privately as In re Adams Golf Stockholder Litigation."
A check of the Delaware code turns up only one reference to shareholder -- a stray parenthetical reference in the new Section 251(g) (hey, someone get on that!). Otherwise, the word shareholder is nowhere to be found.
What to make of all this? It's not as if stockholders of Delaware corporations lose or are otherwise denied substantive rights if they call themselves shareholders. The two words are, afterall, synonyms in normal parlance. However, if attention to detail is the stock and trade of a transactional lawyer's craft -- and it is, it is -- then it's surprising to me that there might be even the slightest pushback in a demand that we pay attention to detail.
So...tomato, tomahto I guess...but if you are in front of a Delaware court, you better make sure it's stockholder all the same.
Wednesday, October 16, 2013
Am I the only one slightly disappointed that the plaintiffs in the Chevron exclusive forum bylaw provision case decided not to pursue their appeal to the Delaware Supreme Court? I'm interested in the question of how the court would treat forum provisions mostly because I'm thinking about the next step: firms electing to adopt mandatory shareholder arbitration, either through Delaware's confidential arbitration procedure or private arbitration. If public firms take their cue from Chevron and begin to adopt such provisions, that's probably not going to be in Delaware's long-term interest. In any event, this is an issue I am interested in following for a host of reasons - many of them totall self-serving. I teach corporate law afterall. What would I possibly do with myself if all teh corporate law cases went to arbtration?! (Don't answer that!)