Mergers & Acquisitions

Sinatra may have found success in the city that never sleeps, but a California court has just made it more difficult for any party doing business with a California resident to do the same.  At least, when it comes to resolving disputes without a jury in a New York courtroom, or in the courtroom of any other jurisdiction that enforces pre-dispute jury trial waivers.  This case will be of major interest to commercial lenders, and other businesses, who prefer to use states like New York and Delaware as their jurisdiction of choice for governing law and adjudicating disputes.

While it is well-settled law in California that pre-dispute contractual jury waivers are unenforceable (see, e.g., Grafton Partners L.P. v. Superior Court (2005) 36 Cal. 4th 944 (“Grafton”)), in most instances forum selection and choice-of-law provisions have been respected by California courts. However, the Court of Appeal for the First Appellate District recently expanded upon Grafton in Handoush v. Lease Financing Group, LLC. The Court dealt a commercial equipment lessor a significant blow by holding that the equipment lessee who signed a lease agreement with the lessor that was governed by New York law, identified New York as the appropriate forum for resolving disputes and included a pre-dispute jury waiver (which is enforceable under New York law), was nevertheless entitled to a trial by jury in California.
Continue Reading Start Spreadin’ the News: California Court Says No to New York, New York; Rejects Forum Selection Clause

In Neurvana Med., LLC v. Balt USA, LLC, No. 2019-0034-KSJM, 2019 Del. Ch. LEXIS 995 (Ch. Sep. 18, 2019), the Court of Chancery declined to exercise personal jurisdiction over Balt International, S.A.S. (“Balt International”), a company headquartered in France and a non-signatory entity to a purchase agreement that included a forum selection clause, on the grounds that Balt International was not ‘closely related’ to a purchase agreement entered into by Balt International’s wholly owned U.S. subsidiary, Balt USA, LLC (“Balt USA”). A key takeaway for practitioners is that the court sets a fairly high bar for plaintiffs to overcome when trying to enforce a forum selection clause against a non-signatory, and further provides a helpful guidepost for foreign organizations when conducting operations through a domestic subsidiary in the United States and the likelihood of a Delaware court exercising personal jurisdiction as a result thereof.    
Continue Reading Delaware Update: Court of Chancery Declines to Bind a Non-signatory Parent Corporation to Forum Selection Clause

This post was originally published on FoodDive.com.

When considering an acquisition of a food and beverage company, potential buyers of a company or its assets should pay particular attention to U.S. Food and Drug Administration requirements and their implications on the target’s business.

Buyers should be cognizant of the regulatory issues at the beginning of the process so that their risk can be assessed in the context of the transaction, and in turn, be addressed by specific representations, covenants and indemnification provisions in the transaction documents. The following considerations should be top of mind throughout the course of due diligence and negotiations. 
Continue Reading How FDA Considerations Impact Food and Beverage Acquisitions

In Shareholder Representative Services LLC v. RSI Holdco, LLC, No. 2018-0517-KSJM, 2019 WL 2290916 (Del. Ch. May 29, 2019), the Delaware Court of Chancery reaffirmed that a target company may protect its pre-merger privileged communications in a post-closing dispute with the acquirer by including clear and unambiguous language in the merger agreement that seeks to protect the privilege. This decision provides additional guidance to sellers intent upon protecting their rights in potential post-closing litigation with buyers.
Continue Reading Delaware Chancery Court Provides Useful Guidance for Protecting Pre-Merger Privileges in Post-Closing Litigation Between Buyers and Sellers

Last month, the U.S. Securities and Exchange Commission (“SEC”) announced it had adopted final rules to amend certain parts of Regulation A[1] promulgated under the Securities Act of 1933 (“Securities Act”).

These new rules implement changes as directed by the Economic Growth, Regulatory Relief, and Consumer Protection Act[2] signed into law on May 24, 2018 by President Donald J. Trump. There are two conceptual changes, both affecting Regulation A as it applies to reporting companies.
Continue Reading Regulation A May Prove Useful Alternative to Form S-4 Registration for Public Companies Doing Smaller M&A Deals

In Flood v. Synutra Int’l, Inc., No. 101, 2018, 2018 Del. LEXIS 460 (Del. Oct. 9, 2018), the Delaware Supreme Court (Strine, C.J.) held that a controlling stockholder who pursues a merger with the controlled company will have the benefit of business judgment review pursuant to Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”), as long as the requisite procedural protections under MFW are put in place prior to the commencement of economic negotiations. In MFW, the Delaware Supreme Court created a framework through which a controlling stockholder could enter into a strategic transaction with the controlled company and still avail itself of the deferential business judgment standard of review. To have the business judgment standard apply, the transaction must be conditioned “ab initio” upon both (1) the approval of an independent, adequately-empowered Special Committee of the board of directors that fulfills its duty of care, and (2) the uncoerced, informed vote of a majority of the minority stockholders (the “MFW Procedural Protections”). Synutra arose from an issue left open in MFW regarding when the MFW Procedural Protections will be deemed to have been in place “ab initio.
Continue Reading Getting to Business Judgment in an Interested Transaction: Controlling Stockholder Must Put Procedural Protections in Place Prior to the Commencement of Economic Negotiations

In Weingarten v. Monster Worldwide, Inc., C.A. No. 12931-VCG, 2017 WL 752179 (Del. Ch. Feb. 27, 2017), the Delaware Court of Chancery (Glasscock, V.C.) clarified when a plaintiff has standing to vitiate inspection rights under Delaware General Corporation Law Section 220, 8  Del. C. § 220.  In a case of first impression, the Court decided that the language of Section 220(c) does not confer standing to a former stockholder bringing an action to exercise his or her inspection rights after the former stockholder’s shares were canceled in a merger.  To reach this conclusion, the Court relied upon the plain meaning of the statute, eschewing policy arguments from both parties.
Continue Reading Delaware Court of Chancery Holds that Cancellation of Shares Through Merger Deprives Stockholder of Standing in Section 220 Action

In Gordon v. Verizon Communications, Inc., No. 653084/13, 2017 WL 442871 (N.Y. App. Div. Feb. 2, 2017), the Appellate Division of the Supreme Court of the State of New York, First Judicial Department (the “First Department”), reversed an order denying plaintiffs’ motion for final approval of a proposed non-monetary settlement in a shareholder class action litigation related to Verizon Communication Inc.’s (“Verizon”) acquisition of Vodafone Group PLC’s (“Vodafone”) stake in Verizon Wireless (“VZW”).  With its decision, the New York Appellate Division breathed new life into beleaguered disclosure-only class action settlements, and modernized what it believed had become an outdated analytical framework for approving class action settlement agreements.  It also appeared to accord special weight to provisions in such agreements whereby corporations promise to obtain fairness opinions in connection with future transactions in determining the overall fairness of the agreements.  Thus, while non-monetary class action settlements are increasingly disfavored in other courts — most notably, in the Delaware Court of Chancery — New York courts remain receptive to their utility.
Continue Reading New York Appellate Division Revives Non-Monetary Class Action Settlement in M&A Class Action with Revised Standard of Review

Stockholder claims alleging wrongful dilution are typically considered to be derivative in nature.  Several decisions out of Delaware, however, have created exceptions to this general rule allowing stockholders to sue directly (rather than derivatively on behalf of the corporation) where, for example, a controlling stockholder authorizes a “disloyal expropriation” which reduces the economic value and voting power of the non-conflicted stockholders.  See, e.g., Gentile v. Rossette, 906 A.2d 91, 100 (Del. 2006); Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007); Feldman v. Cutaia, 951 A.2d. 727 (Del. 2008).  In El Paso Pipeline GP Company, L.L.C. v. Brinckerhoff, No. 103, 2016, 2016 Del. LEXIS 653 (Del. Dec. 20, 2016), the Delaware Supreme Court declined to add to these exceptions and reaffirmed the general rule that dilution claims must be brought derivatively.  As a result, a derivative plaintiff losses his or her standing to pursue a dilution claim if the entity is acquired through a merger.
Continue Reading Delaware Supreme Court Confirms that Dilution Claims Typically Are Derivative and Are Extinguished After a Merger

Two recent rulings out of the Delaware Court of Chancery have highlighted the importance of clearly defining the terms of pre-closing obligations. In an M&A transaction, it takes significant time to get from a signed letter of intent to a closed deal. Pre-closing obligations, and the level of effort a party is required to exert to meet those obligations, are typically subject to heavy negotiation. While practitioners tend to negotiate according to a sliding scale of efforts standards—”commercially reasonable efforts,” for example, require something less than “best efforts”—neither Delaware nor New York courts have articulated tiered efforts standards in such a manner. Furthermore, and what the recent Delaware rulings again underscore, the various formulations do not have precisely defined meanings in common law.
Continue Reading What Are ‘Commercially Reasonable Efforts’ in M&A Transactions?