In Anderson v. Magellan Health, Inc., No. 2021-0202, — A.3d —-, 2023 WL 4364524 (Del. Ch. July 6, 2023) (McCormick, C.), the Delaware Court of Chancery addressed the circumstances under which the Court will award a shareholder plaintiff attorneys’ fees in disclosure-based deal litigation. In particular, Anderson analyzed the history of disclosure-based deal litigation in Delaware and the Court’s evolving standard for awarding fees where shareholder action has caused a company to issue additional pre-merger disclosures “mooting” pending deal litigation. Prior to the decision in Anderson, the state of the law was unsettled. The first line of cases would award fees as long as the shareholder plaintiff secured additional disclosures that were “helpful” such that they provided “some benefit” to shareholders. The second line of cases, however, adopted a stricter standard requiring that the supplemental disclosures be “plainly material.” In an effort to combat the so-called “deal tax” associated with disclosure-based merger litigation, Anderson comes out in favor of the stricter standard. Going forward, the Court will only award disclosure-based mootness fees when the complaining shareholder obtains additional disclosures that are “plainly material” to the shareholders. Companies, boards and advisors engaging in M&A transactions should pay attention to this decision as it will weigh on the proper strategy for approaching a shareholder challenge to an M&A transaction. Continue Reading Delaware Court of Chancery Clarifies Heightened Standard for Recovery of Attorneys’ Fees in Disclosure-Based Deal Litigation

The term “Acqui-hire” is commonly used to describe an M&A transaction where the buyer is predominantly interested in acquiring key employees of the target and not specifically the underlying business and/or assets. This type of transaction is particularly common in the technology and software industries, where key talent can often be more valuable than the underlying product or service, although it has become more prevalent in other industries as well. For the target employees and founders, such an acquisition may represent a “soft landing” in the event that they find that their organization won’t scale in the way that was previously imagined or if their funding sources have dried up.Continue Reading What You Need to Know about Acqui-Hires

In a blog earlier this year, we discussed the Delaware Chancery Court’s refusal to enforce a sale of business non-compete in Kodiak Building Partners, LLC v Adams. We wondered then whether Kodiak represented a one-off decision or whether it augured a trend that might give buyers of businesses pause. Delaware courts seem to have answered the question. In what constitutes a notable trend for buyers of businesses, Delaware courts have twice more refused to enforce non-competes under a sale of a business analysis. Continue Reading Buyer Beware: Delaware Courts Continue to Refuse to Enforce Deal-Based Non-Competes

The FTC announced today a notice of proposed rulemaking (“NPRM”)[1] proposing extensive revisions to both the rules that implement the Hart-Scott-Rodino Antitrust Improvements Act (the “Act” or “HSR Act”), and the Premerger Notification and Report Form (the “Form”) that merging parties must submit under the Act. The NPRM would also implement the Merger Filing Fee Modernization Act of 2022. Continue Reading Notice of Proposed Rulemaking: FTC Proposes to Redesign and Dramatically Expand the Scope of the HSR Act Filing Process

The Corporate Transparency Act (“CTA”) was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA aims to enhance transparency of beneficial ownership information for certain types of business entities in an effort to combat money laundering, terrorist financing, and other illicit activities. The CTA becomes effective on January 1, 2024 (“Effective Date”), but reporting companies will have either 30 days or one year to comply, depending on whether they were formed before or after the Effective Date.Continue Reading Corporate Transparency Act: Reporting Requirements; Preparing Your Company and Other Related Considerations

In Lee v. Fisher, No. 21-15923, 2023 U.S. App. LEXIS 13521 (9th Cir. June 1, 2023), the United States Court of Appeals for the Ninth Circuit, sitting en banc, affirmed the dismissal of a shareholder derivative complaint alleging, among other things, violations of Section 14(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78n(a), and SEC Rule 14a-9, 17 C.F.R. § 240.14a-9 (collectively, the “Proxy Claims”), enforcing a forum-selection clause in the defendant company’s bylaws designating the Delaware Court of Chancery as the exclusive jurisdiction for adjudicating any derivative claims involving the company. By affirming the dismissal, the Ninth Circuit called into question whether the Proxy Claims were properly classified as derivative claims, noting that the Exchange Act’s antiwaiver provision was not triggered when the shareholder plaintiff could pursue the Proxy Claims directly in federal court. The Ninth Circuit’s decision creates a circuit split with the Seventh Circuit’s decision in Seafarers Pension Plan ex rel. Boeing Co. v. Bradway, 23 F.4th 714 (7th Cir. 2022), raising the specter that the United States Supreme Court eventually will weigh in on the issue.Continue Reading Ninth Circuit Enforces Delaware Forum Selection Clause to Affirm Dismissal of Derivative Claim for Alleged Violation of Section 14(a) of the Securities Exchange Act of 1934

The past few years have seen dramatic shifts for mergers and acquisitions involving automotive dealerships. It has been estimated that approximately 3% of dealerships undergo a change of ownership in an average year. In the early days of the COVID-19 pandemic, however, deal flow in this sector nearly came to a complete halt due to the nationwide lockdown and a lack of demand. By early 2021, the industry had effectively made a full recovery in spite of supply chain and inventory challenges and M&A activity in this space rebounded accordingly, with a record 383 transactions completed in 2021, and an estimated 374 transactions completed in 2022. Despite larger U.S. economy macroeconomic headwinds and leveling consumer demand, buy/sell activity in the auto dealer sector is expected to remain robust in 2023 and beyond as several prominent acquirors continue to deploy their capital and more sellers coming to market due to a variety of reasons, including estate planning and general uncertainties about the larger economy.Continue Reading The Art of the Dealership: A Legal Road Map for Buying and Selling Automotive Dealerships

In Slack Technologies, LLC v. Pirani, No. 22-200, 2023 U.S. LEXIS 2301 (U.S. June 1, 2023), the Supreme Court of the United States (Gorsuch, J.) held that Section 11 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77k, requires plaintiffs to show that they purchased securities registered under the registration statement they seek to challenge, a requirement the Supreme Court referred to as “tracing.” In Slack, the public offering occurred under circumstances that did not allow the plaintiff or other purchasers to trace any security to the challenged registration statement. As a result, the Court vacated the decision of a panel of the United States Court of Appeals for the Ninth Circuit that had relieved plaintiff of a tracing obligation. The Supreme Court’s unanimous opinion confirms that courts must strictly enforce Section 11’s tracing requirement even when doing so precludes all purchasers in an offering from accessing Section 11’s liability provisions.Continue Reading United States Supreme Court Holds That Section 11 Plaintiffs Must Purchase Securities Issued Under the Registration Statement They Seek to Challenge

The Department of Homeland Security (“DHS”) announced on May 4, 2023 a planned end to the COVID-19 remote I-9 flexibility. The flexibility ends on July 31 and prior pandemic I-9s must be remediated by Aug 30, 2023. Therefore, employers should act quickly to review and remediate I-9s that were verified remotely in the past three years.Continue Reading ICE Announces July and August Deadlines for Employers: Preparing for the DHS Planned Sunset of the COVID Pandemic Remote I-9 Verification Accommodations

Antitrust enforcement has been heating up over the last few years in several areas – notably in healthcare and labor.[1] As the antitrust climate intensifies and spreads, private equity (PE) firms are starting to feel the heat, finding themselves the focus of increased antitrust scrutiny. Significantly, antitrust enforcement and litigation risks are moving from the portfolio companies to the PE firms themselves. Three areas of heightened risk stand out: interlocking directorates, roll-ups, and PE divestiture buyers.[2]Continue Reading Hot Antitrust Enforcement Climate Reaches Private Equity