M&A

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The “Conference on Multi-Jurisdictional Deal Litigation” will be held April 25, 2014.  Here is a brief introduction:

M&A litigation is increasingly filed in both the target’s state of incorporation and its headquarters state. It is the most important current development in corporate litigation. The leading plaintiffs’ and defendants’ deal litigators from Delaware and from Texas will discuss every aspect of this issue at our day-long conference. Chief Justice Strine of the Delaware Supreme Court and Justice Brown of the Texas Supreme Court will be panelists.

On Friday (March 7, 2014), the Delaware Court Chancery issued Vice Chancellor Laster’s 91-page post-trial opinionin In re Rural Metro Corp. S’holders Litig. 

The decision holds the investment bank defendant, RMC Capital Markets LLC, liable for aiding and abetting breaches of fiduciary duty by the directors.  I have not finished the entire opinion yet, but interested readers can access the full opinion here.

The opinion is sure to be one of the most carefully read Chancery opinions of the year – especially by those in the M&A area – and has already generated a fair bit of commentary.  For now, I will outsource to the following:

Some law professors may remember when Justices Roberts and Kennedy opined on the value legal scholarship. Justice Roberts indicated in an interview that law professors spend too much time writing long law review articles about “obscure” topics.  Justice Kennedy discussed the value he derives from reading blog posts by professors who write about certs granted and opinions issued. I have no doubt that most law students don’t look at law review articles unless they absolutely have to and I know that when I was a practicing lawyer both as outside counsel and as in house counsel, I almost never relied upon them. If I was dealing with a cutting-edge issue, I looked to bar journals, blog posts and case law unless I had to review legislative history.

As a new academic, I enjoy reading law review articles regularly and I read blog posts all the time. I know that outside counsel  read blogs too, in part because now they’re also blogging and because sometimes counsel will email me to ask about a blog post. I encourage my students to follow bloggers and to learn the skill because one day they may need to blog for their own firms or for…

What happens if short sellers of stock are unable to cover because no one has any shares to sell? That’s one of the many interesting issues in the new book, Harriman vs. Hill: Wall Street’s Great Railroad War, by Larry Haeg (University of Minnesota Press 2013). Haeg details the fight between Edward Henry Harriman, supported by Jacob Schiff of the Kuhn, Loeb firm, and James J. Hill, supported by J.P. Morgan (no biographical detail needed), for control of the Northern Pacific railroad. Harriman controlled the Union Pacific railroad and Hill controlled the Great Northern and Northern Pacific railroads. When Hill and Harriman both became interested in the Burlington Northern system and Burlington Northern refused to deal with Harriman, Harriman raised the stakes a level by pursuing control of Hill’s own Northern Pacific.

I’m embarrassed to admit that I wasn’t aware of either the Northern Pacific affair or the stock market panic it caused. I had heard of the Northern Securities antitrust case that grew out of the affair; I undoubtedly encountered it in my antitrust class in law school. (Everything the late, great antitrust scholar Phil Areeda said in that class is still burned into my brain.)

I’m happy…

If you practiced as a transactional attorney before law teaching, chances are that you looked at form agreements provided in treatises, saved on your law firm database, handed to you by partners from past deals, or saved in your own template archives.  This is no different from what litigators do either—they look for model existing memos, complaints, document requests, etc. that guide the first draft and let you start somewhere past “zero”.  The rapidly changing legal environment and unique needs of each client in each deal limits the shelf life of form agreements and saddles them with all sort of potential downsides if they aren’t used thoughtfully, verified by research, or tailored to the specific deal.  This disclaimer aside, I am curious about how we teach students about the role of exemplars, and as a starting point, where to find exemplars.  Students and junior attorneys, if not given the right tools to find the best models, will use bad model forms.  If you don’t believe me, see what you get when you search for “standard asset purchase agreement”. 

This raises the question of where should students, attorneys, law professors wanting to incorporate experiential learning exercise modules into their courses look…

In December, the Deal Professor, Steven Davidoff, wrote a great piece about the grey areas triggered by DISH Network Chairman Charles Ergen’s debt purchase from LightSquared (a failing satellite-based broadband comany).  This case has several twists and turns, and I plan to write a few posts on some of these areas.  Today, we’ll start with debt purchase. 

As Davidoff explains, Lightsquared’s debt could not (per the debt documents) be purchased by “direct competitor” (e.g., Dish Network), so Ergen used a personal investment vehicle to buy the debt.  This, the Deal Professor notes, appears acceptable under the debt documents (even if it’s not what was intended):

In a court filing, LightSquared contends that Mr. Ergen breached the debt agreement because the documents define a “direct competitor” to also be a subsidiary of a direct competitor. LightSquared is arguing that because Mr. Ergen controls both Dish and the hedge fund that bought the debt, the fund is a subsidiary of Dish.

Yet that argument stretches the plain meaning of a “subsidiary” — a company owned or controlled by a holding company — language that is not in the document. So LightSquared’s claims against Mr. Ergen are tenuous at best.

The acquisition itself seemed…

The National Business Law Scholars Conference (NBLSC) will be held on Thursday, June 19th and Friday, June 20th at Loyola Law School, Los Angeles. This is the fifth annual meeting of the NBLSC, a conference which annually draws together dozens of legal scholars from across the United States and around the world. We welcome all scholarly submissions relating to business law. Presentations should focus on research appropriate for publication in academic journals, especially law reviews, and should make a contribution to the existing scholarly literature. We will attempt to provide the opportunity for everyone to actively participate. Junior scholars and those considering entering the legal academy are especially encouraged to participate.

To submit a presentation, email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu with an abstract or paper by April 4, 2014. Please title the email “NBLSC Submission – {Name}”. If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance.” Please specify in your email whether you are willing to serve as a commentator or moderator. A conference schedule will be circulated in late May.  More information is available here:  http://lls.edu/resources/events/listofevents/eventtitle,81539,en/

Conference Organizers

Barbara Black (The University of Cincinnati College of Law)…

Thanks to Professor Brian Quinn (Boston College) for passing along the video posted below on “Material Adverse Change” in the M&A Context (Part 1) from law firm Weil Gotshal.  Weil Gotshal has posted a number of similar clips, which I have found useful in the past. 

This past Sunday, Robert B. Schumer (Paul Weiss) authored a related post over at the Harvard Law School Forum on Corporate Governance and Financial Regulation.  His post is entitled “Delaware Court: Missed Sales Forecasts Could be ‘Material Adverse Effect”‘ and opens with the following paragraph:

In Osram Sylvania Inc. v. Townsend Ventures, LLC, the Delaware Court of Chancery (VC Parsons) declined to dismiss claims by Osram Sylvania Inc. that, in connection with OSI’s purchase of stock of Encelium Holdings, Inc. from the company’s other stockholders (the “Sellers”), Encelium’s failure to meet sales forecasts and manipulation of financial results by the Sellers amounted to a material adverse effect (“MAE”). The decision was issued in the context of post-closing indemnity claims asserted by OSI against the Sellers and not a disputed closing condition.

Few, if any, Delaware cases have found a triggering of a MAC/MAE clause, but such cases obviously depend on the…

Posted in M&A

The increase in institutional ownership of corporate stock has led to questions about the role of financial intermediaries in the corporate governance process. This post focuses on the issues associated with the so-called “separation of ownership from ownership,” arising from the growth of three types of institutional investors, pensions, mutual funds, and hedge funds.

Originally, the anti-takeover law passed its court challenges because the judges accepted faulty data that showed investors could acquire at least 85 percent of the target corporation and satisfy the Williams Act, Subramanian said. But none of the cases used to support the anti-takeover law actually allowed hostile suitors to acquire a controlling 85 percent of a target company, he said, and plaintiffs using research from new studies would be able to convince a judge that the statute is unconstitutionally restrictive.

For me, the financial crisis was an eye-opening moment. I’ve long believed in free market economics and believed that the Church would do a lot of good…

Fernan Restrepo has posted “Do Different Standards of
Judicial Review Affect the Gains of Minority Shareholders in Freeze-Out
Transactions? A Re-Examination of Siliconix” on SSRN.  Here is the abstract:

Freeze-out transactions have been subject to different
standards of judicial review in Delaware since 2001, when the chancery court,
in In re Siliconix Inc. Shareholders Litigation, held that, unlike merger
freeze-outs, tender offer freeze-outs were not subject to “entire fairness
review”. This dichotomy, in turn, gave rise to a tension in the literature
regarding the potential impact of Siliconix, as well as the treatment that
freeze-outs should receive. While some defended the regime established by
Siliconix, others argued for doctrinal convergence through a universal
application of entire fairness, and still others proposed alternative
variations of convergence based on how the negotiation process is conducted.
The Delaware Chancery Court itself, in fact, subsequently made a partial step
toward convergence by narrowing the scope of its precedent, as reflected in In
re CNX Gas Corporation Shareholders Litigation. The empirical evidence on the
effect of Siliconix (and, therefore, on the practical relevance of different
standards of judicial review), however, is limited. In particular, in
“Post-Siliconix freeze-outs:

…