Sullivan & Cromwell discusses Delaware Legislation Saying No to “Loser-Pays” Fee-Shifting Bylaws But Yes to Forum-Selection Bylaws for Stock Corporations

On May 12 and June 11, 2015, the Delaware Senate and House of Representatives, respectively, passed a bill (the “Bill”)[1] that would amend Title 8 of the Delaware General Corporation Law (“DGCL”) to prohibit Delaware stock corporations from including in their charters or bylaws so-called “loser-pays” fee-shifting provisions in connection with “internal corporate claims” brought by stockholders. Following the Delaware Supreme Court’s May 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund, in which the Court held that “fee-shifting provisions in a non-stock corporation’s bylaws can be valid and enforceable,”[2] it was unclear to some practitioners … Read more

Sullivan & Cromwell discusses In re KKR Financial Holdings LLC Shareholder Litigation

In an October 14, 2014 decision[1] on a motion to dismiss, the Delaware Court of Chancery (C Bouchard) held that business judgment review applied to breach of fiduciary duty claims asserted against directors in connection with a stock-for-stock sale of KKR Financial Holdings LLC (“KFN”) to KKR & Co. L.P. (“KKR”), an entity which held 1% of KFN’s stock and whose affiliate managed KFN’s day-to-day operations under a management agreement having terms making it difficult for KFN to sell to anyone other than KKR. The Court held business judgment to be the appropriate standard of review because (i) the … Read more

Sullivan & Cromwell discusses In re Orchard Enterprises, Inc. Stockholder Litigation

In October 2009, Dimensional Associates, LLC (“Dimensional”), the controlling stockholder of The Orchard Enterprises, Inc. (“Orchard”), which held 42% of Orchard’s outstanding common stock and 99% of its outstanding convertible preferred stock that collectively gave it approximately 53% of Orchard’s outstanding voting power, formally proposed a squeeze-out merger at a price of $1.68 per share, representing a 25% premium to the then-current stock price. Orchard’s board responded by forming a special committee with a mandate that included the right to negotiate or reject a transaction with Dimensional and to solicit interest from other third parties. While four of the five … Read more

Sullivan & Cromwell discusses SIGA Technologies, Inc. v. Pharmathene, Inc.

In an opinion issued on May 24, 2013,[1] the Delaware Supreme Court reaffirmed that an express contractual obligation to negotiate an agreement in good faith is enforceable and held that expectation damages[2] are available for breach of that obligation if the court is reasonably certain that the contracting parties would have reached an agreement but for the defendant’s bad faith, assuming the damages can be ascertained with reasonable certainty. The case serves as a useful reminder that care should be taken in drafting term sheets or other preliminary documents and that obligations to negotiate in good faith should be taken

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Editor's Tweet: Delaware Reaffirms Express Obligation to Negotiate Agreement in Good Faith Is Enforceable and Holds Expectation Damages Are Available

Sullivan & Cromwell Discusses last week’s new development in Delaware on “Don’t Ask, Don’t Waive” Standstills

In a preliminary injunction opinion issued on May 21, 2013, the Delaware Court of Chancery (VC Glasscock) found that the board of directors of NetSpend Holdings Inc., comprised of four directors representing private equity-affiliated stockholders that owned over 45% of NetSpend’s shares, three independent directors and the CEO, likely failed to satisfy their so-called “Revlon” duties to attempt to secure the best value reasonably attainable when agreeing to sell the company to Total Systems Services, Inc. (“TSYS”) in an all-cash $1.4 billion transaction. Specifically, the Court concluded that while the single-bidder sale process was not unreasonable per se … Read more

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Editor's Tweet: Sullivan & Cromwell Discusses last week's new development in Delaware on "Don't Ask, Don't Waive" Standstills