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Recent Delaware Corporate Law Updates

June 18, 2013

Pyott v. Louisiana Municipal Police Employees’ Retirement System:  Delaware Supreme Court Gives Preclusive Effect to Dismissal of Derivative Suit by California Federal Court and Rejects “Fast Filer” Presumption
In Pyott v. Louisiana Municipal Police Employees’ Retirement System, 2013 WL 1364695 (Del. Apr. 4, 2013), the Delaware Supreme Court reversed a decision in which the Court of Chancery declined to dismiss a derivative suit after a federal court in California dismissed a parallel derivative suit with prejudice.
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In re Primedia, Inc. Shareholders Litigation: Court of Chancery Addresses Board’s Alleged Failure to Obtain Value for a Derivative Claim Extinguished by Merger
In In re Primedia, Inc. Shareholders Litigation, 2013 WL 2169415 (Del. Ch. May 10, 2013), Vice Chancellor Laster of the Court of Chancery held that plaintiffs whose standing to pursue derivative insider trading claims had been extinguished by merger had standing to challenge directly the entire fairness of that merger based on a claim that the target board of directors failed to obtain sufficient value in the merger for the pending derivative claims.
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In re Wayport, Inc. Litigation: Court of Chancery Applies “Special Facts” Standard to Fiduciary Duty Claims Arising out of Stock Purchase Transaction Between Minority Common Stockholder and Preferred Stockholder        
In a post-trial opinion, In re Wayport, Inc. Litigation, 2013 WL 1811873 (Del. Ch. May 1, 2013), Vice Chancellor Laster of the Court of Chancery held that corporate fiduciaries do not have a duty to disclose information about the corporation in connection with direct stock purchases from stockholders absent knowledge of “special facts.” The Court, however, held one trading fiduciary liable for common law fraud due to its failure to correct a statement to the selling stockholder that was truthful when made, but became inaccurate due to subsequent events.
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Koehler v. NetSpend Holdings, Inc.: Court of Chancery Determines that Board Employed an Unreasonable Process, but Declines to Issue Injunction
In Koehler v. NetSpend Holdings, Inc., 2013 WL 2181518 (Del. Ch. May 21, 2013), Vice Chancellor Glasscock of the Court of Chancery denied plaintiff’s motion for preliminary injunction despite finding that a majority independent and disinterested board of directors likely breached its fiduciary duties by approving a $1.4 billion merger with a third party. The Court concluded that the defendant directors did not act reasonably to maximize stockholder value by pursuing a single-bidder negotiating strategy, agreeing to certain deal protection devices, including a no-solicitation provision, and agreeing not to waive “Don’t-Ask-Don’t-Waive” standstill provisions that barred potential offers from previously interested bidders. The Court, however, determined that the balance of equities weighed against the issuance of an injunction in the instance of a premium transaction with no alternative bidder.
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In re NYSE Euronext Shareholders Litigation: Court of Chancery Criticizes Recommendation Provision in Merger Agreement
In In re NYSE Euronext Shareholders Litigation, C.A. No. 8136-CS (Del. Ch. May 10, 2013) (TRANSCRIPT), Chancellor Strine of the Court of Chancery, ruling from the bench following oral argument, declined to enjoin preliminarily a stockholder vote on the proposed merger between NYSE Euronext (“NYSE”) and IntercontinentalExchange, Inc. (“ICE”). The Court found that plaintiffs had not established any of the necessary elements for injunctive relief, but nonetheless criticized a provision in the merger agreement that restricted the NYSE board’s ability to change its recommendation when faced with a partial-company competing bid.
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Carsanaro v. Bloodhound Technologies, Inc.: Court of Chancery Allows Plaintiffs’ Challenge to Venture Capital Preferred Financings to Proceed
In Carsanaro v. Bloodhound Technologies, Inc., 2013 WL 1104901 (Del. Ch. Mar. 15, 2013), Vice Chancellor Laster of the Court of Chancery denied defendants’ motion to dismiss a complaint alleging breaches of fiduciary duties and statutory violations, among other things, in connection with several rounds of venture capital financings for a start-up healthcare technology company (“Bloodhound” or the “Company”).
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