Judge Medinilla’s recent opinion in Cytotheryx, Inc. v. Castle Creek Biosciences, Inc. is a reminder for practitioners to carefully consider whether an integration clause in a purchase agreement will be sufficient to bar extra-contractual misrepresentation claims. And although fraud claims arising out of M&A transactions often are brought against sellers, the decision also offers an
Sidley Austin Blog
Sale of Buyer’s Equity Provides “Good Faith” Justification for Not Earning Earnout
As we have written about in the past, earnout provisions in M&A agreements are often ways to find value and bridge a buyer’s and seller’s differing expectations of the future. But they also are ripe for litigation, especially if the buyer changes the way the business is run or pursues other opportunities that may…
SPAC Litigation Continues to Churn in the Belly of the Chancery Beast
As this blog has consistently observed, although the well of SPAC mergers substantially dried up a few years ago, the wave of lawsuits stemming from those de-SPAC mergers has not abated. In the latest decision addressing claims for breach of fiduciary duty arising from a de-SPAC merger, Solak v. Mountain Crest Capital LLC, Vice Chancellor…
Chambers 2024 Global Practice Guide for Shareholders’ Rights and Shareholder Activism
The 2024 Chambers Global Practice Guide for “Shareholders’ Rights & Shareholder Activism”, with contributions from Kai Liekefett, Derek Zaba, Ram Sachs, and Evan Grosch, is now available. The guide provides an overview of corporate governance and shareholder activism based on the latest legal developments and market trends.
The post Chambers 2024 Global Practice Guide for…
Equity Has Its Limits: Chancery Rejects Bid For An “Equitable Eraser”
It may seem obvious that “[e]quity cannot bless th[e] deliberate violation of an explicit statutory prohibition,” but in the recent Delaware Court of Chancery decision, TS Falcon I, LLC v. Golden Mountain Financial Holdings Corp., Vice Chancellor Lori Will reminded us of this maxim in the context of setting record dates for annual stockholders’ meetings. …
Watch What You Say: Disparaging Comments May Trigger Contractual Repurchase Rights Even If Shielded From A Defamation Claim
By Ian M. Ross
A recent Delaware decision has demonstrated the limits of the absolute litigation privilege, holding that it did not protect an LLC member from claims that his defamatory statements triggered contractual repurchase rights of his membership interests. Absolute litigation privilege, in Delaware and many other jurisdictions, protects parties from actions for allegedly defamatory statements made during…
Words Matter: Different Definitions of “Commercially Reasonable Efforts” Lead to Different Results in Drug-Development Earnout Disputes
Acquisitions of biotech companies with development-stage drug candidates often include earnout agreements. The buyer pays the seller’s stockholders with cash or stock upfront, and the seller’s stockholders are entitled to additional payments if the drug or drugs in development reach certain milestones, often culminating in FDA approval or commercialization. Achieving those milestones can take many…
Eye Doctor With Blind Spot Loses LLC Manager Position
Last month, the Delaware Court of Chancery upheld an amendment of a Limited Liability Company agreement through a merger even when it had recently struck down a similar amendment in the same LLC agreement. In Campus Eye Management Holdings, LLC v. E. Bruce DiDonato, OD, Vice Chancellor Will concluded that because the LLC agreement…
The Dog That Didn’t Bark: Court of Chancery Decision Reaffirms the Strength of the Demand Futility Standard
In July, in Vladimir Gusinsky Revocable Tr. v. Hayes, No. CV 2022‑1124‑MTZ (July 23, 2024), Vice Chancellor Zurn issued an opinion reiterating the high bar a plaintiff must overcome to excuse demand.
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(Fear) the Reaper, LLC: Court of Chancery Clarifies LLC Governance Rights Upon Member Death
A recent decision from the Delaware Court of Chancery, Gurney-Goldman v. Goldman, C. A. 2023-1124-JTL (July 12, 2024), addressed a matter of first impression: What is the power of an estate’s executor to exercise an LLC member’s corporate governance rights after that member dies or becomes disabled? The case reveals a tension between the “pick…