April 17, 2012

Delaware Finds Rushing to Alter Before Target’s Positive Earnings Could Be Bad Faith

Last week, in In re Answers Corp., Delaware Vice Chancellor Noble refused to dismiss a complaint challenging a merger plaintiffs alleged was entered into hurriedly before very positive results for the target were released that were anticipated to drive up the price of the target stock. VC Noble found the allegations against the outside directors for going along with the rushed process were sufficient to allege bad faith, although it signaled plaintiff was unlikely to prevail on that claim after trial. It also found the aiding and abetting claim against the buyer survived a motion to dismiss, although it also expressed skepticism about the viability of this claim at trial.