October 19, 2015
Delaware Supreme Court Reduces Incentive for Plaintiff Firms to Pursue Healthways-Type Complaints
Last week, the Delaware Supreme Court affirmed Vice Chancellor Glasscock’s bench ruling in Fire & Police Pension Fund, San Antonio v. Arris Group, which significantly reduces the incentives for plaintiff firms to file Healthways-type complaints – although $128K may still be a sufficient incentive for some of the lesser plaintiff firms. Here’s VC Glasscock’s original bench ruling from February awarding $128K in plaintiff attorney’s fees.
Following VC Laster’s decision in Healthways denying the motions to dismiss breach of fiduciary duty claims against the Healthways board – and the aiding & abetting breach of fiduciary duty claims against the bank acting as administrative agent for Healthways’ credit facility – a virtual cottage industry developed as plaintiff firms filed numerous Section 220 actions and Healthways-type complaints against the boards of companies whose credit agreements contained similar dead hand change-of-control default provisions and the associated banks acting as administrative agents. Now that the Delaware Supreme Court has spoken regarding the attorneys fees awarded in Arris, it may be easier to finally resolve many of the existing mooted Healthways-type claims as this decision should significantly lower the expectations for plaintiff firms to be awarded attorneys’ fees.
The Healthways decision remains of concern to many banks for the expansive definition of “knowing participation” relied upon by the court in denying the administrative agent’s motion to dismiss the aiding & abetting breach of fiduciary duty claims, as that broad definition of “knowing participation” likely makes it more difficult for financial advisors to get similar claims dismissed in the M&A context…