Monthly Archives: January 2016

January 28, 2016

Court Decides Successor In Merger May Enforce Arbitration Clause

Here’s a blog from Allen Matkin’s Keith Bishop:

Can a party to written agreement that does not include an arbitration clause enforce an arbitration provision in another agreement to which it is not a party? Boiled down to the essentials, this is the question decided yesterday by the Court of Appeal in Jenks v. DLA Piper Rudnick Gray Cary US LLP, Cal. Ct. of Appeal Case No. A143990 (Dec. 16, 2015). The Court’s holding that a nonsignatory party can enforce the arbitration provision is less surprising under the facts of the case.

The plaintiff, M. Todd Jenks, was hired by Gray Cary Ware & Friedenrich (Gray Cary). His offer letter included an arbitration clause. Gray Cary subsequently merged into DLA Piper. Thereafter, DLA Piper and Mr. Jenks signed a termination agreement that made no mention of arbitration. Over two years later, Mr. Jenks sued DLA Piper, alleging four causes of action. DLA succeeded in persuading the trial court to order arbitration. Although the arbitrator returned an award for Mr. Jenks, he decided to appeal the trial court’s entry of judgment in conformity with the arbitration award.

The Court of Appeal, in an opinion by Justice Robert L. Dondero, found that DLA Piper had standing to enforce the arbitration agreement in the offer letter even though it was not a party based on Marenco v. DirecTV, 233 Cal. App. 4th 1409 (2015). The Court, citing California Corporations Code § 16914 and Maryland law, also found that DLA Piper succeeded by operation of law to Gray Cary’s contract rights. Next, the Court found that Gray Cary’s offer letter had not been modified and was not superseded by DLA Piper’s termination letter, notwithstanding an integration clause in the termination letter. In this case, integration was expressly limited to the “subject matter hereof”, i.e., the terms of Mr. Jenks’ resignation.

While the Court of Appeal’s opinion makes interesting reading, it does raise one significant question. Why did the Court bother to write it at all? At the outset, the Court held that Mr. Jenks had forfeited his argument that DLA Piper as a nonsignatory could not enforce the arbitration agreement. When a team forfeits a game, they don’t go ahead and play the game. It’s simply game over. In this case, the Court’s analysis, however illuminating, would appear to be just dicta.

January 27, 2016

Webcast: “Best Efforts Offerings – Nuts & Bolts”

Tune in tomorrow for the webcast – “Best Efforts Offerings: Nuts & Bolts” – to hear from Hunton & Williams’ Greg Cope, Arnall Golden Gregory’s Bob Dow and Pillsbury’s Bob Robbins to learn the nuances of Rule 10b-9 and “best efforts” offerings. Here’s our “Best Efforts Offerings Handbook“…

January 26, 2016

HSR’s Revised Jurisdictional Thresholds

As noted in these memos, the thresholds set forth in the HSR Act have been revised ― as they are annually―based on the change in gross national product. The minimum size of transaction has been raised from $76.3 million to $78.2 million – expected to apply to all transactions closing after the effective date, probably in the last week of February 2016.

January 25, 2016

Disclosure-Only Settlements: In re Trulia As Death Knell?

Last week, I blogged about a recent study that shows disclosure-only settlements dropping dramatically in the last quarter of 2015 as the Delaware judiciary delivered some hard-hitting decisions in that area. Now we have In re Trulia, CA 10020-CB (Del. Ch.; 1/22/16), in which Chancellor Bouchard refused to approve a disclosure-only settlement with a decision that possibly delivers a coup de grace to these types of settlements absent a showing that the additional disclosures are clearly material.

Chancellor Bouchard’s decision makes it clear that the Delaware Chancery Court will no longer approve settlements involving the release of broad claims in exchange for additional disclosures of dubious quality. These settlements have involved an exchange of near-meaningless changes to the “Background,” “Interests of Certain Persons in the Merger” and “Opinion of Financial Advisor” sections of a merger proxy or Schedule 14D-9 – and/or merely cosmetic changes to the buyer’s deal protections in a merger agreement – in return for a defendant’s agreement to support the plaintiff’s fee application.

So In re Trulia is a potential game-changer – as it comes on the heels Aeroflex, Riverbed, TW Telecom, etc. – as it may further diminish the leverage that strike suit firms have been able to wield for years. It appears to be the most potent condemnation of marginally-pled claims – and it should refocus deal litigation on those relatively rare circumstances where there is demonstrable evidence of disloyalty, bad faith and disqualifying conflicts of interest.

Notably, Chancellor Bouchard recommends the adoption – on a clear day – of exclusive forum bylaws to the extent the decision fuels an increase in deal litigation outside of Delaware. And he calls on the courts of “sister states” to appreciate the judicial waste inherent in litigation designed only to line the pockets of plaintiff firms while providing no real value to shareholders. Thanks to Greenberg Traurig’s Cliff Neimeth for his insights!

Also see this blog by Steve Quinlivan – and we’re posting memos in our “Disclosure” Practice Area

January 22, 2016

UK’s Coming Regime: Disclose Shareholders With “Significant Control”

Here’s news from this Pillsbury memo: Starting in April, UK companies will be required to maintain a publicly available register of people who have “significant control” over them. This new register is part of a wider movement to increase transparency around who ultimately owns and controls companies incorporated in the UK and is being implemented before other EU countries do the same in 2017. With final form guidance due in the next few months, now is the time for companies to consider how they will approach what could well be a time-consuming process of compiling the register, informing possible overseas shareholders on the new rules, and ensuring compliance with these new obligations.

January 21, 2016

Nasdaq May Propose “Golden Leash” Disclosure Requirement

According to this Jones Day memo, it’s possible that Nasdaq is planning to propose new rules that would require disclosure of any compensation arrangements with those who serve as dissident director candidates. This would fuel the debate over “golden leash” payments made by activists to their director nominees in a proxy fight. The memo outlines the arguments both for – and against – such payments…

January 20, 2016

Study: “Merger Objection” Litigation Drops Heavily in Last Quarter of ’15

Recently, as noted in the “D&O Diary Blog,” Matthew Cain (an economist fellow for the SEC) and Professor Steven Davidoff Solomon came out with this study that analyzes preliminary statistics for takeover litigation in 2015 – lawsuits were brought in 88% of completed takeovers last year versus 95% in 2014. But the real story is reflected by the stats for the last quarter of 2015, as litigation was heavily impacted by Delaware counts stepping up to challenge “disclosure only” settlements in a slew of cases – dropping the lawsuit rate to just 21% in that quarter. Despite the higher rates of dismissals, large awards and settlements were given in litigation arising from the Rural/Metro, Dole and Freeport-McMoRan, as noted in this Dodd-Frank blog

January 19, 2016

Activism’s Long Road From Corporate Raiding to Banner Year

The charts in this article outline how activism has changed. And here’s an excerpt from this WSJ article:

After decades of being treated as boorish gate-crashers, activist investors are infiltrating the boardrooms of large companies like never before. This year activists launched more campaigns in the U.S.—360 through Dec. 17—than any other year on record, according to FactSet. They secured corporate board seats in 127 of those campaigns, blowing past last year’s record of 107. Activists now manage more than $120 billion in investor capital, double what they had just three years ago, according to researcher HFR.

The industry has come a long way since the 1980s, when Carl Icahn, Saul Steinberg, T. Boone Pickens and other mavericks would amass large stakes in companies and demand a sale of the entire company. They were called “corporate raiders” and “greenmailers” and were widely criticized.

These days activists, while not exactly welcomed in corporate boardrooms, are rarely treated as ill-mannered outsiders. “These activist funds are just a different asset class who have the same pensions and endowments investing in them as other funds,” says Rob Kindler, head of mergers and acquisitions at Morgan Stanley. “The demonization of activists, when really what they are doing is providing returns to the same pension and endowment plans, just seems overdone.”

Several factors contributed to this shift, according to corporate executives, activists, bankers and lawyers. The financial crisis fanned dissatisfaction with corporate executives and brought low interest rates that helped activists thrive. Activists got more sophisticated about analyzing target companies and built alliances with other big shareholders, including mutual funds. And broad shifts in corporate governance gave more power to all shareholders, including activists.

January 12, 2016

2015 MAC Survey

Recently, Nixon Peabody posted its “2015 MAC Survey.” Here is an excerpt:

Our inaugural survey, which covered 2001 to 2002, reflected the effects of the September 11, 2001, terrorist attacks on dealmaking. The next year’s study indicated a trend toward bidder-friendly MAC clauses during 2002–2003 and significant expansions of the exclusions focused on acts of terrorism and war and on broad-based market volatility. As economic activity picked up between 2004 and 2007, our surveys reported increasingly pro-target formulations with robust lists of exclusions. The economic downturn and credit crisis halted this pro-target trend, and our 2008 and 2009 surveys showed another increase in the negotiating strength of bidders through the marked decrease in the use of exclusions to MAC provisions. But as the nation began its climb out of the recession, our surveys from 2010 through 2012 signaled a return in target negotiating strength.

However, the ongoing economic recovery has been gradual, and our recent surveys note the cautious optimism of dealmakers. While our 2013 survey reflected increases in both pro-target and pro-bidder trends, the 2014 survey indicated the development of pro-bidder trends, which were continued in the 2015 survey.

January 11, 2016

January-February Issue: Deal Lawyers Print Newsletter

This January-February issue of the Deal Lawyers print newsletter was just posted – & also mailed – and includes articles on (try a 2016 no-risk trial):

– Rural Metro: Lessons Learned
– Unbundling Proposals After the Holidays
– Boards & Their Financial Advisors: What Do Recent Delaware Opinions Mean for Processes & Relationships?
– Explosion of Representation & Warranty Insurance in the Lower Middle Market
– How Target Could Impact Acquirer’s Conflict Minerals Reporting
– Some Crystal Balling: M&A Insurance & the Future Role of Deal Lawyers
– So Where Are All The M&A Arbitration Provisions?
– Closing Your M&A Deal on a Weekend

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online for the first time. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.