January 23, 2020
Delaware: Review of 2019’s “Unsung Heroes”
Francis Pileggi recently posted his 15th annual review of key Delaware decisions on his Delaware Corporate & Commercial Litigation Blog. With some exceptions, Francis focuses his review on what he refers to as “the unsung heroes among the many decisions that have not already been widely discussed by the mainstream press or legal trade publications.” This excerpt on the Chancery Court’s decision in Mehta v. Mobile Posse, (Del. Ch.; 5/19) is a case in point:
A recent Delaware Court of Chancery opinion began by describing the complaint as reading like a law school exam designed to test the knowledge of a student regarding the requirements in the DGCL that must be satisfied in connection with a merger, and the court commented that the company would not have done well on the exam.
In Mehta v. Mobile Posse, Inc., C.A. No. 2018-0355-KSJM (Del. Ch. May 8, 2019), the court identified the six primary issues in this case as follows:
(1) Whether DGCL Section 262 was not complied with in connection with the failure to notify stockholders of their appraisal rights within the required timeframe;
(2) Whether DGCL Section 228 was not complied with due to the failure to send prompt notice of the written stockholder consents;
(3) Whether the merger agreement, or documents it incorporates, failed to comply with DGCL Section 251 by not including the amount of cash the preferred stockholders would receive for their shares;
(4) Whether the stockholder consents did not enjoy the ratifying effect under DGCL Section 144;
(5) Whether the director defendants breached their fiduciary duty of disclosure; and
(6) Whether the director defendants breached the fiduciary duty of loyalty because the merger was a self-dealing transaction and not entirely fair. With one small exception, the court found that the statutory violations were sufficiently established at the early procedural stage of a motion for judgment on the pleadings.
Since Francis refers to this case as an unsung hero, I feel kind of glad that I actually blogged about it. Admittedly, I didn’t quite cover as much ground as he does, but hey, we run a volume business here.
– John Jenkins