DealLawyers.com Blog

I’ve blogged several times about recent cases involving aiding & abetting claims against buyers.  This is a significant emerging trend and I’ve generally tried to blog about new cases dealing with these claims on a timely basis. That being said, I’ve been sitting on an important one for a while. Specifically, I’m referring to Vice Chancellor Laster’s post-trial decision in In re Columbia Pipeline Group Merger Litigation, (Del. Ch.; 6/30), where he ordered a buyer to pay $400 million in damages for aiding & abetting the seller’s breaches of fiduciary duty.

I blogged about the Vice Chancellor’s earlier ruling on the defendants’ motion to dismiss the plaintiffs’ claims, and I had every intention of blogging about his post-trial decision too. However, then I clicked on the decision, discovered it was another one of the Vice Chancellor’s exhaustive – and exhausting – 150+ page opinions and, well, i just couldn’t bring myself to wade through it. I knew that law firms would eventually bail me out, so I decided to bide my time. Fortunately, I was right, and a couple of firms have ridden to my rescue in the past week with memos analyzing VC Laster’s decision. Here’s an excerpt from Dechert’s memo summarizing the decision:

The Delaware Court of Chancery penned the latest chapter, on June 30, 2023, in a long-running dispute concerning TC Energy Corporation’s (“TransCanada”) July 2016 acquisition of Columbia Pipeline Group (“Columbia”), holding TransCanada liable for aiding and abetting breaches of fiduciary duty in Columbia’s sale process, and imposing damages upwards of US$400 million.

The Court’s 192-page Post-Trial Opinion explains when a buyer’s hard bargaining crosses the line into exploiting a corporate fiduciary’s self-interest or carelessness. The Court also imposed aiding and abetting liability on TransCanada for failing to ensure that Columbia’s proxy was not materially misleading. Last, the decision evolves Delaware law to create a presumption that stockholders in public companies rely on materially misleading proxy statements, placing the burden on defendants to rebut this presumption of reliance.

Here are some of the key takeaways from the decision that Fried Frank identified in its memo:

– There is still a high bar to plaintiffs’ success on a claim that a buyer aided and abetted a target’s fiduciary breaches in a sale process. Importantly, the court emphasized that TransCanada would not have aiding and abetting liability but for its having exploited the breaches to try to obtain a better deal for itself. The court stressed the totality of the circumstances, noting that TransCanada did not make foot faults or take a small number of isolated problematic actions, but had “pushed on” the conflicted target officers for months. Then, the reduced offer price and coercive threats “caused the tower of actions TransCanada had taken over the preceding months to topple across the line of culpability.”

– The decision also furthers a recent trend of the court being more receptive to claims that a buyer aided and abetted a target’s breaches of the duty of disclosure. The court found that Columbia’s disclosure was materially false or misleading; that TransCanada knew as much (as the material omissions and misstatements related to TransCanada’s own interactions with Columbia in the sale process); and that TransCanada participated in the breach given that it reviewed the proxy statement (as it was contractually required to do under the merger agreement) but made no comments to correct the omissions or misstatements.

Vice Chancellor Laster’s decision also creates a rebuttable presumption that the stockholders of a public company relied upon materially false or misleading disclosure provided to them by the company concerning a matter requiring their approval. That’s a big deal, because this presumption would permit stockholders in future cases to receive an award of rescissory damages without the need to establish individualized reliance.

– John Jenkins