February 7, 2025
Del. Supreme Affirms Chancery Decision Applying “Corwin Cleansing” to Price Reduction
In a brief, one-page order this week in In re Anaplan, Inc. Stockholders Litigation (Del.; 2/25), the Delaware Supreme Court affirmed the Chancery Court’s June 2024 approval of a motion to dismiss breach of fiduciary duty claims arising out of a $400 million reduction in the purchase price to be paid to target stockholders as a result of post-signing equity awards to insiders that allegedly violated the terms of the merger agreement. In In re Anaplan, Inc. Stockholders Litigation, (Del. Ch.; 6/24), Vice Chancellor Cook had held that because the transaction was approved by a fully informed and uncoerced vote of the target’s stockholders, it was subject to business judgment review under Corwin.
As John had shared at the time of the Chancery Court decision, the key takeaway may just be that if you want to make a quick exit from a lawsuit based on Corwin cleansing, your best bet is to lay the whole situation out in your proxy disclosure without sugar coating it. Vice Chancellor Cook had also rejected the plaintiffs’ arguments of “situational coercion” and “structional coercion” — i.e., claiming the status quo was so unpalatable that stockholders had no alternative but to vote for the deal at the reduced price doesn’t alone support a finding that the vote was coerced and insufficient for Corwin.
– Meredith Ervine