Shareholder Litigation in M&A: Procedural Issues, Remedies, Defense Strategies, Responding to Meritless Claims

Since the landmark 2016 Delaware Chancery Court decision in In re Trulia, much shareholder litigation relating to M&A deals has moved to federal district courts. These cases are rarely litigated even to a motion to dismiss, and instead tend to settle quickly, with defendants making additional disclosures and counsel for the shareholder seeking a small “mootness” fee. Commentators have rightly called these nuisance cases a “deal tax.” Some recent developments suggest meaningful alternatives to this situation for defendants wanting to challenge these cases.

Even with the migration of these disclosure-based cases to federal court, significant M&A litigation continues to be pursued by shareholders in Delaware Chancery Court against directors and officers for breaches of fiduciary duty. In particular, such litigation tends to be brought as direct actions--and often as class actions--in connection with transactions involving controlling shareholders or alleged conflicts. There has also been a significant trend in shareholders bringing derivative claims against boards under Caremark. In much of this litigation, shareholders have been successful in making increasing use of Section 220 books and records demands in advance of bringing the M&A litigation, which has supported plaintiffs in many cases in defeating motions to dismiss.

Listen as our authoritative panel discusses various aspects of shareholder litigation in merger transactions and how to defend against those actions so that the deal may proceed.

1. Types of shareholder claims
   1. Federal Section 14(a) claims
   2. Fiduciary duty claims, direct and derivative
   3. Revlon claims and Corwin protection
   4. Transactions involving controllers and MFW protection
2. Use of Section 220 books and records demands
3. Standards of review
4. Remedies: injunctive relief, damages
5. Defense strategies

The panel will review these and other important issues:

• What are some alternative defensive strategies for resolving federal disclosure claims under Section 14(a)?
• What strategic factors should defendants consider in responding to Section 220 books and records demands where litigation is anticipated?
• What are the principal issues for defendants in actions asserting Revlon claims, and how should defense counsel respond?
• What are the principal issues for defendants in actions involving controlling shareholders, and how should defense counsel respond?
• What should guide defendants in responding to derivative claims against officers and directors for breaching their fiduciary duties?