The document discusses merger objection lawsuits that typically occur when a company is acquired. It provides examples of typical characteristics of these lawsuits, including that they usually follow the announcement of a merger within two weeks and are often settled within two months. The document also summarizes the fiduciary duties of company directors in evaluating merger offers, including the duties of care, good faith and loyalty. It notes that Delaware law establishes three levels of scrutiny for the court to evaluate director decisions: the business judgment rule, enhanced scrutiny, and entire fairness.
Edwards Wildman John Hughes Merger Objection Suits PresentationEdwards Wildman
This document summarizes the key aspects of merger objection lawsuits. It begins with a hypothetical scenario of a public company being acquired. It then discusses what merger objection lawsuits are, including their typical characteristics, outcomes, and standards applied by courts. It provides examples of case studies and discusses insurance implications. Merger objection lawsuits almost always follow the announcement of an acquisition and most result in supplemental disclosures and attorney fee payments for plaintiffs.
Igor Ellyn, QC, CS is a leading Toronto litigation lawyer, chartered arbitrator and mediator, who specializes in shareholders disputes and arbitration. In this highly informative presentation, Mr. Ellyn discusses litigation and arbitration of shareholder oppression cases.
This document provides an overview of bankruptcy law concepts including eligibility for bankruptcy, how bankruptcy changes leverage for parties, why companies file for bankruptcy, and the automatic stay. It discusses a hypothetical scenario involving a distressed Manhattan office building and examines bankruptcy issues that may arise, such as filing eligibility for limited liability companies. The document also covers factors courts examine for bad faith filings and cases where independent directors or "friendly" involuntary bankruptcy petitions were used.
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Pa...NationalUnderwriter
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Party Bad Faith; Acknowledges Relevance of Actual Investigation by Frederic J. Giordano and Robert F. Pawlowski
The Supreme Court of New Jersey recently issued an important pair of decisions for policyholders with bad faith claims against their first-party insurance companies in Badiali v. New Jersey Manufacturers Insurance Group[1] and Wadeer v. New Jersey Manufacturers Insurance Company.[2] In Badiali and Wadeer, the court reiterated the narrow “fairly debatable” standard as the threshold for bad faith claims in New Jersey. But, the court also opened the door to modify this standard in the Badiali decision by recognizing the relevance of the actual claims handling in a particular case.
General Liability, Umbrella/Excess Coverage, Commercial Auto-Workers’ Compens...Financial Poise
As a business owner, there are a plethora of choices when it comes to insurance. This webinar touches upon all you need to know about General Liability, Umbrella/Excess Coverage, Commercial Auto Insurance, and Workers’ Compensation insurance.
General liability coverage protects the business from third party suits for Property and Bodily Injury claims. The panelists also look at potential product liability or intellectual property exposure that is not covered. Most business owners understand that commercial umbrella is a must, but how do you determine how much is the right amount? The panelists will also examine why Hired/Non-Owned is important when it comes to Commercial Auto coverage.The panelists will also touch upon best practices for managing employees who drive for your business with their own cars.
The panelists will also cover Workers’ Compensation insurance. Topics discussed include managing the costs of the insurance itself as well as the proper management of workers compensation claims. Other topics discussed include codes and classification errors, how to get money back from the insurer, as well as best practices for Independent Contractors.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/general-liability-umbrella-excess-coverage-commercial-auto-workers-compensation-2021/
Ma and Pa invested their retirement savings based on the advice of an investment advisor. Their investments were in risky or fraudulent schemes that resulted in losses of most or all of their money. Now in their retirement with little income or assets, Ma and Pa are seeking ways to recover some of their losses. Potential avenues for recovery include pursuing legal action against the brokers and brokerage firms that sold them the investments, as these parties may have liability if they did not properly vet the investments or make suitable recommendations. Any funds recovered would likely only provide partial compensation and legal action could take several years.
External Meeting for Proposed Rule 79 FR 59898 (May 12, 2015 with William J. ...William J. Harrington
1) ABS issuers are high-risk end users of swap contracts as they cannot readily raise new funds or adjust their capital structure to pay termination payments, unlike corporations or municipalities.
2) During the financial crisis, interest rate rallies left ABS issuers owing 10-20% of swap notional amounts in termination fees, which would have caused firesales of illiquid assets without bailouts.
3) Requiring ABS issuers to post full margin against all swaps would simplify contracts and help resolve issues caused by flip clauses that allow ABS issuers to subordinate termination payments owed to bankrupt counterparties.
Edwards Wildman John Hughes Merger Objection Suits PresentationEdwards Wildman
This document summarizes the key aspects of merger objection lawsuits. It begins with a hypothetical scenario of a public company being acquired. It then discusses what merger objection lawsuits are, including their typical characteristics, outcomes, and standards applied by courts. It provides examples of case studies and discusses insurance implications. Merger objection lawsuits almost always follow the announcement of an acquisition and most result in supplemental disclosures and attorney fee payments for plaintiffs.
Igor Ellyn, QC, CS is a leading Toronto litigation lawyer, chartered arbitrator and mediator, who specializes in shareholders disputes and arbitration. In this highly informative presentation, Mr. Ellyn discusses litigation and arbitration of shareholder oppression cases.
This document provides an overview of bankruptcy law concepts including eligibility for bankruptcy, how bankruptcy changes leverage for parties, why companies file for bankruptcy, and the automatic stay. It discusses a hypothetical scenario involving a distressed Manhattan office building and examines bankruptcy issues that may arise, such as filing eligibility for limited liability companies. The document also covers factors courts examine for bad faith filings and cases where independent directors or "friendly" involuntary bankruptcy petitions were used.
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Pa...NationalUnderwriter
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Party Bad Faith; Acknowledges Relevance of Actual Investigation by Frederic J. Giordano and Robert F. Pawlowski
The Supreme Court of New Jersey recently issued an important pair of decisions for policyholders with bad faith claims against their first-party insurance companies in Badiali v. New Jersey Manufacturers Insurance Group[1] and Wadeer v. New Jersey Manufacturers Insurance Company.[2] In Badiali and Wadeer, the court reiterated the narrow “fairly debatable” standard as the threshold for bad faith claims in New Jersey. But, the court also opened the door to modify this standard in the Badiali decision by recognizing the relevance of the actual claims handling in a particular case.
General Liability, Umbrella/Excess Coverage, Commercial Auto-Workers’ Compens...Financial Poise
As a business owner, there are a plethora of choices when it comes to insurance. This webinar touches upon all you need to know about General Liability, Umbrella/Excess Coverage, Commercial Auto Insurance, and Workers’ Compensation insurance.
General liability coverage protects the business from third party suits for Property and Bodily Injury claims. The panelists also look at potential product liability or intellectual property exposure that is not covered. Most business owners understand that commercial umbrella is a must, but how do you determine how much is the right amount? The panelists will also examine why Hired/Non-Owned is important when it comes to Commercial Auto coverage.The panelists will also touch upon best practices for managing employees who drive for your business with their own cars.
The panelists will also cover Workers’ Compensation insurance. Topics discussed include managing the costs of the insurance itself as well as the proper management of workers compensation claims. Other topics discussed include codes and classification errors, how to get money back from the insurer, as well as best practices for Independent Contractors.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/general-liability-umbrella-excess-coverage-commercial-auto-workers-compensation-2021/
Ma and Pa invested their retirement savings based on the advice of an investment advisor. Their investments were in risky or fraudulent schemes that resulted in losses of most or all of their money. Now in their retirement with little income or assets, Ma and Pa are seeking ways to recover some of their losses. Potential avenues for recovery include pursuing legal action against the brokers and brokerage firms that sold them the investments, as these parties may have liability if they did not properly vet the investments or make suitable recommendations. Any funds recovered would likely only provide partial compensation and legal action could take several years.
External Meeting for Proposed Rule 79 FR 59898 (May 12, 2015 with William J. ...William J. Harrington
1) ABS issuers are high-risk end users of swap contracts as they cannot readily raise new funds or adjust their capital structure to pay termination payments, unlike corporations or municipalities.
2) During the financial crisis, interest rate rallies left ABS issuers owing 10-20% of swap notional amounts in termination fees, which would have caused firesales of illiquid assets without bailouts.
3) Requiring ABS issuers to post full margin against all swaps would simplify contracts and help resolve issues caused by flip clauses that allow ABS issuers to subordinate termination payments owed to bankrupt counterparties.
Help, My Business is In Trouble! (Series: Restructuring, Insolvency & Trouble...Financial Poise
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/help-my-business-is-in-trouble-2021/
This document summarizes the state of third-party litigation funding in Ireland according to the following key points in 3 sentences:
Third-party litigation funding is generally not permitted in Ireland due to common law rules against maintenance and champerty. While the courts have considered updating these laws, they have so far affirmed that third-party funding remains unlawful without legislative change. Some alternative options are available like conditional fee agreements, but professional third-party funding by those without a pre-existing interest in the litigation remains prohibited.
Hot Topics In Class Actions (February 2012)Miranda Lam
This document summarizes sessions from a conference on defending class actions in Canada. It discusses trends in British Columbia class action law, including certification standards becoming easier and the scope of cases expanding to national classes. Pre-certification strategies for defendants are outlined, such as challenging jurisdiction, arbitration agreements, or the nature of the claim. The document also covers class action issues like limitation periods in trust claims, aggregate damages, and post-settlement contribution.
Help, My Business is in Trouble! (Series: Restructuring, Insolvency & Trouble...Financial Poise
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/help-my-business-is-in-trouble-2020/
Three Case Studies (Series: Commercial Litigation Funding 101) Financial Poise
This webinar discusses three litigation funding case studies:
1) Disclosure of litigation funding arrangements in class action lawsuits. Recent court rulings have ordered disclosure of funding but prohibited disclosure of funder communications.
2) Non-attorney ownership of law firms. While historically prohibited, some jurisdictions now allow alternative business structures, including PWC partnering with a law firm.
3) Other developments, including a litigation funder purchasing a judgment, New York legislation on consumer funding, and securitization of litigation funding claims. The panel of litigation funding experts analyzes these cases and discusses legal and strategic implications.
Key Provisions in M&A Agreements (Series: M&A Boot Camp)Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. This episode explains specific, common provisions and discusses how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/key-provisions-in-ma-agreements-2021/
Avoiding Malpractice Conflicts Of Interest In Bankruptcy ...legal5
This document discusses conflicts of interest that can arise in bankruptcy representations and the standards that attorneys must follow to avoid legal malpractice claims. It notes that conflicts of interest are one of the most common claims in malpractice cases, especially in bankruptcy. The document outlines the Model Rules of Professional Conduct, Texas Disciplinary Rules of Professional Conduct, and Bankruptcy Code Section 327 that provide standards for evaluating conflicts. It emphasizes that a conflicts analysis is highly fact-specific and examines factors like the identity of the client and potential duties to third parties that could create conflicts in bankruptcy cases.
Alternative Structures - PO Financing, Factoring & MCA (Series: Business Borr...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2021/
TROs and Preliminary Injunctions (Series: Newbie Litigator School 101 - Part 1)Financial Poise
Sometimes—often at the beginning of a case—you need the court to take immediate action to protect your client’s interests or to maintain the status quo while the litigation progresses. This webinar discusses procedures and strategies for obtaining temporary restraining orders and preliminary injunctions. The topics discussed include the procedural and substantive requirements for obtaining TROs and preliminary injunctions, some best practices for how to succeed on motions seeking TROs and preliminary injunctions, and how to challenge and defeat those motions.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/tros-and-preliminary-injunctions-2021/
PLI M&A 2017 - Advanced Trends Opening Remarks 1-12-17 (Display)Kevin Miller
This document provides an opening remarks summary for a conference on mergers and acquisitions trends from 2017. It discusses four significant trends from prior years that have affected Delaware litigation: 1) adoption of exclusive venue bylaws, 2) the M&F Worldwide decision permitting dismissal of claims with controller transactions under certain conditions, 3) the Cornerstone Therapeutics decision permitting dismissal of duty of care claims with an exculpatory clause, and 4) the Corwin v. KKR Financial decision establishing the business judgment rule for fully informed stockholder approved mergers. It then summarizes major mergers and acquisitions developments and cases from 2016 related to interpreting and applying the Corwin decision.
These slides will go into an indepth discussion on the aspects and requirements of reverse and forward triangular mergers. For more information, contact our firm. (08/2016)
Bad Faith Litigation in Canada: Much Ado About Nothing?Samantha Ip
1. Bad faith litigation and large punitive damage awards against insurers in Canada are rare compared to the US. The highest court in Canada has limited punitive damages against insurers to $1 million, and there have been few cases where insurers were found liable for bad faith refusal to settle.
2. The duty of good faith is an implied term in insurance contracts in Canada, but there is no statutory cause of action for insurer bad faith as there is in some US states. Punitive damages require a showing of both overwhelmingly inadequate claims handling and exceptionally egregious insurer conduct.
3. Allegations of bad faith claims handling are commonly included in coverage lawsuits in Canada, but rarely result in punitive damage awards.
The document discusses fiduciary duties and challenges following the Supreme Court's Dudenhoeffer decision. It summarizes various court cases that have addressed different types of ERISA stock drop claims. The document discusses claims based on publicly available information and whether "special circumstances" were adequately alleged. It also discusses pleading standards for claims based on inside information, examining what alternative actions plaintiffs must plausibly allege fiduciaries could have taken without doing more harm than good. The document provides examples from multiple circuit court cases.
Deal Lawyers - Knowing Participation Article 3-5-15Kevin Miller
1. The document discusses conflicting views on the "knowing participation" element of aiding and abetting claims in the context of "dead hand" change of control provisions in credit agreements.
2. It summarizes a Delaware Court of Chancery case, Healthways, where the court refused to dismiss aiding and abetting claims against an administrative agent for including a dead hand provision.
3. However, two subsequent Delaware Court of Chancery cases, Lee v Pincus and In re Comverge, applied a narrower definition of "knowing participation" that arguably would have led to dismissal in Healthways.
Helen Kim - 2015 Roundtable SecuritiesHelen B. Kim
The document summarizes a roundtable discussion about recent developments affecting securities litigation, including the ATP Tour v. Deutscher Tennis Bund decision on fee-shifting bylaws and the Halliburton Co. v. Erica P. John Fund Inc. ruling. The participants, who are lawyers from various firms, discussed how the ATP Tour decision could enable fee-shifting in securities litigation but may not apply to fraud claims. They also debated whether fee-shifting bylaws could curb frivolous suits or deter valid litigation, and anticipated regulatory and legislative responses. Regarding Halliburton, the ruling maintained the fraud-on-the-market theory but made it easier for defendants to rebut the presumption
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...Financial Poise
Litigation funding is an increasingly-popular tool for attorneys and clients to share the risk and reward of litigation with third-party investors, and for investors to capitalize on the uncorrelated returns generated by legal-driven revenue. However, the term "litigation-" or "legal-" funding actually encompasses a handful of products, which vary based on borrower profile, stage and sector of litigation, use of proceeds, and ultimately, cost of capital and risk-reward profile. This webinar examines three funding products -- case fundings, law firm loans, and portfolio fundings -- and aims to inform attorneys on best solutions for their firms and clients, and provide an overview for institutional investors looking to allocate capital to litigations.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/a-menu-of-products-for-investors-and-lawyers-2021/
This document discusses the intersection of business law and bankruptcy. It provides an overview of bankruptcy law concepts including different chapters of bankruptcy, the automatic stay, treatment of secured and unsecured claims, executory contracts, leases, sales of property, and plan confirmation. It also discusses how various business situations could intersect with bankruptcy law, such as when a business, vendor, customer or owner experiences financial troubles. Key areas of focus are reviewing cash flow and debt structure, analyzing claims and contracts, and understanding opportunities to purchase debtor assets.
The document discusses several recent Delaware court cases that have implications for financial advisors, including In re Dole Food Co. shareholder litigation. It summarizes the key claims, findings, and conclusions of the Dole Food case, including that the court found the company's controller and president breached their fiduciary duties but did not find the financial advisor liable. It also summarizes allegations and issues discussed in In re PLX Technology and In re Zale Corp. shareholder litigation regarding potential conflicts of interest of financial advisors.
Data Breach Response: Before and After the Breach (Series: Cybersecurity & Da...Financial Poise
This document discusses responding to a data breach, including identifying if a breach has occurred, investigating the breach, containing the breach, fixing vulnerabilities, assembling a breach response team, and determining notification obligations. It provides an overview of steps to take in the first 24 hours of discovering a breach, such as securing premises, stopping additional data loss, and assessing risks. It also outlines some state-specific notification requirements, such as notifying various government agencies in Massachusetts and the Superintendent of Financial Services in New York within 72 hours of certain cybersecurity events.
Sometimes It Begins When A Client, Tenant, Or Customer Starts To Slow-Pay, With The Result That Your Accounts Receivable Start To Accrue Gradually. Other Times The Issue Presents Itself More Suddenly. Either Way, You Find Your Company Owed A Great Deal Of Money That Looks Like It May Not Be Collected Because Your Client/Tenant/Customer Has Filed Bankruptcy, Has Commenced An Assignment For The Benefit Of Creditors, Has Been Put Into Receivership, Or Is Otherwise Just Plain Insolvent. What Do You Do? What Should You Not Do? The Topics Discussed In This Webinar Include The Pros And Cons Of Putting A Counterparty Into Involuntary Bankruptcy; When And How You May Be Able To Pursue Third Parties (Like Guarantors, Directors, Or Officers) For The Amount Owed; Risks Related To Preference Attack; Pros And Cons Of Sitting On A “Creditors’ Committee” In A Chapter 11; How To Negotiate For “Critical Vendor” Protection In Chapter 11; And Practical Guidance For Continuing To Provide Goods Or Services To An Insolvent Counterparty.
Part of the webinar series: Restructuring, Insolvency & Troubled Companies 2021
See more at https://www.financialpoise.com/webinars/
RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022: Bad Debtor Owes Me Money!Financial Poise
Sometimes it begins when a client, tenant, or customer starts to slow-pay, with the result that your accounts receivable start to accrue gradually. Other times the issue presents itself more suddenly. Either way, you find your company owed a great deal of money that looks like it may not be collected because your client/tenant/customer has filed bankruptcy, has commenced an assignment for the benefit of creditors, has been put into receivership, or is otherwise just plain insolvent. What do you do? What should you not do? The topics discussed in this webinar include the pros and cons of putting a counterparty into involuntary bankruptcy; when and how you may be able to pursue third parties (like guarantors, directors, or officers) for the amount owed; risks related to preference attack; pros and cons of sitting on a “creditors’ committee” in a Chapter 11; how to negotiate for “critical vendor” protection in Chapter 11; and practical guidance for continuing to provide goods or services to an insolvent counterparty.
Part of the webinar series: RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022
See more at https://www.financialpoise.com/webinars/
Help, My Business is In Trouble! (Series: Restructuring, Insolvency & Trouble...Financial Poise
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/help-my-business-is-in-trouble-2021/
This document summarizes the state of third-party litigation funding in Ireland according to the following key points in 3 sentences:
Third-party litigation funding is generally not permitted in Ireland due to common law rules against maintenance and champerty. While the courts have considered updating these laws, they have so far affirmed that third-party funding remains unlawful without legislative change. Some alternative options are available like conditional fee agreements, but professional third-party funding by those without a pre-existing interest in the litigation remains prohibited.
Hot Topics In Class Actions (February 2012)Miranda Lam
This document summarizes sessions from a conference on defending class actions in Canada. It discusses trends in British Columbia class action law, including certification standards becoming easier and the scope of cases expanding to national classes. Pre-certification strategies for defendants are outlined, such as challenging jurisdiction, arbitration agreements, or the nature of the claim. The document also covers class action issues like limitation periods in trust claims, aggregate damages, and post-settlement contribution.
Help, My Business is in Trouble! (Series: Restructuring, Insolvency & Trouble...Financial Poise
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/help-my-business-is-in-trouble-2020/
Three Case Studies (Series: Commercial Litigation Funding 101) Financial Poise
This webinar discusses three litigation funding case studies:
1) Disclosure of litigation funding arrangements in class action lawsuits. Recent court rulings have ordered disclosure of funding but prohibited disclosure of funder communications.
2) Non-attorney ownership of law firms. While historically prohibited, some jurisdictions now allow alternative business structures, including PWC partnering with a law firm.
3) Other developments, including a litigation funder purchasing a judgment, New York legislation on consumer funding, and securitization of litigation funding claims. The panel of litigation funding experts analyzes these cases and discusses legal and strategic implications.
Key Provisions in M&A Agreements (Series: M&A Boot Camp)Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. This episode explains specific, common provisions and discusses how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/key-provisions-in-ma-agreements-2021/
Avoiding Malpractice Conflicts Of Interest In Bankruptcy ...legal5
This document discusses conflicts of interest that can arise in bankruptcy representations and the standards that attorneys must follow to avoid legal malpractice claims. It notes that conflicts of interest are one of the most common claims in malpractice cases, especially in bankruptcy. The document outlines the Model Rules of Professional Conduct, Texas Disciplinary Rules of Professional Conduct, and Bankruptcy Code Section 327 that provide standards for evaluating conflicts. It emphasizes that a conflicts analysis is highly fact-specific and examines factors like the identity of the client and potential duties to third parties that could create conflicts in bankruptcy cases.
Alternative Structures - PO Financing, Factoring & MCA (Series: Business Borr...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2021/
TROs and Preliminary Injunctions (Series: Newbie Litigator School 101 - Part 1)Financial Poise
Sometimes—often at the beginning of a case—you need the court to take immediate action to protect your client’s interests or to maintain the status quo while the litigation progresses. This webinar discusses procedures and strategies for obtaining temporary restraining orders and preliminary injunctions. The topics discussed include the procedural and substantive requirements for obtaining TROs and preliminary injunctions, some best practices for how to succeed on motions seeking TROs and preliminary injunctions, and how to challenge and defeat those motions.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/tros-and-preliminary-injunctions-2021/
PLI M&A 2017 - Advanced Trends Opening Remarks 1-12-17 (Display)Kevin Miller
This document provides an opening remarks summary for a conference on mergers and acquisitions trends from 2017. It discusses four significant trends from prior years that have affected Delaware litigation: 1) adoption of exclusive venue bylaws, 2) the M&F Worldwide decision permitting dismissal of claims with controller transactions under certain conditions, 3) the Cornerstone Therapeutics decision permitting dismissal of duty of care claims with an exculpatory clause, and 4) the Corwin v. KKR Financial decision establishing the business judgment rule for fully informed stockholder approved mergers. It then summarizes major mergers and acquisitions developments and cases from 2016 related to interpreting and applying the Corwin decision.
These slides will go into an indepth discussion on the aspects and requirements of reverse and forward triangular mergers. For more information, contact our firm. (08/2016)
Bad Faith Litigation in Canada: Much Ado About Nothing?Samantha Ip
1. Bad faith litigation and large punitive damage awards against insurers in Canada are rare compared to the US. The highest court in Canada has limited punitive damages against insurers to $1 million, and there have been few cases where insurers were found liable for bad faith refusal to settle.
2. The duty of good faith is an implied term in insurance contracts in Canada, but there is no statutory cause of action for insurer bad faith as there is in some US states. Punitive damages require a showing of both overwhelmingly inadequate claims handling and exceptionally egregious insurer conduct.
3. Allegations of bad faith claims handling are commonly included in coverage lawsuits in Canada, but rarely result in punitive damage awards.
The document discusses fiduciary duties and challenges following the Supreme Court's Dudenhoeffer decision. It summarizes various court cases that have addressed different types of ERISA stock drop claims. The document discusses claims based on publicly available information and whether "special circumstances" were adequately alleged. It also discusses pleading standards for claims based on inside information, examining what alternative actions plaintiffs must plausibly allege fiduciaries could have taken without doing more harm than good. The document provides examples from multiple circuit court cases.
Deal Lawyers - Knowing Participation Article 3-5-15Kevin Miller
1. The document discusses conflicting views on the "knowing participation" element of aiding and abetting claims in the context of "dead hand" change of control provisions in credit agreements.
2. It summarizes a Delaware Court of Chancery case, Healthways, where the court refused to dismiss aiding and abetting claims against an administrative agent for including a dead hand provision.
3. However, two subsequent Delaware Court of Chancery cases, Lee v Pincus and In re Comverge, applied a narrower definition of "knowing participation" that arguably would have led to dismissal in Healthways.
Helen Kim - 2015 Roundtable SecuritiesHelen B. Kim
The document summarizes a roundtable discussion about recent developments affecting securities litigation, including the ATP Tour v. Deutscher Tennis Bund decision on fee-shifting bylaws and the Halliburton Co. v. Erica P. John Fund Inc. ruling. The participants, who are lawyers from various firms, discussed how the ATP Tour decision could enable fee-shifting in securities litigation but may not apply to fraud claims. They also debated whether fee-shifting bylaws could curb frivolous suits or deter valid litigation, and anticipated regulatory and legislative responses. Regarding Halliburton, the ruling maintained the fraud-on-the-market theory but made it easier for defendants to rebut the presumption
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...Financial Poise
Litigation funding is an increasingly-popular tool for attorneys and clients to share the risk and reward of litigation with third-party investors, and for investors to capitalize on the uncorrelated returns generated by legal-driven revenue. However, the term "litigation-" or "legal-" funding actually encompasses a handful of products, which vary based on borrower profile, stage and sector of litigation, use of proceeds, and ultimately, cost of capital and risk-reward profile. This webinar examines three funding products -- case fundings, law firm loans, and portfolio fundings -- and aims to inform attorneys on best solutions for their firms and clients, and provide an overview for institutional investors looking to allocate capital to litigations.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/a-menu-of-products-for-investors-and-lawyers-2021/
This document discusses the intersection of business law and bankruptcy. It provides an overview of bankruptcy law concepts including different chapters of bankruptcy, the automatic stay, treatment of secured and unsecured claims, executory contracts, leases, sales of property, and plan confirmation. It also discusses how various business situations could intersect with bankruptcy law, such as when a business, vendor, customer or owner experiences financial troubles. Key areas of focus are reviewing cash flow and debt structure, analyzing claims and contracts, and understanding opportunities to purchase debtor assets.
The document discusses several recent Delaware court cases that have implications for financial advisors, including In re Dole Food Co. shareholder litigation. It summarizes the key claims, findings, and conclusions of the Dole Food case, including that the court found the company's controller and president breached their fiduciary duties but did not find the financial advisor liable. It also summarizes allegations and issues discussed in In re PLX Technology and In re Zale Corp. shareholder litigation regarding potential conflicts of interest of financial advisors.
Data Breach Response: Before and After the Breach (Series: Cybersecurity & Da...Financial Poise
This document discusses responding to a data breach, including identifying if a breach has occurred, investigating the breach, containing the breach, fixing vulnerabilities, assembling a breach response team, and determining notification obligations. It provides an overview of steps to take in the first 24 hours of discovering a breach, such as securing premises, stopping additional data loss, and assessing risks. It also outlines some state-specific notification requirements, such as notifying various government agencies in Massachusetts and the Superintendent of Financial Services in New York within 72 hours of certain cybersecurity events.
Sometimes It Begins When A Client, Tenant, Or Customer Starts To Slow-Pay, With The Result That Your Accounts Receivable Start To Accrue Gradually. Other Times The Issue Presents Itself More Suddenly. Either Way, You Find Your Company Owed A Great Deal Of Money That Looks Like It May Not Be Collected Because Your Client/Tenant/Customer Has Filed Bankruptcy, Has Commenced An Assignment For The Benefit Of Creditors, Has Been Put Into Receivership, Or Is Otherwise Just Plain Insolvent. What Do You Do? What Should You Not Do? The Topics Discussed In This Webinar Include The Pros And Cons Of Putting A Counterparty Into Involuntary Bankruptcy; When And How You May Be Able To Pursue Third Parties (Like Guarantors, Directors, Or Officers) For The Amount Owed; Risks Related To Preference Attack; Pros And Cons Of Sitting On A “Creditors’ Committee” In A Chapter 11; How To Negotiate For “Critical Vendor” Protection In Chapter 11; And Practical Guidance For Continuing To Provide Goods Or Services To An Insolvent Counterparty.
Part of the webinar series: Restructuring, Insolvency & Troubled Companies 2021
See more at https://www.financialpoise.com/webinars/
RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022: Bad Debtor Owes Me Money!Financial Poise
Sometimes it begins when a client, tenant, or customer starts to slow-pay, with the result that your accounts receivable start to accrue gradually. Other times the issue presents itself more suddenly. Either way, you find your company owed a great deal of money that looks like it may not be collected because your client/tenant/customer has filed bankruptcy, has commenced an assignment for the benefit of creditors, has been put into receivership, or is otherwise just plain insolvent. What do you do? What should you not do? The topics discussed in this webinar include the pros and cons of putting a counterparty into involuntary bankruptcy; when and how you may be able to pursue third parties (like guarantors, directors, or officers) for the amount owed; risks related to preference attack; pros and cons of sitting on a “creditors’ committee” in a Chapter 11; how to negotiate for “critical vendor” protection in Chapter 11; and practical guidance for continuing to provide goods or services to an insolvent counterparty.
Part of the webinar series: RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022
See more at https://www.financialpoise.com/webinars/
This document provides an overview and summary of a presentation on proxy contests in M&A from 2012. The presentation discusses the basic information about proxy contests, including what they are and why they occur. It also covers the types of proxy contests, trends in proxy contests, the steps involved and applicable laws, fiduciary duties of directors, and considerations for winning a proxy contest. The presentation was intended to provide information to attendees on these topics related to proxy contests in M&A situations from 2012.
John Darer of 4Structures in Stamford, CTJohn Darer
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Claims Trading in bankruptcy cases has advanced and grown in sophistication swiftly in recent history. Companies and their advisors should be prepared before wading into these waters. How will a claim be treated once transferred? What steps should a company acquiring a claim take to ensure the claim is paid? How should a claim be valued? What kind of documentation will be needed to properly transfer the claim? If a dispute arises regarding the claim, how should the acquiring company defend itself? For 2022, do the financial programs initiated under the CARES Act impact claims trading, and if so, how? This webinar focuses on understanding these issues and addressing best practices for advanced reorganization practitioners and advisors working on the cutting edge of bankruptcy transactions.
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If your business has a corporate board or advisory
committee, you should consider protecting your assets with
D & O insurance. Many people think that only publicly traded
companies require D & O Insurance. In fact, public, private,
and even non-profit organization can face D & O litigation
risks.
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
Part of the webinar series:
RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022
See more at https://www.financialpoise.com/webinars/
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For example, even the most seasoned appraiser may struggle with finding comparative sales for a property. A landowner might see their property value go up exponentially “if only” the city council will allow for a zoning variance. Many an owner believes that their property is in the “path of progress,” but when? Is it reasonable to value a property “as stabilized” if it is only forty percent leased? These are the types of questions we will consider.
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Insider Lease Agreements (Series: Fairness Issues in Real Estate-Based Bankru...Financial Poise
It is a common play in real estate to create a separate operating entity to serve as a tenant and execute a lease between the owner of the property and himself. Typically, this happens in assets which serve as a real estate-based business, such as a retail property. The structured enables the operator to reduce the taxable income of the business and also provide a liability shield for the property owner.
This arrangement can lead to some ethical issues, should the property owner become distressed. For example, is the lease amount above market and therefore being used to inflate the property valuation? Is rent actually being paid? Is there a proper lease in place or just an internal handshake? Attorneys need to understand the set-up in order to know what is in bounds and what is outside the lines.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/insider-lease-agreements-2021/
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See more at https://www.financialpoise.com/webinars/
Corporate Bankruptcy 101 & Select Bankruptcy Issuesmelissaapena
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Single Asset Real Estate Cases (Series: Fairness Issues in Real Estate-Based ...Financial Poise
Anyone involved in the field of creditors rights on a matter involving an LLC that exists solely to hold the principal asset has surely seen the play where, the night before property is scheduled to be sold at a foreclosure auction, the debtor files bankruptcy. For those not familiar with the process, doing so invokes the “Automatic Stay”, which prohibits the secured lender from foreclosing on the property. The debtor then attempts to make their case to the court for reorganization.
But is failing to pay your mortgage really something bankruptcy was meant to solve? If the bank was going to agree to a loan modification, wouldn’t the parties have worked something out by the time the sheriff sale was set? The bankruptcy code recognizes this and therefore has a section devoted to dealing with this specific kind of bankruptcy—the Single Asset Real Estate (“SARE”) case. The goal of this episode is to look into ethical issues surrounding these matters.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/single-asset-real-estate-cases-2021/
This document summarizes key aspects of employment arbitration agreements and class action waivers. It explains that arbitration agreements require employees to resolve disputes through arbitration rather than litigation. The key benefits to employers are lower costs, less public visibility, and more scheduling flexibility compared to litigation. However, arbitration limits discovery and appeal rights. The document also discusses class action waivers and their enforceability in limiting employees' ability to bring collective legal claims. It provides guidance on ensuring arbitration agreements are legally enforceable.
Negotiating and Drafting Cash Collateral/DIP Financing OrdersFinancial Poise
Every company needs access to cash to fund its operations. Companies in bankruptcy are no different. But how should a company planning to enter bankruptcy approach this issue if all of its cash is tied up by a secured lender? What will a bankruptcy judge say when the company asks her permission to use cash on terms presented by its lender? How should lenders, debtors, and creditors approach negotiations over the terms of a cash collateral order or debtor-in-possession (DIP) financing agreement? For 2022, professionals must also understand the impact that the economic programs enacted under the CARES Act may have on the use of cash by a commercial debtor during its case. This webinar focuses on answering these questions for advanced business reorganization practitioners and advisors from the perspective of all parties to a negotiation, as well as addressing best practices in drafting, negotiating, and presenting cash collateral and DIP financing orders in complex reorganization proceedings.
Part of the webinar series: BANKRUPTCY TRANSACTIONS - 301: ADVICE FOR THE ADVANCED PRACTITIONER 2022
See more at https://www.financialpoise.com/webinars/
This document summarizes asset protection strategies for physicians. It discusses how physicians are at high risk of creditors and lawsuits due to their occupation. It then outlines various solutions to manage this risk, including proper titling of assets, exemption planning, use of trusts, LLCs and partnerships to protect assets. It cautions that offshore trusts should not be used solely to avoid taxes or hide assets, as that may constitute fraud. Finally, it stresses that developing a comprehensive asset protection plan before creditors arise can help manage risks.
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3. “For better or worse, after the announcement of a merger or
acquisition, stockholder class action suits typically follow like
mushrooms follow the rain.”
-Dias v. Purches, 2012 WL 4503174 (Del. Ch. Oct. 1, 2012).
3
Introduction
4. Hypothetical:
♦ Public Company A is the target of an acquisition by Public Company
B.
♦ Company B offers a 30% premium over Company A’s current stock
price.
♦ This price is still below the previous 12 month high.
♦ Company A would become a subsidiary of Company B.
♦ All inside directors would remain employees.
♦ All inside directors would receive stock in Company B.
4
What is a Merger Objection Lawsuit?
5. 5
The shareholders of Company A will almost definitely sue.
♦ These suits have “skyrocketed” in recent years.
♦ In 2007, litigation followed a merger/acquisition in:
♦ 53% of deals over $500 million*
♦ 21% of deals over $100 million*
♦ In 2012, litigation followed a merger/acquisition in:
♦ 96% of deals over $500 million.**
♦ 93% of deals over $100 million.**
♦ Roughly 2/3 of suits filed within 2 weeks of deal announcement.
♦ Settlement on average is reached within two months.
* Cornerstone Research, 3/2012 Report
**Cornerstone Research, 2/28/2013 Report
What is a Merger Objection Lawsuit?
6. 6
♦ Approximately 80% filed in state court.*
♦ Often a lower pleading standard after Ashcroft v. Iqbal, 556
U.S. 662 (2009).
♦ More plaintiff friendly.
♦ 72% of cases in 2012 filed in multiple states.
*NERA Economic Consulting Report 7/24/12
What is a Merger Objection Lawsuit?
7. 7
♦ Delaware law permits a forum-selection clause in the corporate charter.
♦ Chevron/FedEx case recently decided by Chancellor Strine.
♦ Delaware-only forum selection bylaws valid.
♦ Underwriting tip: Does your insured have this provision?
♦ More than 250 public companies have adopted these in the
past several years.
♦ 39% of M&A suits in 2012 were filed in Delaware. Uptick from just 25%
as recently as 2011.*
*Cornerstone Research 2/28/13
What is a Merger Objection Lawsuit?
8. 8
What is a Merger Objection Lawsuit?
♦ Without a forum selection clause, there is a risk of parallel litigation going
forward in different states simultaneously.
♦ See, e.g., NJ Carpenters v. NYSE Euronext, No. 654496/2012 (NY)
♦ Judge Kornreich in New York refused to stay the case despite a parallel case
pending before Chancellor Strine in Delaware, suggesting that courts “work
together” instead.
♦ In March 2013 New York’s First Department stayed the New York case for 60
days until after preliminary injunction hearing in Delaware; in May
2013, Chancellor Strine denied the injunction.
♦ In June 2013, the shareholders approved the merger.
♦ See also Matter of Topps Co. Inc. Shareholder Lit., 2007 NY Slip Op 52543(U)
♦ “New York clearly has an overwhelming nexus to this controversy and is a
highly appropriate forum for its resolution.”
♦ Proceeded in New York and Delaware until settlement.
9. 9
♦ Shareholders allege that the directors of the target company breached
their fiduciary duties by failing to make an informed decision regarding
the adequacy of the purchase price or failed to “shop” the target.
♦ Frequently include claims for misrepresenting or omitting material
information in the proxy materials.
♦ These are direct, not derivative, claims because the injury is to the
shareholders, not the corporation. See Parnes v. Bally Entertainment
Corp., 722 A.2d 1243 (Del. 1999). But see Hannon’s Inc. vs. Berkshire
Hathaway Inc. and H.J. Heinz Company (PA law).
♦ The suits often allege an aiding and abetting claim against the acquiring
company/firm (e.g., a private equity firm).
What is a Merger Objection Lawsuit?
10. 10
Outcomes
♦ Of merger objection cases filed in 2012 that have been resolved:
♦ 64% settled.
♦ 33% were dismissed.
♦ 3% voluntarily withdrawn.*
♦ For securities class action cases in 2012:
♦ 28% settled prior to ruling on motion to dismiss (after 2.3 years of
litigation)
♦ 64% settled prior to ruling on summary judgment (after 3.5 years of
litigation)
♦ 6% after that (after 4.9 years of litigation).**
*Cornerstone Research, 2/28/13
**Cornerstone Research, 2012 Securities Class Action Settlements
11. 11
Outcomes
♦ In 81% of cases that settled in 2012, shareholders received only
supplemental disclosures and nothing else, and their attorneys were
paid their fees.
♦ Average attorneys’ fees $725,000.
♦ $540,000 for disclosure-only settlements.
♦ Fees influenced by size of settlement; number of suits filed; and overall
deal value, among other factors.
*All stats from Cornerstone Research, 2/28/13
12. 12
♦ In re Transatlantic Holdings Inc. Shareholder Litigation,
DE Chancery Court No. 6574-CS
♦ Bench ruling by Chancellor Leo E. Strine, Jr. on 2/28/13
♦ Harbinger of the future or merely a “bump in the road”?
♦ Plaintiffs sought to enjoin a vote by Transatlantic
stockholders on the Allegheny transaction in light of
alleged deficiencies in the proxy statement.
♦ Transatlantic filed an 8-K with supplemental disclosures.
♦ Strine found that these supplemental disclosures did not
“contradict or meaningfully affect the flow of information in
a way that is different from what the board is suggesting.”
♦ Plaintiffs’ request for attorneys’ fees denied.
Outcomes
13. 13
♦ Two large settlements in 2012 (for 2011 transactions):
♦ $136 million in El Paso/Kinder Morgan ($26 million of this was for
attorneys’ fees).
♦ $49 million in Delphi Financial/Tokio Marine.
♦ In September 2011, Del Monte settled for $89.4 million ($22.3 million
of this was for attorneys’ fees).
♦ Average settlement 2003-2009: $36 million.
♦ Average settlement 2010-2012: $78 million.
*All stats from Cornerstone Research, 2/28/13
Outcomes
14. 14
Back to the Hypothetical
♦ What should the board of Company A do?
♦ Evaluate the offer and make a recommendation
to the shareholders.
♦ A majority of the shareholders must approve the sale.
8 Del. C. § 271(a).
♦ What is the standard by which the offer should be
measured?
♦ What are the fiduciary duties the board members
are bound by?
15. 15
What is the Standard for the Price?
♦ Directors have a duty to seek and attain the highest immediate value
reasonably attainable to stockholders.
♦ Known as the “Revlon” duty. See Revlon v. MacAndrews & Forbes, 506
A.2d 173 (Del. 1985).
♦ A fairness opinion from a disinterested investment banker is crucial.
♦ Directors should perform a “market check” to be sure they are
getting the best price.
16. 16
What is the Standard for the Process?
Fiduciary Duties
♦ Duty of Care
♦ Duty of Good Faith
♦ Duty of Loyalty
17. 17
♦ Duty of care:
♦ Directors are required to act reasonably to maximize value for
shareholders.
♦ This usually means performing a pre- or post-signing market check
to assure the highest price available has been obtained.
♦ Section 102(b)(7) of the Delaware code protects directors from
monetary damages for breach of the duty of care (and only the
duty of care).
♦ Duty of good faith: “conscious disregard of duty.”
♦ In re Walt Disney Co., 906 A.2d 27 (Del. 2006).
What is the Standard for the Process?
18. 18
♦ Duty of Loyalty: Anti-conflict of interest rule.
♦ A majority of directors must be both (1) disinterested (money) and
(2) independent (relationships).
♦ Cede & Co. v. Technicolor, Inc.
♦ “Independence” means that the directors will not benefit
financially, or through job security or other intangibles, from their
new position at the acquirer.
♦ Absence of conflict applies to the board’s advisers: legal, financial.
♦ In re Del Monte Foods Shareholders Litigation, 25 A.3d 813, 831
(2011)
What is the Standard for the Process?
19. 19
♦ Delaware has three tiers for evaluating director decision making:
♦ The Business Judgment Rule
♦ Enhanced Scrutiny
♦ Entire Fairness
What is the Standard for the Court’s Evaluation?
20. 20
♦ As a suit begins, the court first asks:
♦ Was the board independent of the acquirer?
♦ Or, was there a special board committee that was independent?
♦ Did the board or the committee receive independent legal and financial
advice?
♦ If the directors can establish this independence, the decision of
the directors is entitled to the protection of the business
judgment rule.
♦ In re Synthes, Inc. Shareholder Litigation, 967 A.2d 640 (Del. Ch. 2008).
♦ In re MFW Shareholder Litigation, 67 A.3d 496 (Del. Ch. 2013) (BJR applies
to going private transaction with controlling stockholder where transaction
approved by independent special committee and subject to informed
majority-of-minority vote).
What is the Standard for the Court’s Evaluation?
21. 21
The Business Judgment Rule
♦ “The rule posits a powerful presumption in favor of actions taken by
the directors, in that a decision made by a loyal and informed board will
not be overturned by courts unless it cannot be attributed to any
rational business purpose…. A shareholder plaintiff assumes the burden
of providing evidence that directors…breached any one of the triad of
their fiduciary duty—good faith, loyalty or due care. If a shareholder
plaintiff fails to meet this evidentiary burden, the business judgment
rule attaches to protect corporate officers and directors and the
decisions they make, and our courts will not second guess these
business decisions.”
• Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993)
22. 22
Enhanced Scrutiny
♦ Enhanced scrutiny applies when directors face potentially subtle or
situational conflicts that do not rise to a level triggering entire fairness
review, but also do not comfortably permit expansive judicial
deference, i.e., the business judgment rule.
♦ In re Del Monte Foods Shareholders Litigation, 25 A.3d 813, 831
(2011)
23. 23
Entire Fairness
♦ If a majority of the board of directors or the committee were not
independent or did not get independent advice, the burden shifts
to the directors.
♦ Also invoked when the acquirer is already the majority
shareholder.
♦ The directors now have to demonstrate that the share price met
the two prongs of the “entire fairness” standard.
♦ Fair process: considering alternatives, consulting
experts, disclosing facts.
♦ Fair price: “within the range of fairness.”
♦ See, e.g., Weigand v. Berry Petroleum Co., C.A. No. 9316 (Del. Ch.
Mar. 27, 1991).
24. 24
Entire Fairness
♦ In deals that involve an acquisition by a controlling
shareholder, defendants can shift the burden of
proving “entire fairness” by showing either that the
transaction was approved by:
♦ A “well-functioning” committee of independent
directors; or
♦ An “informed vote” of a majority of the minority
shareholders.
♦ See, e.g., Americas Mining Corp. v. Thibeault, 51 A.3d
1213, 1218-19 (Del. 2012).
25. 25
Typical Procedural Posture
♦ Shareholders move to enjoin the transaction, alleging:
♦ Share price was too low.
♦ Board breached a duty by recommending a price based on conflicted or
bad advice.
♦ Recommendation made by the board was misleading because there were
insufficient/inadequate disclosures.
♦ In order to close the deal, the defendants will often:
♦ Agree to supplemental disclosures.
♦ Revise procedures relating to the transaction (i.e., an extended period to
solicit bids).
♦ Not oppose plaintiffs’ request for an award of attorneys’ fees.
♦ Attorneys’ fees awarded under the “corporate benefit doctrine.”
26. 26
♦ After the deal closes, the litigation often continues over
the recommendation of the board and plaintiffs can
seek damages based on the allegedly suppressed
purchase price.
Typical Procedural Posture
27. 27
Case Study: In re El Paso
Background facts
♦ El Paso to be sold to Kinder
Morgan for $21.1 billion.
♦ Plaintiffs alleged breach of
fiduciary duty due to two
conflicts, sought injunction
against deal:
♦ El Paso CEO negotiated the sale, but did not disclose that he wanted
to buy certain aspects of the El Paso business from Kinder Morgan.
♦ El Paso board relied on advice from Goldman Sachs, which owned
19% of Kinder Morgan.
28. 28
Outcome
♦ Injunction denied.
♦ Chancellor Strine: Shareholders could vote to deny, or seek money
damages, without court intervention.
♦ Sale went forward with 95% of shareholders approving.
♦ Kinder Morgan ultimately paid a total of $136 million.
♦ $110 million to El Paso shareholders.
♦ Goldman forewent $20 million fee; instead went to shareholders.
♦ $26 million in plaintiffs’ attorneys’ fees.
Case Study: In re El Paso
29. 29
Case Study: Del Monte
Background Facts
♦ PE firms KKR, Vestar, and Centerview sought to
buy Del Monte.
♦ Plaintiff shareholders sought preliminary
injunction, alleging that Barclays both advised
Del Monte and provided financing to the
buyers.
♦ Injunction granted; 20-day window to solicit
higher bids.
30. 30
Outcome
♦ No higher bids were made.
♦ Sale went forward with 75% of shareholders approving.
♦ Del Monte ultimately paid $65.7 million to shareholders.
♦ Barclays paid $23.7 million.
♦ $22 million in plaintiffs’ attorneys’ fees.
Case Study: Del Monte
31. 31
Insurance Issues
♦ Coverage under target company’s D&O Policy.
♦ Depending on timing of claim, coverage may fall under a run-off
endorsement: “The Insured shall have the right to a period of 6
years following the Effective Time in which to give written notice to
the insurer…”
♦ Acquiring company agrees to maintain
D&O insurance for the directors of the
target company if the target company is
to continue as a subsidiary of the
acquiring company.
32. 32
♦ Directors covered under Side A for either non-indemnifiable or non-indemnified
claims.
♦ Side B retention can be problematic for directors, depending upon trigger for Side A
coverage.
♦ Entity covered under Side B for indemnified claims.
♦ Entity coverage under Side C depends on how policy defines “Securities Claims.”
♦ “…a Claim…alleging a violation of any law…whether statutory or common law (including…the
purchase or sale or offer or solicitation of an offer to purchase or sell securities), which is: (a)
brought by any person or entity alleging, arising out of, based upon or attributable to the purchase
or sale or offer or solicitation of an offer to purchase or sell any securities of an Organization; or (b)
brought by any security holder or purchaser or seller of securities of an Organization with respect
to such security holder’s, purchaser’s or seller’s interest in securities of such Organization.”
♦ “…a Claim…alleging a violation of any…regulation, rule or statute regulating securities…”
♦ Defense costs for the directors are likely covered.
Insurance Issues
33. 33
♦ In response to increased frequency of merger objection suits, some
insurers have increased the SIR.
♦ Example: “Section X, Limit of Liability and Retentions is amended by
adding the following: Solely with respect to any Merger or Acquisition
Claim made against any Insured for any actual or alleged Wrongful
Acts, the Insurer shall only be liable for the amount of Loss arising from
such Merger or Acquisition Claim which is in excess of the applicable
Retention amount stated below [higher than regular SIR for Side B and
Side C]. The Retention amount shall be borne by the Company with
regard to all such Loss, provided, however, no retention amount shall
apply with regard to any Loss under Coverage A of this Policy.”
♦ Underwriters report getting traction in market with SIRs of $1 - $1.5
million for mid-market insureds.
Insurance Issues: SIRs
34. 34
Insurance Issues: Bump-Up Exclusion
♦ Indemnity payments for an increase in the share price are likely not
covered under a “bump up” exclusion.
♦ Example: “In the event of a Claim alleging that the price or
consideration paid or proposed to be paid for the acquisition or
completion of the acquisition of all or substantially all the ownership
interest in or assets of an entity is inadequate, Loss with respect to such
Claim shall not include any amount of any judgment or settlement
representing the amount by which such price or consideration is
effectively increased; provided, however, that this paragraph shall not
apply to Defense Costs or to any Non-Indemnifiable Loss in connection
therewith.”
35. 35
Insurance Issues: Bump-Up Exclusion
If present in the target company’s D&O policy, does
the foregoing exclusion bar coverage for damages
caused by breach of fiduciary duty by the target
company’s directors?
36. 36
♦ No case has applied the bump-up exclusion to preclude coverage to
directors for breach of fiduciary duty claims.
♦ Bump-up exclusion has been applied to preclude entity coverage.
♦ Genzyme Corp. v. Federal Ins. Co., 2010 WL 3991739 (1st Cir. Oct.
13, 2010).
♦ Unusual facts.
♦ Exclusion there applied only to amounts paid to settle claims
against company, not for indemnity of Ds & Os.
♦ Delta Financial Corp v. Westchester Surplus Insurance Co., 378 F.
App’x 241 (3d Cir. 2010).
Insurance Issues: Bump-Up Exclusion
37. 37
♦ Award of plaintiffs’ attorneys’ fees not excluded.
♦ See, e.g., Carolina Cas. Ins. Co. v. Merge Health.
Solutions, 2012 U.S. Dist. LEXIS 60765 (N.D. Ill. 2012), aff’d
2013 U.S. App. LEXIS 14342 (7th Cir. July 16, 2013).
♦ Multiplied portion of attorneys’ fees covered because not
expressly precluded by policy.
♦ Other arguments
♦ Directors not liable for plaintiffs’ attorneys’ fee award in
breach of fiduciary duty cases. Cf. (§1983 claims; consumer
protection claims; employment discrimination claims).
Insurance Issues: Attorneys’ Fees
38. 38
♦ Suits are increasingly frequent with increasingly higher costs. Selected
filings from June – September 2013:
♦ Hulsebus et al. v. Belo Corp., et al. (Dallas County, TX) ($2.2B deal)
♦ Liu v. Asianfo-Linkage, Inc., et al. (Del. Chancery) ($890M deal)
♦ Crescente v. StellarOne Corp., et al. (W.D. VA) ($445M deal)
♦ Martin v. Warner Chilcott Public Ltd. Co. (D.N.J.) ($8.5B deal)
♦ Federman v. Maidenform Brands Inc., et al. (Del. Chancery) (575M deal)
♦ Fosket v. Brynes et al. (Del. Chancery) ($2.3B deal)
♦ Oliver v. Saks Inc., et al. (N.Y. Sup.) ($3B deal)
♦ Ansfield et al. v. Wren et al. (N.Y. Sup.) ($35B deal)
♦ Dyer et al. v. Minark et al. (Fla. 11th Judicial Circuit) ($285M deal)
♦ Josenhans v. Sourcefire Inc., et al. (D. Md) ($2.7B deal)
♦ Biedler v. Stein et al. (Del. Chancery) ($818M deal)
♦ Vicars et al. v. PNGS GP LLC et al. (Harris Cty, TX) ($750M deal)
Takeaways
39. 39
♦ High stakes cases litigated on an extremely expedited schedule, often
in multiple jurisdictions.
♦ Even if merger objection cases have a lower severity than securities
cases, primary insurers could be affected by their rate of recurrence.
Excess layers may have less exposure.
♦ From a claims handling perspective, an early opinion from defense
counsel on what standard of review the court will apply (business
judgment, enhanced scrutiny, or entire fairness), and the reasons
why, is critical.
♦ It is important to ask if there is anything that the board was advised
to do by its legal or financial advisors that it failed to do in advance of
the merger.
Takeaways