September 08, 2017
- Every Law Firm Management Committee Member Needs To Read This Book by: Ross Fishman
- Crossing the Threshold – Small Business to “ALE” by: Monique Warren
- MACRA Update: How to Prepare for Changes in MIPS by: Kenneth Yood and Erica J. Kraus
- NIOSH Engineering Controls Program Protects Workers from Emerging... by: Lynn L. Bergeson and Carla N. Hutton
- “Share And Share Alike”: UK IPO Publishes Report On The Challenges Of... by: Rosie Duckworth
- Michigan DEQ Proposes New Cleanup Criteria Rules by: Charles M. Denton and Tammy L. Helminski
- Indefinite Leave Not A Reasonable Accommodation Under Connecticut Law by: Barry J. Waters
- Federal Reserve Publishes Updates on Payment System Improvement... by: Consumer Finance Ballard Spahr
- Bellefonte’s Influence Continues to Wane by: Larry P. Schiffer
- Anti-Concurrent Causation Clauses: Why the Value of Your Property... by: John L. Corbett
- Congress Approves Package of Government Continuance and Public... by: Robert Y. Maples
- The Week Ahead in the European Parliament – September 8, 2017 by: Sebastian F.A. Vos
- Beltway Buzz, September 8, 2017 by: James J. Plunkett
- More Companies Must Comply with the Gramm-Leach-Bliley Act, But Don’t... by: Sara H. Jodka and Justin L. Root
- Outlet And Factory Class Actions Take A Hit: California Court of... by: Jay Ramsey
- DOC Announced Open REEEAC Meeting by: Kathleen M. Roberts
- DOE Issues Notice of Proposed Rulemaking for Small-Scale Natural Gas... by: Nelli Doroshkin and Mark R. Haskell
- Betsy DeVos Indicates Big Plans to “Reframe” Title IX by: Michael W. Hawkins and Kathleen A. Carnes
- Federal Reserve Restricts Termination of Qualified Financial Contracts by: Guy C. Dempsey, Jr.
- EU Commission Extends Red Tractor Biofuel Crop Assurance Scheme by: Kathleen M. Roberts
- What to do About the Equifax Data Breach by: Sheila A. Millar
- 2017 Amendments to the Delaware General Corporation Law by: S. Ward Atterbury and Marc S. Reiser
- Zero Dividend Shares are Ordinary Share Capital by: Stephen Pevsner and Robert Gaut
- HelioBioSys Inc. Patents Algae-like Organisms For Biofuels by: Lauren M. Graham, Ph.D.
- Second Circuit Issues Key Ruling Regarding Personal Benefit... by: Mark D. Wood and Michael J. Lohnes
- NYSE Issues Proposed Amendment to Limit Issuance of Material News... by: Mark D. Wood and Mark J. Reyes
- SLGS Forever? by: Alexios S. Hadji
- DuPont, ADM Win Innovation In Bioplastics Award by: Lauren M. Graham, Ph.D.
- EPA Waives RFS Requirements For States Affected By Hurricane Harvey by: Lauren M. Graham, Ph.D.
- Selling Recalled Products: CPSC Fines Home Depot by: Jonathan Judge
- Privacy-Class-Action-Plaintiffs' Emerging Litigation Strategy... by: Zuzana S. Ikels
- FDA Authorizes Qualified Health Claim Linking Early Peanut... by: Food and Drug Law at Keller and Heckman
- New York Paid Family Leave Regulations Finalized: How Do They Compare... by: Susan Gross Sholinsky and Marc A. Mandelman
- EPA Releases Draft Guidance for Pesticide Registrants on... by: Lisa M. Campbell and Sheryl Dolan
- IRS Extends Permanent Invitation to Exam to Attend Appeals Conferences by: Jean A. Pawlow and Kevin Spencer
- Employers Take Note: Public’s Approval of Unions Goes Up, Gallup... by: Howard M. Bloom and Philip B. Rosen
- Every Day is Bitcoin Pizza Day: What Clients and Estate Planners Need... by: Suzanne Brown Walsh
- PTO Litigation Report – September 8, 2017 by: PTO Litigation Center
- Securities Over the Blockchain Expected to Get Legal Framework in... by: Claude-Étienne Armingaud and Sidney Lichtenstein
- Quest Diagnostics Report Reveals That Prescription Drug Misuse... by: Sarah R. Skubas
- Preparing for the New Massachusetts Equal Pay Law, Part I: Whether,... by: Diane M. Saunders
- Electric Reliability Update - September 8, 2017 by: Malcolm C. McLellan and Suzanne Keppeler McBride
- Washington Attorney General Seeks Disgorgement of Profits Resulting... by: Ryan Leske
- Spousal Jealously Provides Grounds for Discrimination Claim by: Timothy J. Domanick
- Hurricane Ready: 5 Ways Florida Employers Can Prepare for the Next... by: Rachel A. Morris
- The UK’s Position Paper on the Post-Brexit Availability of Goods –... by: Aonghus Heatley
- French Labor Law Reform: A Breakdown of Key Items in the Overhaul by: Myrtille Lapuelle
- World Economic Forum Publishes Report on FinTech by: Giovanni Campi and Ignasi Guardans
- Are Limited Liability Companies “Persons”? by: Keith Paul Bishop
- Plans to ‘Reframe’ Title IX Enforcement Announced by: Paul V. Kelly
- Court Approves $342,500 Settlement On Behalf of 82 Tipped Food... by: Brian D. Murphy
- Hong Kong and South Korea on ICOs by: Robert M. Crea
- Leaving Defenses On The Table In Drafting Employee Handbooks And... by: Tiffany A. Buckley-Norwood
- With the Overtime Appeal Over, It’s Now Time to Focus on the Do-Over by: Steven F. Pockrass
Wednesday, August 23, 2017
A few years ago in Kahn v. M&F Worldwide1 (MFW), the Delaware Supreme Court provided a public company controlling stockholder with the recipe for a minority interest acquisition that, if scrupulously followed, would enjoy business judgment rule review at the pleadings stage in the face breach of fiduciary duty allegations against the controlling stockholder regarding that acquisition. But the MFW court left unanswered the question of whether adopting an acquirer’s minority stockholder protections would afford a controlling stockholder the same protection in a sale context.
The Delaware Chancery Court recently answered that question in the Martha Stewart stockholder litigation2 and extended the application of the MFW recipe to conflicted one-side controller transactions. With the Chancery Court’s blessing that the MFW recipe was good enough for her, Stewart passed off a stock sale recipe for the enjoyment of all controlling stockholders.
In a consolidated class action, former stockholders of Martha Stewart Living Omnimedia, Inc. (the Company) asserted claims against Martha, the Company’s former controlling stockholder, for breach of fiduciary duty and against Sequential Brands Group, Inc. (Sequential), a third party buyer unaffiliated with her, for aiding and abetting that breach, in connection with a December 2015 transaction in which Sequential acquired the Company via merger. The plaintiffs claimed she leveraged her position as a controlling stockholder to secure greater consideration for herself than was paid to other stockholders in the form of side deals with Sequential.
The two overarching requirements of the MFW recipe for a transaction enjoying business judgment rule protection at the pleading stage are (i) the establishment of a well-functioning, fully independent special committee to negotiate the transaction from the outset and (ii) a nonwaivable condition that the transaction be approved by a fully informed, uncoerced majority of the minority stockholders at the appropriate stage of negotiations. The Chancery Court broke new ground by holding the majority-of-minority stockholder approval provision must be non-waivable prior to the time a controlling stockholder begins negotiations for additional consideration in a transaction separate from that to be received by other stockholders.
Based on the information contained in the Company’s proxy materials, the Chancery Court found the plaintiffs failed to plead sufficient facts to support inferences the Company did not successfully execute the MFW recipe and therefore dismissed the breach of fiduciary duty and aiding and abetting claims against her and Sequential without the need for conflict of interest analysis. Thanks to Martha, controllers now have a stock sale recipe they can call their own.
1 88 A.3d 635 (Del. 2014).
2 In re Martha Stewart Living Omnimedia, Inc. S’holder Litig., Consol. C.A. No. 11202-VCS (Del. Ch. Aug. 18, 2017).
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As a member of the Corporate Department, Chris focuses his practice on mergers & acquisitions, private equity, asset divestitures, securities offerings, financings, corporate governance and other general corporate matters for publicly traded and privately held companies. He has previously served as outside in-house counsel to a division of a publicly-traded multinational corporation.