Delaware Court of Chancery Grants Summary Judgment in Favor of Buyer of Answers.com
On February 3, 2014, Vice Chancellor John Noble of the Delaware Court of Chancery granted summary judgment in favor of the defendants in a class action lawsuit arising out of the acquisition of Answers Corporation by AFCV Holdings, LLC, a portfolio company of Summit Partners, L.P. Answers operates the Q&A website Answers.com. Wilson Sonsini Goodrich & Rosati represented AFCV and Summit in the litigation.
In February 2011, AFCV announced that it intended to acquire the outstanding shares of Answers for $10.50 per share. While the price represented a significant premium to Answers' recent trading price, as is the case with virtually every public company merger, lawsuits quickly followed the announcement.
The defendants defeated a motion by the plaintiffs to enjoin the acquisition of Answers in April 2011, and the transaction closed. The plaintiffs did not give up on the lawsuit, however, and survived a motion to dismiss by the defendants a year later under the liberal pleading standards of the Delaware Supreme Court's decision in Central Mortgage.
Discovery ensued, and reality set in. In particular, the plaintiffs could find no support in the record for their allegations that the Answers directors, the majority of whom were concededly independent and disinterested, nonetheless acted in bad faith when they approved the deal with AFCV and Summit. In addition, there was no support for the contention that negotiations between Answers and AFCV and Summit were anything other than vigorous and at arms' length. Accordingly, Vice Chancellor Noble granted summary judgment in favor of all defendants, dismissing the breach of fiduciary duty claims asserted against the Answers directors and dismissing the aiding and abetting claim against AFCV and Summit.
For more information, please see the court's opinion.