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7.12.21
Delaware Court of Chancery Orders Specific Performance in Favor of Wilson Sonsini’s Client After Declining to Find Material Adverse Effect
On July 9, 2021, the Delaware Court of Chancery issued a post-trial opinion in Bardy Diagnostics, Inc. v. Hillrom, Inc., C.A. No. 2021-0175-JRS, ordering specific performance in favor of Wilson Sonsini Goodrich & Rosati’s client, Bardy Diagnostics, Inc. (BardyDx), the seller under a merger agreement with Hill-Rom, Inc. (Hillrom). The Wilson Sonsini team included partners David Berger, Steven Guggenheim, and Brad Sorrels; Of Counsel Andrew Cordo; senior counsel Jessica Hartwell; and associates Lindsay Faccenda, Ben Potts, Nora Crawford, Jeremy Gagas, and Leah León.
Alerts
7.06.21
Chancellor McCormick Provides Helpful Guidance on Pre-Suit Litigation Demands Under Delaware Law
Last month, Delaware's new Chancellor Kathaleen S. McCormick issued a decision largely dismissing challenges to board action after finding that the plaintiff's emails to the board constituted pre-suit litigation demands, and thus the plaintiff was precluded from arguing that the director defendants were interested or lacked independence for purposes of considering a demand.1 As a result, the Delaware Court of Chancery concluded the plaintiff's only option to pursue litigation was to allege that its demands had been wrongfully refused, which it had not done. The decision provided an opportunity for the court to weigh in on technical issues related to pre-suit demand under Court of Chancery Rule 23.1 that have not been discussed at length by the court in some time.
Alerts
12.09.20
Delaware Court of Chancery Addresses Effects of Pandemic on Material Adverse Effect Provision and Ordinary Course Covenants in Busted Deal Case
On November 30, 2020, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery issued a post-trial decision addressing contractual issues related to the effects of the COVID-19 pandemic on the sale of a collection of luxury hotels. The case, AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, was one of many busted deal lawsuits filed in the Court of Chancery implicating COVID-19's impact on M&A, with the opinion being the first to formally address these issues. The 242-page opinion found that the pandemic did not cause a material adverse effect (MAE) on the seller's business under the contract. But the court found that the buyer was entitled to walk away from the deal because the seller had changed its business in response to the pandemic, breaching its ordinary course covenants in the sale agreement. Both holdings are noteworthy given that busted deal disputes in the pandemic have largely focused on these two issues—and there had been open questions about which types of typical exclusions from MAE definitions might cover the pandemic and about how the Court of Chancery would handle ordinary course covenants, given the limited treatment of that issue in prior M&A case law.