M&A 2023-2024 Delaware Update: Caremark Duties, Busted Deal Litigation, SPAC Challenges, Unenforceable Con Ed Provisions

Description

In 2023 the Delaware courts issued several notable decisions defining the scope of Caremark oversight liability and the ability of a corporation to control any such litigation. The courts expanded oversight liability to include corporate officers and held that the scope of liability varies with an officer's responsibilities.

The Court of Chancery issued several opinions in "busted deal" litigation addressing situations where buyers sought to escape from contracts to acquire corporations because of purposed breaches of representations and warranties. In two such cases, the court determined that the buyers were not required to close because the representations and warranties made at signing that were affirmed as true at closing did not include any materiality qualifier.

There were several new rulings relating to SPAC challenges. In five cases, the Delaware courts held that the entire fairness standard applied to breach of fiduciary duty claims arising from de-SPAC transactions and that there were reasonably conceivable claims for breach of the fiduciary duty of loyalty arising from materially misleading public filings issued in connection with each transaction.

Plaintiffs prevailed in two cases seeking damages for violation of fiduciary duties evaluated under the Revlon standard of review. In both cases, the court found that the officers of the target preferred the eventual acquirer and took actions that steered the target to the officers' favored counterparty for unique, personal reasons.

In a novel issue, the court of chancery held that a Con Ed provision in a merger agreement that permitted the target company to sue for lost premium damages in a busted deal while disclaiming stockholders as third-party beneficiaries was unenforceable by either the target or its stockholders because it would allow for damages in excess of expectation damages.

Listen as our panel of experienced M&A attorneys reviews significant Delaware court decisions issued during 2023 and the first part of 2024 and their impact on M&A practice.