By: Joe Marrow
Continuing a recent trend, a Delaware Chancery Court judge recently denied a request for an award of attorneys’ fees and expenses in connection with the Keurig Green Mountain Inc. shareholder litigation. On July 22, 2016, in the case In Re: Keurig Green Mountain Inc. Shareholders Litigation, case number 11815, Chancellor Andre G. Bouchard considered a petition seeking an award of attorneys’ fees and expenses to the attorneys representing shareholders that had challenged the acquisition of Keurig.
On behalf of the shareholders, the lawyers had questioned the deal disclosures that had been made by Keurig in its proxy statement. As a result of the action, Keurig made certain supplemental disclosures to the shareholders. The attorneys representing the shareholders then sought an award of $300,000 of fees and expenses from Keurig. Keurig’s attorneys opposed the petition arguing that the supplement disclosures merely confirmed information that had previously been provided in the proxy statement. Chancellor Bouchard agreed and denied the petition on the basis that disclosures in question were not beneficial to the shareholders. Chancellor Bouchard has taken a strong position against granting significant fee awards in the context of disclosure-only settlements in shareholder litigation.
For more information, please contact corporate attorney Joe Marrow.
By: Mark Tarallo
Any M&A transaction, especially a contested transaction or a transaction involving insiders, can lead to litigation. One type of litigation is an appraisal claim, where shareholders contest the value put on the company in the transaction and ask a court to determine “fair value.” According to an article by Professors Minor Myers and Charles Korsmo, the value of appraisal claims filed in Delaware in 2013 was approximately $1.5 billion, almost ten times the value of appraisal claims in 2004. More than 15 percent of all takeover cases resulted in appraisal claims during 2013. The increase in appraisal cases over the last few years is likely tied to the decision of the Delaware Chancery Court in Transkaryotic (May, 2007) in which the court ruled that a party did not have to own the shares in the target as of the “record date” used to determine shares eligible to vote at a meeting to approve the transaction; instead, the party could acquire the shares at any time up until the meeting approving the deal. This created an arbitrage opportunity for larger investors, who could wait until immediately before a shareholder meeting (and have a better understanding of the offer) before purchasing a stake in the target. In addition, there is a very high interest rate payable on any awards (federal funds rates plus 5% running from closing of transaction to payment of any award). These two factor have made appraisal arbitrage a very attractive play for larger hedge fund investors, likely the primary driver (versus dissatisfied shareholders exercising their rights) behind the increase in the dollar value of appraisal cases.
For more information on this topic, please feel free to contact Mark.