Foley & Lardner LLP partner Nicholas O’Keefe commented on the increase in Delaware merger and acquisition litigation activity in the Agenda article, “M&A Suit Settlements Are Way Up in Delaware,” published by the Financial Times.
There is “big incentive to bring famous cases because you can get rich,” O’Keefe said of the growth in M&A settlements in the Delaware Chancery Court. “And one of the ways to do it…is to focus on controller cases where you have entire fairness.”
The Chancery Court uses the entire fairness standard, a rigorous judicial review, in assessing potentially conflicted transactions. Senate Bill 21, passed in Delaware this year, provides new reforms directed at keeping businesses incorporated in the state, including statutory safe harbors, limited discovery scope, and clarified thresholds for identifying disinterested directors and controlling stockholders.
O’Keefe said as a result, he expects a decrease in M&A litigation levels over the next two years.
“For boards, SB 21 was a good thing because it’s going to make it easier to defend against litigation, [including] M&A litigation,” he added. “They should just stay tuned to see if it gets shot down because that will free up plaintiffs’ firms to bring more litigation.”
(Subscription required)
