When a proposed merger, acquisition, or buyout of a public company is announced, shareholders have the right to—and should—demand that directors and officers pursue a fair process in negotiating a deal that provides shareholders with a fair value for their investments.
What can shareholders seek in Corporate Takeover Litigation?
When corporate fiduciaries fail to maximize shareholder value in negotiating corporate transactions, shareholders can bring a direct class action to demand, among other things: additional consideration or a higher price; more favorable deal terms; statutory appraisal rights; the chance for other bidders to present superior offers; the disclosure of material information to allow shareholders to make an informed decision on whether to vote in favor of the deal.
Corporate Governance Allegations
Shareholders may also assert corporate governance claims. Typical corporate governance allegations in corporate transactions include failure by a target company*s board to organize a competitive sales process and set up necessary committees; insufficient disclosures or misrepresentations in merger filings; and conflicts of interest related to executive noncompete agreements, change-of-control pay, and retention by the acquirer.
Why Is a Majority of Corporate Takeover Litigation in Delaware?
Over a million businesses, including more than 50 percent of publicly traded companies in the U.S. and more than 66 percent of Fortune 500 companies, are incorporated in Delaware. However, while incorporated in Delaware, the vast majority of these businesses have headquarters elsewhere. Thus, plaintiffs have the option of bring corporate takeover litigation in Delaware or the state where the company is headquartered.
However, in 2010, after a favorable opinion in a Delaware court, companies began to adopt forum selection clauses in their bylaws requiring that cases be litigated in Delaware instead of a company’s home state. After these clauses were upheld by the Delaware courts in 2012, they became commonplace with more than 1,000 companies having adopted these clauses.
As a result, with a majority of U.S. companies incorporated in Delaware and the adoption of forum selection clauses requiring cases against those companies to be litigated in Delaware, it has become the home to the majority of corporate takeover litigation.
Additional resources provided by the author
Timothy L. Miles has dedicated his career to representing shareholders in complex class-action litigation. Whether serving as lead, co-lead, or liaison counsel, Mr. Miles has helped recover hundreds of millions of dollars for defrauded investors, shaped precedent-setting decisions, and delivered real corporate governance reforms. Judges and peers have repeatedly recognized Mr. Miles’ relentless advocacy for shareholders, as well as his unbendable ethical standards. For example, Mr. Miles is a member of the prestigious Top 100 Civil Plaintiff Trial Lawyers: The National Trial Lawyers Association, which is by invitation only and is “extended to those attorneys who exemplify superior qualifications, trial results, and leadership in their respective state based upon objective and uniformly applied criteria.” The National Trial Lawyers Association explained the significance of this honor: “With the selection of Timothy L. Miles by The National Trial Lawyers: Top 100, [Mr.] Miles has shown that he exemplifies superior qualifications, leadership skills, and trial results as a trial lawyer. The selection process for this elite honor is based on a multi-phase process which includes peer nominations combined with third party research.” Mr. Miles other recognitions include: • The AV® Preeminent™ Rating by Martindale-Hubble® in Securities Law, Litigation and Class Actions (2014-2018). The AV Rating is the highest possible rating given by LexisNexis Martindale-Hubbell Peer Review for a lawyer and is established on a peer-review basis. The AV Preeminent designation signifies that Mr. Miles has been rated by judges and fellow attorneys as having the highest possible rating for legal abilities and ethical standards. The rating is awarded to less than five percent of all attorneys across the United States, and is the highest rating offered by the Martindale-Hubbell Law Directory. • The AV® Preeminent™ Attorney – Judicial Edition, the Highest Possible Rating in Both Legal Ability & Ethical Standard Reflecting the confidential opinions of members of the Bar and Judiciary by Martindale-Hubble (2017-2018). • The Top-Rated Lawyer in Litigation™ for Ethical Standards and Legal Ability by Martindale-Hubble® (Feb. 2015). • Superb Rated Attorney, (10.0 out of 10), the Highest Rating Possible by Avvo. • Avvo Top Rated Lawyer 2017 & 2018 (Avvo). . • America’s Most Honored Professionals – Top 1% (2016-2018) (American Registry). Mr. Miles focuses his practice on securities fraud class actions, shareholder derivative actions, and corporate mergers and acquisitions class actions.