In In re Books-A-Million, Inc. Stockholders Litigation, No. 11343-VCL (Del. Ch. Oct. 10, 2016), the plaintiffs, minority stockholders of Books-A-Million, Inc. (the “Company”), alleged that the Company’s directors, controlling stockholders and several of its officers breached their fiduciary duties in connection with a squeeze-out merger effected by the controlling stockholders in 2015 to take the Company private. The Court of Chancery held that the plaintiffs failed to plead facts to take the transaction outside the six-pronged framework approved by the Delaware Supreme Court in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2014) (“MFW”), and, consequently, the business judgment rule, rather than the entire fairness test, applied in reviewing the merger. Upon application of the business judgment rule, the Court dismissed the case.In April 2012, the descendants of the founder of the Company, who collectively controlled the … [Read more...] about Delaware Chancery Court Applies MFW Framework to Dismiss Suit by Minority Stockholders in Connection with Squeeze-Out Merger
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As insurance coverage lawyers, we hear this question all the time. In the current economy, where everyone is trying to control expenses, private companies must weigh the cost of directors' and officers' liability insurance (commonly known as D&O insurance) against the risks of not having it. In order to make an informed decision, managers need to understand what those risks are, and whether they and their companies can afford to assume those risks uninsured.For public and private companies alike, D&O insurance generally covers insureds for claims made against them by third parties for losses they claim were caused by management's acts, errors, omissions, misstatements and misleading statements. As in all insurance, D&O coverage is subject to the policy's limit of liability, exclusions and other conditions. (For a thorough discussion of these complex issues, please see the three-part series titled "The Devil Is in the Details.") Accordingly, the list of third parties that … [Read more...] about D&O Insurance: Why on Earth Would a Private Company Need It?
The EEOC has been pursuing litigation against wellness programs of late, arguing that certain health plan penalties render participation in wellness program health screens ”involuntary” and thus violate Americans with Disabilities Act (ADA), which prohibits medical exams unless they are voluntary or are job-related and consistent with business necessity. (See recent blog post about this.) Senate Republicans rightly criticized the EEOC general counsel during recent confirmation hearings about the agency’s pursuit of litigation against wellness programs when it has not provided guidance about the standards it believes employers should follow to ensure compliance with the ADA. They noted that “wellness plans with premium discounts were specifically authorized in the health care law with strong bipartisan support—one of the few provisions of Obamacare with both … [Read more...] about EEOC Wellness Program Suits Highlight Need for Agency Guidance
In every mergers and acquisitions (M&A) transaction, a series of risk management choices must be made. These choices range from “bet the company” decisions to ordinary course insurance procurement decisions. Following an acquisition or a divestiture, risk management decisions must be made with regard to the newly constructed business enterprise. As an example, consider a global acquisition that results in a decentralized management structure. Over time, the businesses will begin to align from both an operational and a management perspective. The risk management team will look for opportunities to reduce insurance costs and to minimize loss exposures as operational and management decisions are made. A captive insurance arrangement can be an important tool for reducing those costs and minimizing those exposures. Captive insurance companies can offer a wide variety of coverage, ranging from standard risks—general and auto … [Read more...] about Managing Risk—Captive Insurance Companies
In ZF Meritor, LLC v. Eaton Transmission Corporation,  (hereinafter "Meritor"), the Third Circuit has issued its third decision within the past 10 years concluding that above-cost vertical restraints imposed by a supplier with market power violate the antitrust laws. The first, LePage's Inc. v. 3M,  ruled that a supplier with market power's above-cost, bundled discounts that excluded competition violate the Sherman Act. The second, United States v. Dentsply Int'l,  struck down a monopolist's exclusive dealing arrangements with fewer than 25 percent of the distributors in the applicable market. Now in Meritor, the Third Circuit has determined, in a 2-1 decision, that a monopolist offering above-cost market share discounts conditioned upon the acceptance by four major buyers of additional non-price restrictions, violates both the Sherman and Clayton Acts if the restraints constitute "de facto partial exclusive dealing," a term that essentially is new to antitrust. Background … [Read more...] about The Third Circuit Does It Again: A Monopolist Violates the Antitrust Laws By Offering Conditional Above -Cost Market Share Discounts That Constitute “De Facto Partial Exclusive Dealing”