The Short Form - Friday, November 14, 2014 Last Chance: "Deal Advisors" CLE - Monday, November 17, 2014 at The Wilmington Club Now bearing a vintage of seven months and change, the 2014 Tulane Conference may seem aeons ago, but The Chancery Daily remains mindful of a certain ride to the airport in a minivan filled predominantly with financial services professionals -- and one elephant. The elephant is known as In re Rural/Metro. The financial services professionals were acutely mindful of the elephant, and vocally so. Subsequently, the elephant has been much talked about, and from the perspective of the average Wilmington corporate law litigator, its elephantine might has perhaps been talked out. But also subsequently, financial services professionals have found themselves on the hook for a tidy eight-figure sum, In re Rural/Metro Corp. Stockholders Litigation, C.A. No. 6350VCL (consol.), opinion (Del. Ch. Oct. 10, 2014), with plaintiffs reportedly advocating for a fee award directly from the financial services professionals, which would push the sum over the even tidier nine-figure threshold. Given the current state of play, one can imagine that this feral elephant continues to loom large in the minds of "Deal Advisors" -- the subject of this CLE presented by Professor Afra Afsharipour of the U.C. Davis School of Law. See details and a link for online registration below. Notwithstanding Rural/Metro, Financial Advisors Are Off the Hook Here Wendy Lee v. Mark Pincus, et al. [Zynga] , C.A. No. 8458-CB, memo. op. (Del. Ch. Nov. 14, 2014) Ct. Ch. R. 12(b)(6); Ct. Ch. R. 23.1; Derivative Claim; Direct Claim; Breach of Fiduciary Duty; Interested Director; Personal Benefit; Disgorgement; Coordinated Litigation; Aiding and Abetting; Knowing Participation Defendants' motions to dismiss granted in part and denied in part Although four director defendants in this matter argued that their receipt of $200 million, collectively, from the sale of stock they owed in a secondary offering was not a net benefit -- footnote 66 explains the arithmetic underlying that contention -the Court disagreed. Social gaming company Zynga decided to conduct a secondary offering months after its initial public offering. Director defendants decided to release certain investors -- notably, themselves -- from lockup provisions that would otherwise preclude them from selling stock in the secondary offering; other stockholders who were subject to lockup provisions were not released. Four director defendants sold stock in the secondary offering for the aforementioned $200 million. Shortly thereafter, and before the expiration of other stockholders' lockup restrictions, the stock price dropped precipitously. Plaintiff, also a pre-IPO stockholder, brought suit alleging that director defendants' release of the lockup prohibitions as to themselves amounted to a self-dealing transaction from which director defendants received a benefited not shared by other stockholders. The Court here concludes that plaintiff's claims are direct, not derivative, and that plaintiff's claims for breach of fiduciary duty are not precluded by the contractual lockups governing plaintiff's shares. 2014 Visiting Scholar in Residence in Business and Corporate Law Presented by: The Institute of Delaware Corporate & Business Law and The Delaware Counsel Group LLP Monday, November 17, 2014 4:00 p.m. at The Wilmington Club "Deal Advisors" Afra Afsharipour Professor of Law and Martin Luther King, Jr. Hall Research Scholar University of California (Davis) School of Law "Deal Advisors" will examine the role of financial and legal advisors in merger and acquisition transactions, a topic that has received a great deal of attention in recent Delaware litigation, notably in In re Rural Metro Corp. Shareholders Litigation, C.A. No. 6350-VCL (consol.), opinion (Del. Ch. Mar. 7, 2014). The Wilmington Club 1103 North Market Street Wilmington, Delaware Business Attire Required One substantive CLE credit in Delaware and Pennsylvania. New Jersey attorneys can self-report. Register online here. For additional information, contact Carol Perrupato at [email protected] or 302477-2178.
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