Litigation: The Delaware Court of Chancery’s largest judgment
On Oct. 14, 2011, the Delaware Court of Chancery issued a 105-page post-trial opinion in In re Southern Peru Copper Corporation Shareholder Derivative Litigation, which involved a challenge to Southern Peru Copper Corp.s purchase of Minera Mexico, S.A. de C.V. from Southern Perus controlling stockholder, Grupo Mexico, S.A.B. de C.V.,...
November 23, 2011 at 06:10 AM
11 minute read
The original version of this story was published on Law.com
On Oct. 14, 2011, the Delaware Court of Chancery issued a 105-page post-trial opinion in In re Southern Peru Copper Corporation Shareholder Derivative Litigation, which involved a challenge to Southern Peru Copper Corp.'s purchase of Minera Mexico, S.A. de C.V. from Southern Peru's controlling stockholder, Grupo Mexico, S.A.B. de C.V., for an implied value of $3.1 billion.
Chancellor Leo E. Strine Jr. applied the “entire fairness” standard, which applies to transactions with controlling stockholders and puts the burden of proof on the board of directors to show that both the transaction price and the process leading to the transaction were fair. The court:
- Concluded that the special committee formed to approve the transaction (advised by a global investment banking and securities firm) was independent and informed, but was nonetheless not “well functioning”
- Rejected the contention that the special committee process shifted the burden of proof back to the plaintiffs
- Found that the directors failed to establish fair process and fair price
- Awarded $1.3 billion in damages (the largest in the court's history)
The defendants argued that the special committee process shifted the burden of proof back to the plaintiffs, but the Chancellor rejected the argument because he found that the committee was not “well functioning.” To start, the resolution creating the special committee did not expressly authorize it to negotiate or investigate alternatives, leaving it to evaluate the transaction as proposed by Grupo Mexico. Because of this, the court found its negotiations to be “stilted and influenced by its uncertainty about whether it was actually empowered to negotiate.”
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Trending Stories
- 1The Law Firm Disrupted: For Big Law Names, Shorter is Sweeter
- 2Wine, Dine and Grind (Through the Weekend): Summer Associates Thirst For Experience in 'Real Matters'
- 3The 'Biden Effect' on Senior Attorneys: Should I Stay or Should I Go?
- 4BD Settles Thousands of Bard Hernia Mesh Lawsuits
- 5First Lawsuit Filed Alleging Contraceptive Depo-Provera Caused Brain Tumor
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250