Court of Chancery Dismisses Complaint Attacking Merger Transaction
A stockholder complaining about a merger transaction materially enhances her prospects of overcoming a motion to dismiss if she can allege self-dealing by a controlling stockholder or that the transaction involves a change of control, thereby invoking the entire fairness standard of review or enhanced scrutiny.
September 08, 2021 at 09:00 AM
5 minute read
Corporate GovernanceA stockholder complaining about a merger transaction materially enhances her prospects of overcoming a motion to dismiss if she can allege self-dealing by a controlling stockholder or that the transaction involves a change of control, thereby invoking the entire fairness standard of review or enhanced scrutiny. Failing that, properly alleging a violation of a statute could also state a claim. In Flannery v. Genomic Health, C.A. No. 2020-0492-JRS (Del. Ch. August 16, 2021), the Delaware Court of Chancery found plaintiffs failed properly to allege that the transaction at issue involved a self-dealing controlling stockholder, or that Revlon duties applied or that the buyer's entry into a voting agreement with a stockholder with more than a 15% ownership stake after the execution of a merger agreement violated Section 203 of the Delaware General Corporation Law (DGCL). For these reasons, the Court of Chancery granted defendants' motions to dismiss plaintiff's attack on Exact Sciences Corp.'s (buyer or Exact) acquisition by merger of Genomic Health Inc. (Genomic or the company) for cash and stock.
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