In an unusual move, Vice Chancellor J. Travis Laster recently ruled from the bench at oral argument, dismissing a stockholder complaint challenging the acquisition of a company with a controlling stockholder. In In re Schawk Stockholders Litigation, C.A. No. 9510-VCL (Del. Ch. Sept. 15, 2015) (Transcript), the Delaware Court of Chancery found the controlling stockholder’s interest in a sale of the company to a third party was aligned with the interests of the minority stockholders, and the decision to sell was protected by the business judgment rule. Although the vice chancellor expressed the view that the standard in any case involving a controlling stockholder should be enhanced scrutiny, he concluded the result in this case would be the same.
Schawk Inc. was a printing company founded and incorporated in Delaware in 1953 by the late Clarence Schawk. At the time of the merger, Clarence Schawk, together with his son, David Schawk, who served as CEO of the company, and other family interests controlled 62 percent of the vote. Although the company had pursued strategic alternatives for nearly a decade, the court wasn’t interested in anything from a “different pre-crash economic era.”
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