Chancery Rules on Claims Related to Merrill Lynch Merger with Bank of America
County of York Employees Retirement Plan v. Merrill Lynch & Co., Inc., et al., (Del. Ch., Oct. 28, 2008), read opinion here. This 39-page Chancery Court decision addressed in a cursory but scholarly manner, several preliminary issues related to the recently announced merger of Merrill Lynch and Bank of America.
The opinion is a treasure trove of Delaware corporate law principles and practical corporate litigation tools that directly address the Delaware legal issues that have arisen in connection with the recent economic crisis of historic proportions. One indication of the seismic shifts we are witnessing is the comparatively large "two-inch high headlines" recently seen on the front page of The Wall Street Journal as formerly unthinkable "fire-sales" have been negotiated on more than one occasion "over a weekend" for blue chip companies that were formerly the 800-pound gorillas of industry (e.g., Merrill Lynch).
I am hoping that some of the corporate law professors who have their own blogs will add their scholarly analysis to this case, but for now I only have time to identify a few highlights. The court cursorily reviewed the following claims that were made about the transaction:
- self-interested directors (not a majority)
- duty of care
- deal protection claims
- irreparable harm (in connection with request for expedited proceedings)
- disclosure claims
- financial advisor compensation (and disclosure of same)
- chairman’s compensation package (and disclosure of same)
In this preliminary overview of certain issues, the court denied a motion to stay this Delaware case in favor of a related federal case in New York, and Chancery also granted expedited proceedings in this case (and explained why it did so).
The court addressed the criteria that will be applied to decide when an amended complaint will relate back to the date of the original complaint for purposes of determining if it was the "first-filed" complaint compared to a similar suit in another forum. In Delaware, this is known as a "McWane analysis", after the Delaware Supreme Court decision of that name. In this regard, the court noted that if it is a "close call", such as when two suits are filed within a day or so of each other, they may be considered as filed contemporaneously. When that occurs, the court observed as follows:
Under the McWane analysis, a court, in the exercise of its discretion, may stay an action “when there is a prior action pending elsewhere, in a court capable of doing prompt and complete justice, involving the same parties and the same issues.” 5 If the foreign action is not “first-filed,” the Court will pursue an inquiry “akin to a forum non conveniens analysis.” 6