In Energy Partners, Ltd. v. Stone Energy Corp., (Del. Ch., Oct. 11, 2006), read opinion here, the Chancery Court addressed whether the issue presented was ripe in the context of an expedited trial to interpret provisions of a merger agreement that was attacked on several fronts, including a third party that made a hostile tender offer after the merger agreement was signed. Thus, one issue raised was the tension between fiduciary duties and the contract terms that arguable impacted those duties. The opinion is also filled with contract interpretation principles.
Importantly, the opinion also discusses the duties of a buyer’s board of directors in a transaction (as compared to the more common discussion of the duties of a seller of a company).
This was a lightening fast decision. The complaint was filed on Aug. 28. The trial was held on Sept. 22. A ruling from the bench was made Sept. 27. This Oct. 11 opinion addressed a motion for reargument as well as explaining in 44-pages, the reasoning for the decision.
The court analyzed when a claim is justiciable under the Declaratory Judgment Act and concluded that some claims were not yet ripe. Although the court did determine that one party to the merger agreement could explore the tender offer in good faith notwithstanding the terms of the agreement, it declined to rule on other issues of interpretation, reasoning that:
In such an important area of the law, this Court must carefully evaluate policy implications and legal determinations, which can only be sufficiently explored in relation to a discrete set of facts. Adjudication of Plaintiffs’ claims in such a sparse factual setting also runs the risk of wasting resources of both the Court and the parties. This Court is reluctant to suggest or encourage preenforcement review of each and every action of a director in the context of competing acquisition proposals. Lacking concrete and substantial facts and recognizing the importance and complexity of the issues presented, I do not find sufficient immediacy and justification in the present circumstances to warrant the exercise of my discretion under 10 Del. C. § 6506 to consider the issuance of a declaratory judgment….