Stay current on changes and developments in corporate law with a wide variety of resources and tools.
June 7 — Caris Life Sciences Inc. won't be able to escape a ruling requiring it to pay over $16.2 million in damages to a class of stock option holders, a majority of the Delaware Supreme Court ruled June 6 ( CDX Holdings Inc. (f/k/a Caris Life Sciences Inc.) v. Fox, 2016 BL 180519, Del., No. 526, 6/6/16 ).
In a rare divided decision, the state high court affirmed 4-1 a July 2015 ruling in which the Delaware Chancery Court concluded that the medical diagnostics company undervalued two spun-off business units when it used a complex spin/merger to effectuate the sale of its pathology unit.
Although the dissenting judge mounted a vigorous argument, the majority deferred to the chancery court's factual findings. Writing for the majority, Delaware Supreme Court Judge Randy Holland said the lower court's findings were supported by the record and were the product of sound reasoning.
The chancery court found that Caris breached a stock incentive plan requiring the company to reimburse employees for stock options cancelled in the merger, in the amount that the stocks' fair market value exceeded the exercise price (13 CARE 1712, 7/31/15).
The lower court said Caris's board failed to make “Fair Market Value” determinations it was supposed to make under the plan.
After the company's spin/merger transaction was completed, a Caris employee option holder filed a class action claiming that the share value attributed to the spin-offs wasn't made in good faith.
The chancery court found that Caris Chief Financial Officer Gerard Martino made option-value determinations that undervalued two spin-offs to minimize the tax liabilities of Chief Executive Officer David Halbert, who owned 70.4 percent of the company.
In her dissent, Judge Karen Valihura said the chancery court's decision should be reversed because it made no factual findings supporting a conclusion that the board acted in bad faith. She specifically disagreed with the lower court's finding that the board hadn't acted at all.
“If the trial court believed that the Board had not acted, then it should have proceeded to analyze whether a majority of the Board intentionally failed to act in the face of a known duty to act,” she wrote. “This typically requires an extraordinary set of facts. Such facts, as to the Board's conduct, are not present here.”
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The opinion is available at http://src.bna.com/fFa.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)