Stay current on changes and developments in corporate law with a wide variety of resources and tools.
May 5 — New York's highest court May 5 declined to revive an investor lawsuit challenging the 2012 buyout of Kenneth Cole Productions Inc. by its founder and controlling stockholder Kenneth D. Cole.
In doing so, the court applied the “business judgment rule”—which is more deferential to corporate decision-making—citing the Delaware Supreme Court's decision in Kahn v. M&F Worldwide Corp., 88 A.3d 635, 2014 BL 71689.
Writing for the court, Judge Leslie E. Stein said the MFW standard properly considers the rights of minority shareholders and balances them against the interests of directors and controlling shareholders.
The ruling is one of first impression that provides an important roadmap for future corporate deals and for lawyers structuring going-private transactions involving controlling shareholders under New York law, said Willkie Farr & Gallagher LLP attorneys Tariq Mundiya, Sameer Advani and Benjamin McCallen, who represented Kenneth Cole Productions, in a May 5 client memorandum.
“The case also provides important guidance for practitioners structuring transactions outside New York and Delaware because the highest courts in two states now have the same standard for review of going private transactions,” they said.
Attorneys representing the shareholder plaintiff did not immediately respond to a request for comment.
In the 2014 MFW decision, the Delaware Supreme Court held that a going-private merger is entitled to “business judgment rule” deference instead of the enhanced “entire-fairness” review when it is conditioned on approval by a special committee of independent directors and an unaffiliated shareholder vote (12 CARE 320, 3/21/14).
In the Kenneth Cole case, the Erie County Employees Retirement System filed a purported class action alleging that the company's directors breached their fiduciary duties owed to minority shareholders.
Cole, who held approximately 89 percent of the company's voting power, made an initial offer to buy his namesake company for $15 per share. After months of negotiations, a special committee approved a $15.25-per-share offer. Subsequently, 99.8 percent of the minority shareholders voted in favor of the merger.
Before reaching the New York Court of Appeals, an appellate court had affirmed a trial court's dismissal of the case (12 CARE 1624, 12/5/14). The state high court, applying the Delaware Supreme Court's review standard, affirmed the appellate court's ruling.
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/eJe.
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)