Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
June 17 — The company did not breach an agreement entitling a large shareholder to designate a director to the Universal American Corp. board when it delayed seating the designee until he signed a confidentiality agreement that restricted his choice of counsel, according to a June 17 Delaware Chancery Court ruling.
Vice Chancellor Sam Glasscock III dismissed the lawsuit because Universal did not waive its right to refuse designation once its board “in faithful discharge of its fiduciary duties” recognized a conflict.
After a merger closed in which Partner Healthcare Solutions Holdings L.P. agreed to sell its subsidiary, Universal filed a lawsuit alleging claims for fraud in connection with the sale.
As a result of the merger, Partners became entitled to designate a director. However, after an initial designee resigned, Universal conditioned the seating of the successor designee upon the signing of confidentiality agreement that prohibited him from choosing the same law firms that were representing Partners.
The parties eventually agreed to the seating upon counsel setting up an ethical wall. However, Partners continued pursuing litigation against Universal alleging damages for not immediately seating its designee.
However, Vice Chancellor Glasscock found that there was no underlying breach of the board seat agreement.
Specifically, he concluded that Universal had not waived its right to refuse seating the designee if there was a conflict of interest.
“Put simply, the conflict between [the designee's] right to counsel of his choosing, and the Board's fiduciary interest in protecting confidential information from conflicted counsel, does not ‘relate to' the Merger Agreement and the conflict waiver embodied in that Agreement is applicable here,” he wrote.
He further concluded that awarding attorney's fees under a bad faith exception was not warranted because Universal's board was responding to legitimate concerns.
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan Tuck at email@example.com
The opinion is available at http://www.bloomberglaw.com/public/document/PARTNERS_HEALTHCARE_SOLUTIONS_HOLDINGS_LP_AND_GTCR_FUND_IXA_LP_PL.
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)