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A Volcano Corp. shareholder can’t proceed in a lawsuit challenging the company’s $1.2 billion merger with Royal Philips NV ( Lax v. Goldman Sachs & Co. , Del., No. 372-2016, 2/9/17 ).
The Delaware Supreme Court Feb. 9 upheld a lower court’s dismissal of the case, on the grounds that the transaction was insulated from judicial review.
The ruling affirms the Delaware Chancery Court’s novel decision that state courts have limited scrutiny over certain deals if a majority of fully informed and disinterested shareholders approve the transaction by tendering their shares. The chancery court’s ruling expanded on the supreme court’s landmark decision, Corwin v. KKR Fin. Holdings LLC, 2015 BL 323544.
Shareholder Melvin Lax alleged that Volcano directors breached their fiduciary duties in approving the merger because they were motivated by certain benefits they stood to receive from the transaction. He also claimed the board’s financial adviser Goldman, Sachs & Co. aided and abetted the breaches.
The chancery court dismissed Lax’s lawsuit in July 2016. It said the transaction could only be challenged on the basis of corporate waste because a majority of Volcano’s disinterested stockholders responded to Royal Philips’ offer to buy their shares. The court, applying Corwin, said that acceptance of a tender offer has the same “cleansing” effect as a stockholder vote in favor of the transaction.
On appeal, Lax argued that the chancery court’s findings were “unprecedented” and “represent a major sea change in Delaware law.” The state high court’s summary decision came one day after it heard oral argument in the case.
To contact the reporter on this story: Michael Greene in Washington at mGreene@bna.com
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The court's order is available at http://courts.delaware.gov/Opinions/Download.aspx?id=252440.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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