The Delaware Court of Chancery's decision in Nguyen v. Barrett (Sept. 28, 2016):
- Highlights yet again the recent narrowing of the circumstances under which plaintiffs can be successful in challenging M&A transactions--in this case, in the context of post-closing disclosure claims;
- Clarifies that there is not, as some had thought, a “new regime” in Delaware under which a plaintiff can elect to bring disclosure claims either pre- or post-closing, with the court reviewing them in either case on the same basis;
- Articulates, for the first time, the higher burden that a plaintiff has in bringing a disclosure claim in a post-closing damages action than in a pre-closing injunctive action; and
- Based on the court's emphasis on its strong interest in ensuring a fully informed stockholder vote, suggests that the court, in a post-closing action, likely will view disclosure claims that were not brought and pursued pre-closing as having been waived.
In the attached Fried Frank M&A Briefing, we:
- Discuss the decision and explain the different standards that apply for dismissal of a disclosure claim when brought pre-closing or post-closing;
- Note the open issue as to whether the court would deem as waived a post-closing disclosure claim not first pursued pre-closing if it is reasonably conceivable that the alleged omission or misrepresentation was material and made in bad faith; and
- Offer practice points arising from the decision (including with respect to disclosure of contingent banker fees).