recent developments in delaware corporate law - Greenberg Traurig ...

178 Delaware Law Review Volume 7:2
I. CASE SUMMARIES
A. The Market Check Revisited
In In re The MONY Group Inc. Shareholder Litigation, 2 the Court of Chancery
confirmed its earlier decisions in In re Pennaco Energy, Inc. Shareholders Litigation 3 and
Kohls v. Duthie 4 and held that a properly structured post-merger agreement market check
may be upheld even under strict Revlon scrutiny. 5
In MONY, the stockholder-plaintiffs sought an injunction against the stockholder
vote on the merger agreement pursuant to which The MONY Group Inc. (“MONY”) and
an acquisition subsidiary wholly owned by AXA Financial, Inc. (“AXA”) would merge.
The complaint alleged a violation of the duties outlined in Revlon, as well as disclosure
violations. 6
In November 2002, the MONY board of directors (the “MONY board”) began
discussions with its financial advisor, Credit Suisse First Boston LLC (“CSFB”), on how
to resolve some of MONY’s financial woes. CSFB created a list of potential partners for
MONY, including AXA, a large and stable insurance company that operated under the same
business model as MONY. At that time, the MONY board rejected the idea of a public
auction for MONY, believing that an auction process, especially a failed one, could greater
weaken MONY’s financial condition by providing confidential information to competitors
2. 852 A.2d 9 (Del. Ch. 2004).
3. 787 A.2d 691 (Del. Ch. 2001).
4. 765 A.2d 1274 (Del. Ch. 2000).
5. In Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986)
(“Revlon”), the Delaware Supreme Court held that the decision of a board of directors permitting
management to negotiate a merger or buyout with a third party was a recognition that the company
was for sale and changed the board’s duty from preservation of Revlon as a corporate entity to the
immediate maximization of the company’s value at a sale for the stockholders’ benefit.
6. Given the fact-specific nature of the alleged disclosure claims, they are not discussed
herein. Suffice it to say, the court reviewed the challenged proxy disclosures and determined that
material information necessary for shareholders to make an informed decision on the merger was
somewhat incomplete or misleading. The court, therefore, granted a limited injunction relating
solely to defective proxy statement disclosures concerning payments under certain change-in-control
agreements, but denied the remainder of the plaintiffs’ preliminary injunction application.