Our firm took the lead in assembling a group of the most prestigious law and economics professors in the country to inform the Delaware Supreme Court that it should avoid imposing a mandatory merger-price rule on trial judges in appraisal cases arising from an apparently robust M&A deal process.
The so-called payday lender DFC Global had been sold to a private equity buyer and is currently appealing to the Delaware Supreme Court a trial court decision that found the "fair value" of its dissenting stockholders' DFC Global stock to be worth more than the merger price. By its appeal, DFC Global is urging the Delaware Supreme Court to adopt a merger-price rule, requiring the courts to automatically defer to the merger price as reflective of the company's fair value whenever the merger appears to have resulted from an arm's-length negotiation process. In December 2016, a group of nine law and corporate finance professors from various universities filed an amicus brief in support of DFC Global's suggested merger-price rule.
In response, our firm assembled a larger group of over 20 leading academics and filed a competing amicus brief on their behalf. This responding group of professors – which included a Harvard Nobel Laureate – has expertise in auction design and game theory, as well as corporation law, finance, governance, M&A, management, and valuation, hailing from such prestigious institutions as Harvard, Yale, and Columbia, among other top law schools. Our brief argues that the merger-price rule is a "trifecta of bad law, bad economics, and bad policy." It urges the Delaware Supreme Court to preserve the fundamental right of shareholders who lose their stock in a corporate transaction to seek appraisal of their shares. The merger-price rule ties the hands of the Delaware courts, robbing them of the discretion to make a judgment about the valuation analysis. Our brief argues that the reversal of this rule will allow the Delaware courts to make an independent determination of the fair value of those shares.
A post on the Business Law Prof Blog summarized and compared the two opposing amicus briefs – referring to another writer's description of the competing briefs as an intellectual "cage match" – and largely agreed with the arguments raised in our brief. A copy of the amicus brief is available here and a copy of the Motion for Leave to file the amicus brief, which includes brief biographies of the prestigious professors we represented, is available here.
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