Pershing Square, L.P. v. Ceridian Corporation, Delaware Court of Chancery, C.A. No. 2780-CC (May 11, 2007)

A seemingly narrow books and records request made by a self-styled “activist” hedge fund in connection with an announced proxy contest raised interesting issues regarding proper purpose and confidentiality in the context of a 220 request. The decision also explored the limits of a stockholder’s ability to communicate with and obtain information from senior executives within a company. In this case, the plaintiff-stockholders sought disclosure of three confidential letters written by senior executives of Ceridian to its board of directors that allegedly raised concerns about Ceridian’s senior management. Plaintiffs learned of the existence of the two letters from a Ceridian executive who was opposed to Ceridian’s senior management. The Ceridian executive disclosed the existence of the letters during secret meetings with representatives of the plaintiffs at which Ceridian representatives were not also present. At the same meetings, the Ceridian executive pledged his support to plaintiff-stockholders in the proxy contest to unseat the current board and his services in the future should the proxy contest succeed.

The Court denied the plaintiffs’ Section 220 demand and found that the plaintiffs’ real -- and improper -- purpose for making their demand was to “find a legal vehicle by which [the plaintiff could] publicly broadcast improperly obtained confidential information.” The Court chastised the plaintiff for seeking the Court’s assistance in a scheme to unseat the current management – a scheme that included disclosure of confidential information by a company executive to the plaintiffs in furtherance of “improper and self-interested goals.” The Court also ruled that the letters were confidential and should be protected from disclosure to avoid a “harmful chilling of candid communications between executives and a board of directors.”

Young Conaway handled the litigation of this matter on behalf of Ceridian Corporation along with lawyers from Wachtell, Lipton, Rosen & Katz. Within the firm, litigation of the matter was conducted by partners David C. McBride, Rolin P. Bissell, and Christian Douglas Wright and associate Tammy L. Mercer of the Corporate Counseling and Litigation Section.


Express Scripts, Inc. v. Crawford, Delaware Court of Chancery, C.A. No. 2663-CC (Feb. 23, 2007)

In one of the most hotly contested takeover battles of the year, Express Scripts obtained a preliminary injunction in aid of its efforts to effect a hostile acquisition of Caremark for approximately $26 billion. Although Caremark's stockholders ultimately voted to approve an acquisition by CVS (after CVS upped its offer by an additional $3.3 billion), Express Scripts obtained significant judicial relief that increased its opportunity to achieve its business objectives. Additionally, the Delaware Court of Chancery issued important guidance respecting the nature of the disclosures required of a target company in a bidding contest and resolved an issue of first impression pertaining to the availability of appraisal rights where a merger is funded, in part, by a special dividend. The Court of Chancery also identified, but did not resolve, important issues respecting the validity and propriety of various deal protection measures adopted by Caremark and CVS.

Young Conaway handled the litigation of this matter and assisted Skadden, Arps, Slate, Meagher & Flom LLP in connection with advising Express Scripts on the transaction. Within the firm, the Corporate Counseling and Litigation Section carried the laboring oar, with the formal presentation in the Court of Chancery.


American Legacy Foundation v. Lorillard Tobacco Co., Court of Chancery (C.A. No. 19406)

Litigation regarding whether the American Legacy Foundation’s anti-tobacco marketing and advertising campaign directed at youth violated the terms of the Master Settlement Agreement resolving the various lawsuits filed by state attorneys general against the tobacco companies.

A summary judgment for our client was affirmed by the Delaware Supreme Court. Young Conaway served as co-counsel with Wilmer Cutler Pickering Hale and Dorr LLP.

In re The Walt Disney Company Derivative Litigation

On August 9, 2005, the Delaware Court of Chancery issued its much-anticipated opinion in the case of In re The Walt Disney Company Derivative Litigation, ruling in favor of all defendants in the long-running saga over the hiring and termination of Michael Ovitz as President of The Walt Disney Company in 1995 and 1996, and the benefits he received pursuant to his employment agreement with Disney when he was terminated.

Disney Stockholders sued Mr. Ovitz and the other members of Disney’s board of directors, alleging that the directors breached their fiduciary duties in entering into that contract and wasted company assets in doing so, and that Mr. Ovitz and the Disney board breached their fiduciary duties in connection with Mr. Ovitz’s termination because Mr. Ovitz should have been terminated “for cause” instead of being given a “non-fault” termination.

Following one of the Chancery Court’s longest trials - 37 days - with testimony from 24 witness and more than 1,000 trial exhibits, Chancellor William B. Chandler III issued a 174-page opinion finding that none of the Disney directors breached their fiduciary duties in connection with Mr. Ovitz’s hiring and termination.

As to Mr. Ovitz, the Court ruled that he acted completely in accordance with his fiduciary duties when he was terminated and that the plaintiffs had failed to prove their claims that his conduct as President merited a “for cause” termination. (The Court had, prior to trial, granted summary judgment in favor of Mr. Ovitz on plaintiffs’ claims that he breached fiduciary duties to Disney when he was hired.)

Hollinger international Inc. v. Black

Action by corporation against parent and controlling owner arising from attempted sale of parent by controlling owner, for breach of fiduciary duty (including usurpation of corporate opportunity), breach of contract, improper by-law amendments and declaration of propriety of corporation's rights plan (obtained preliminary injunction against sale of parent and declaration of propriety of rights plan).