Gibson Dunn's Securities Litigation Group has extensive experience defending the litigation that inevitably follows the announcement of public company mergers. We work closely with our corporate lawyers and anticipate potential issues before a deal is announced, minimizing the costs and risks associated with the fast-paced discovery and preliminary injunction battles that often accompany such deals. We have successfully handled these types of proceedings all over the United States, through both aggressive litigation on the merits and, where appropriate, favorable settlement.
Our M&A practice, including takeover defense, is one of the most extensive and well-respected. According to Corporate Control Alert, Gibson Dunn ranks among the top five firms in helping takeover targets defend themselves. We have worked on many of the major hostile offers in the United States and abroad.
Our securities litigators also represent companies, directors and their financial advisers in connection with shareholder litigation arising out of proposed mergers.
Our track record is hardly surprising, as Gibson Dunn lawyers created many of the legal ideas and strategies that others in the legal industry now employ.
Recent representations include:
- Obtained complete victory for Hewlett-Packard following a three-week JAMS San Francisco arbitration on all claims asserted by the former CEO of a company that had been acquired by HP. He claimed entitlement to upwards of $150 million in damages as a result of a decision by the acquired company's board of directors to terminate him for cause and unilaterally cancel millions of his backdated, in-the-money stock options. Gibson Dunn successfully argued that both the termination and option cancellation were permissible under Delaware Law, and that the board's decisions were both appropriate under the circumstances and entitled to deference.
- Successfully represented hedge fund Eminence Capital in litigation that forced the hand of Jos. A. Bank to negotiate a merger with rival The Men's Wearhouse, on terms that were highly favorable to both companies' stockholders, including Eminence, which held significant stakes in both clothing retailers. Eminence commenced the lawsuit in the Delaware Chancery Court alleging that the Jos. A. Bank directors breached their fiduciary duties by refusing to pursue, and erecting improper obstacles to, a negotiated deal with The Men's Wearhouse. Following that move The Men's Wearhouse filed a substantially similar case. In response to the litigation pressure Jos. A. Bank ultimately dropped its refusal to negotiate. This case was another example of the continued growth in M&A litigation, now brought to challenge virtually all public company mergers and going private transactions.
- Secured affirmance from the California Court of Appeal of summary judgment for Lawrence Ng, co-founder of oversee.net, a multimillion-dollar Internet marketing business that oversees and monitors over 600,000 domain names. Plaintiff co-founder sued in connection with Mr. Ng's decision to sell his shares to a private equity firm, alleging breach of fiduciary duty as a company director for failing to consider an allegedly superior offer for all outstanding company shares. The trial court granted summary judgment based on Gibson Dunn's argument that plaintiff was precluded from bringing the lawsuit because of a previous action he had brought against Mr. Ng in Delaware but then dismissed with prejudice so that he could participate in the sale to the private equity firm.
- Secured partial acquittal and a declaration of mistrial in the District Court for the District of Columbia for a former executive of China North East Petroleum (CNEP) in the first-ever criminal securities fraud trial stemming from investigation of Chinese reverse mergers by the U.S. Department of Justice and Securities and Exchange Commission. The client was indicted in connection with an alleged fraud stemming from two securities offerings raising more than $30 million in capital; CNEP had traded on the New York Stock Exchange. The seven criminal counts included one of conspiracy to commit securities fraud, four of securities fraud and two of false statements. Following a six-week criminal jury trial Gibson Dunn secured an acquittal on two of the four securities fraud counts and the jury deadlocked on the remaining five counts, prompting the court to declare a mistrial as to them.
- Secured summary judgment from the Delaware Court of Chancery and affirmance by the Delaware Supreme Court for client Dr. Ernst Volgenau in a shareholder suit arising from the sale of government contractor SRA International, Inc. (SRA), founded by Dr. Volgenau, to Providence Equity Partners. The decision importantly clarified the rights of controlling shareholders under Delaware law. Providence acquired SRA for a substantial premium over SRA's unaffected share price. As part of the deal Dr. Volgenau rolled over a portion of his controlling equity stake into the new company and became chairman of the SRA Board of Directors. Despite the premium to shareholders, plaintiff Southeastern Pennsylvania Transportation Authority (SEPTA) sued SRA, Providence and Dr. Volgenau, claiming a breach of fiduciary duties and alleging that Dr. Volgenau controlled the transaction and received an impermissible premium at the expense of the minority shareholders. In granting the defendants summary judgment, the Court of Chancery had concluded that the transaction should be reviewed under the deferential business judgment rule because adequate procedural protections ensured that the minority shareholders' rights were protected in the negotiation process.
- Obtained from the Delaware Supreme Court a rare expedited ruling from the bench reversing an injunction of the Delaware Chancery Court against an $8.3 billion stock repurchase transaction involving client Vivendi S.A. and software publisher Activision Blizzard, Inc. Gibson Dunn represented Vivendi in the transaction in which Vivendi agreed to sell most of its majority ownership stake in Activision back to the company and a consortium of investors. After the transaction's public announcement shareholder derivative suits were filed in California and Delaware challenging the sale. Thereafter one of the shareholder plaintiffs sued in the Delaware Court of Chancery seeking to prevent the transaction from closing. The day before the scheduled closing the Chancery Court issued a preliminary injunction barring it. Gibson Dunn and several other firms representing Activision and its directors requested an expedited appeal to the Delaware Supreme Court, which agreed to hear it on an accelerated schedule. The Supreme Court's ruling reversing the injunction remanded the case, allowing the transaction to proceed.
- Obtained reversal from the California Court of Appeal, First Appellate District, of a judgment of the California Superior Court invalidating the election of Gibson Dunn clients to the boards of directors for The McGraw Group of specialty insurance companies under the California Corporations Code. Plaintiff, a one-third shareholder in The McGraw Group, sought to invalidate the election based on financial transactions between the Gibson Dunn clients' affiliates and the majority shareholders who elected them. The trial court agreed and declared the election and related actions invalid. On appeal Gibson Dunn argued for reversal because the majority shareholders were indispensable parties who were not joined in the action, resulting in impairment of their ability to protect their interests, and exposure of Gibson Dunn's clients to inconsistent obligations in subsequent litigation. The Court of Appeal agreed and reversed, holding that it was error not to require plaintiff to join the other shareholders as parties to the action.
- Successfully represented the Chandler Trusts in a case in the Southern District of New York alleging fraudulent transfer claims aggregating more than $8 billion against Tribune Company shareholders by former Tribune creditors. The lawsuit challenged payments to the shareholders in connection with a leveraged buyout of the company in 2007. The Tribune Company ultimately filed for bankruptcy protection approximately one year after the closing of the LBO in 2008. The Chandler Trusts were among the largest Tribune shareholders. The court dismissed all fraudulent transfer claims on the legal ground, developed by Gibson Dunn, that individual creditors lacked standing to pursue avoidance of the same transfers that a representative of the Tribune estate had previously sought and was continuing to seek avoidance of under an alternative theory of liability.
- Successfully opposed an effort to enjoin the stockholder vote to approve Fushi Copperweld's "going private" merger. After Fushi, a Nevada corporation based in China, received a proposal to take the company private, various plaintiffs filed lawsuits alleging the directors had breached their fiduciary duty to stockholders. Gibson Dunn was retained by the Special Committee and assisted the corporate team by negotiating terms for the benefit of unaffiliated stockholders. The Special Committee approved the proposed merger and recommended it to Fushi's board and stockholders. Following argument, the U.S. District Court for the District of Nevada denied plaintiff's motion, finding that plaintiff s had not satisfied any of the requirements for preliminary injunctive relief. The court agreed with Gibson Dunn that the business judgment rule applies to protect the Special Committee's actions.
- Successfully opposed an effort to enjoin a stockholder vote on Ameristar Casinos, Inc.'s proposed merger with Pinnacle Entertainment, Inc. Ameristar's Board of Directors had analyzed and rejected the idea of remaining independent and restructuring the company as a real estate investment trust (REIT). Plaintiffs alleged the Board breached its fiduciary duty to stockholders and sought a preliminary injunction on the vote, arguing that Ameristar's definitive proxy statement filed with the SEC omitted certain material information provided by financial advisors regarding the "upside" of a REIT transaction. The court denied the motion, agreeing with Gibson Dunn that plaintiffs had not established a likelihood of success on the merits of their disclosure claim.