(Article from Securities Law Alert, December 2016)
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New York Court of Appeals: Adopting Delaware’s MFW Standard, Court Holds Business Judgment Rule Applies to Going-Private Mergers Conditioned on Independent Committee Approval and the Informed Voluntary Vote of a Majority of Minority Stockholders
In Kahn v M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (MFW), the Delaware Supreme Court held “business judgment is the standard of review that should govern mergers between a controlling stockholder and its corporate subsidiary, where the merger is conditioned ab initio upon both the approval of an independent, adequately-empowered [s]pecial [c]ommittee that fulfills its duty of care; and the uncoerced, informed vote of a majority of the minority stockholders.”
On May 5, 2016, the New York Court of Appeals adopted the MFW standard for going-private mergers. In re Kenneth Cole Prod. S’holder Litig., 27 N.Y. 3d 268 (N.Y. 2016) (Stein, J.). The Court of Appeals found “the MFW standard properly considers the rights of minority shareholders . . . and balances them against the interests of directors and controlling shareholders in avoiding frivolous litigation and protecting independently-made business decisions from unwarranted judicial interference.”
New York Court of Appeals: New York’s Common Interest Doctrine Only Protects Attorney-Client Communications Disclosed to a Third Party in Connection with a Common Legal Interest in Pending or Anticipated Litigation
Pursuant to the common interest doctrine, “an attorney-client communication that is disclosed to a third party remains privileged if the third party shares a common legal interest with the client who made the communication and the communication is made in furtherance of that common legal interest.” Ambac Assurance Corp. v. Countrywide Home Loans, 27 N.Y.3d 616 (N.Y. 2016) (Pigott, J.).
On June 9, 2016, the New York Court of Appeals held that New York’s common interest doctrine only applies if the attorney-client communications were shared with a third party “in furtherance of a common legal interest in pending or reasonably anticipated litigation” (emphasis added). Significantly, the court found New York’s common interest doctrine inapplicable to attorney-client communications shared by entities with “a common legal interest in a commercial transaction or other common problem” where those entities “do not reasonably anticipate litigation.”