Yearly Archives: 2021

Minority Shareholder’s Vote Required by Pre-Disclosure Voting Agreement Did Not Count for Corwin Purposes

In In re Pattern Energy Group Inc. Stockholders Litigation, the Delaware Court of Chancery denied a motion to dismiss a class action challenging the sale of Pattern Energy to Canada Pension Plan Investment Board due to allegations that the special committee and certain officers involved in the sale process improperly favored Canada Pension due to the preference of Riverstone Holdings LLC, a private equity fund that formed Pattern Energy and controlled its upstream supplier. The court, in an opinion by Vice Chancellor Zurn, held that the approval of the transaction by a majority of the minority stockholders did not cleanse the transaction under Corwin because such approval was partly based on the vote of a large holder of preferred shares that was contractually bound, pre-disclosure, to vote in accordance with the board’s recommendation, and therefore its vote was not fully informed for purposes of Corwin. For the opinion, click here.

Delaware Court of Chancery Holds 35% Shareholder Not a Controller

In In re GGP, Inc. Stockholder Litigation, the Delaware Court of Chancery dismissed a class action challenging the acquisition of GGP by Brookfield Property Partners, L.P. Brookfield, who had rescued GGP from bankruptcy, held approximately 35% of GGP’s stock. In addition to its right to designate three members to the GGP board for so long as it owned 20% of GGP’s stock, Brookfield had a standstill agreement with GGP that entitled Brookfield to vote its shares, up to 10% of the outstanding shares of GGP, for or against any non-Brookfield nominee to the GGP board. The standstill also required that transactions between GGP and Brookfield be approved by a majority of the minority GGP stockholders, and provided that GGP would not waive certain provisions of the standstill for other large stockholders unless it granted a similar waiver to Brookfield. The plaintiff challenged the acquisition by Brookfield, arguing that Brookfield was a controller owing fiduciary duties to the minority GGP stockholders and therefore the transaction was subject to entire fairness review. The court, in an opinion by Vice Chancellor Slights, held that Brookfield did not exercise control over GGP, in part because the contractual standstill arrangements with GGP decreased the influence that Brookfield had over the company. Nor did Brookfield exercise control over the merger, as the special committee that negotiated and approved the merger was independent from Brookfield. Moreover, the court concluded that the merger was approved by an informed and uncoerced stockholder vote, and therefore the transaction was cleansed under Corwin. For the opinion, click here.

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