Andre G. Bouchard, Geoffrey R. Chepiga, and Jaren Janghorbani are Partners at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss memorandum by Mr. Bouchard, Mr. Chepiga, Ms. Janghorbani, Frances F. Mi, Jason S. Tyler, and Cara Grisin Fay, and is part of the Delaware law series; links to other posts in the series are available here.
In Anderson v. Magellan Health, Inc., the Delaware Court of Chancery drastically reduced a plaintiff’s mootness fee request and held, in an opinion by Chancellor McCormick, that, moving forward, plaintiffs can justify a mootness fee only if they obtain supplemental disclosures that are “plainly material.” In so holding, the court split with prior Court of Chancery precedent requiring that such disclosures be merely “helpful” to support a mootness fee. The result is that the standard required for supplemental disclosures in the context of a mootness fee award is now higher and in line with the “plainly material” standard established for disclosure-only settlements in In re Trulia, Inc. Stockholders Litigation (discussed here). Magellan also provides helpful guidance around the dollar value of mootness fee awards based on supplemental disclosures, as well as the standards required for a mootness fee award based on the loosening of deal protections, including the waiver of “don’t-ask-don’t-waive” standstill provisions.
Background
In January 2021, Magellan entered into a merger agreement with Centene Corporation. At that time, five standstill agreements containing “don’t-ask-don’t-waive” provisions remained in effect with prospective bidders from an earlier 2019 sale process. Customary standstill provisions for a sale process prohibit the bidder from making unsolicited offers. A don’t-ask-don’t-waive provision further prohibits the bidder from requesting (publicly or privately) a waiver of the standstill to be able to make a bid. The court observed that while such provisions have value-maximizing uses in an active auction, they also can cause a target board to be uninformed that a party is interested in making a topping bid. In this case, however, one of the standstills was scheduled to expire before the Magellan stockholder vote on the proposed Centene transaction, and the others were with parties that were not serious bidders during the earlier 2019 process.
