Shareholder Activist Litigation
Olshan’s Shareholder Activism Practice Group, which is widely recognized as the premier practice representing activist investors, includes a seasoned team of litigators because strategic litigation may be critical to successful execution of activist investors’ goals to effect corporate change. We stand ready on short notice to commence expedited proceedings as an affirmative tool, to litigate against an issuer’s defensive lawsuit and to provide advice when a contested solicitation turns hostile.
We routinely collaborate with the Shareholder Activism Practice Group to assist our activist clients in a range of matters, including enforcing shareholder rights to compel special and annual meetings, obtaining corporate records, obtaining shareholder lists, challenging defensive maneuvers that impede the stockholder franchise and in asserting class and derivative claims to challenge board conduct. Together with members of our Securities Litigation and Enforcement Group, we also represent shareholders in responding to claims asserted in federal court, including claims by management alleging violations of federal securities laws involving proxy and reporting obligations. We frequently appear in the Delaware Court of Chancery, where the majority of such cases are brought, and other courtrooms throughout the country on behalf of shareholder activists. Our shareholder activist attorneys also have extensive experience in handling appraisal claims, having successfully recovered substantial sums on behalf of dissenting shareholders, including in off-shore proceedings. When needed, our litigators draw on deep and longstanding relationships with key players in the activist community including corporate governance experts, Delaware counsel and proxy solicitation firms.
With decades of shareholder activist litigation experience in proxy and other contests for corporate control, our shareholder clients rely on us to develop strategies for transferring power that will reduce or eliminate the risk of litigation and avoid potential liability. When negotiating settlements, we work as a team with the Shareholder Activism Practice Group to structure resolutions that achieve client goals.
Olshan Helps IsZo Capital Score Activist Litigation Victory in British Virgin Islands
On March 5, 2021, Olshan client IsZo Capital prevailed in its lawsuit against NYSE-listed Nam Tai Property Inc. and an affiliate of Nam Tai’s de facto controlling stockholder, Kaisa Group Holdings Limited in an action before the Eastern Caribbean Supreme Court, which was affirmed by the Eastern Caribbean Court of Appeal on October 4, 2021. The Court ruled in IsZo’s favor and voided a $170 million private placement executed by Nam Tai that distributed more than 16 million shares to the Kaisa affiliate and a third party. The Court found that execution of the private placement was a breach of Nam Tai’s directors’ fiduciary duties and was undertaken to secure Kaisa’s control of the company in response to a requisition from approximately 40% of the outstanding shares to convene a meeting of Nam Tai shareholders to remove and replace the Kaisa-affiliated directors from the Board. Olshan’s litigation team led by Lori Marks-Esterman and Adrienne Ward, and supported by senior associate Theodore Hawkins, used Section 1782 to gather evidence from Nam Tai’s financial advisor, PR firm and the sole U.S.-based director, which the U.K.- and British Virgin Islands-based trial team used to demonstrate that Nam Tai’s proffered reason for the private placement was not true. Activist Partner Ryan Nebel provided support throughout the trial and on appeal on corporate governance issues. Read the full opinion here.
Olshan Client Blocks Freeze Out By Obtaining Status Quo Order in Delaware Court of Chancery
Olshan was lead counsel in representing Israeli company Paltop Advanced Dental Solutions Ltd. and its founder in connection with a bitterly fought battle with the officers and directors of Keystone Dental, Inc., the Delaware company with which Paltop had merged with. Though the combined company’s governing documents require that the company be governed equally by Paltop and Keystone board representatives, and that Paltop would continue to be run by its founder, in March 2020, Keystone’s officers and directors took aggressive and unlawful actions by the officers and directors to freeze him out. Olshan moved swiftly, filing for expedited relief in the form of a motion for a Status Quo Order, in the Delaware Court of Chancery. On May 4 and May 13, 2020, the Court issued Status Quo Order which restored governance of the company to the status quo as it existed before Defendants’ unlawful activities and protected Olshan’s clients by setting forth in exacting detail the actions Defendants were prohibited from taking. These Orders were critical to the client, as without them, Defendants would have taken over all control of the Company. Lori Marks-Esterman and Adrienne Ward led the litigation team, with support by Activist Partner Elizabeth Gonzalez-Sussman. The Orders can be read here and here.
Critical Evidence Obtained through Section 1782 Helps Dissenters Secure Victory in Cayman Islands Appraisal Action
On March 18, 2020, the Grand Court of the Cayman Islands released one of the most significant decisions on fair value appraisal in the jurisdiction, finding that the fair value of dissenting shareholders’ shares of Nord Anglia Education, Inc., exceeded the price offered in a merger transaction. Olshan obtained Section 1782 discovery from several financial institutions, including Nord Anglia’s U.S.-based investment bank. In reaching its decision, the Grand Court expressly referenced the 2,900 documents produced by the investment bank, and wrote that such documents “were obviously relevant to advancing a reasoned critique” of the bank’s discounted cash flow analysis. Lori Marks-Esterman led the litigation team. Read the full opinion here.
First Successful Use of Universal Proxy Card follows Lawsuit by Rice Team to Prevent EQT from Manipulating Shareholder Election
On April 25, 2019, Olshan client Toby Z. Rice, on behalf of the Rice Team, filed a lawsuit in Pennsylvania State Court against EQT Corporation and its Board of Directors. The lawsuit sought to prevent EQT and the Board from taking actions that the Rice Team believed were designed to thwart its proxy campaign and manipulate the outcome of the contested election of directors at EQT’s 2019 Annual Meeting of Shareholders. The complaint alleged that EQT was attempting to create an uneven playing field by taking the highly unusual and unfair step of requiring, as a condition of the submission of nominations, that the Rice Team’s nominees consent to being named in EQT’s proxy materials although there was no such requirement in EQT’s bylaws and any such requirement would violate Pennsylvania law. The complaint also alleged additional attempts by the Board to gain an unfair advantage in the solicitation process, including by refusing to approve the Rice Team’s nominees in a timely fashion to avoid triggering an event of default under EQT’s outstanding credit agreement. Following the filing of the lawsuit, EQT agreed to permit the Rice Team to appear on a universal proxy card, in which all of the company and dissident’s nominees appeared on their respective proxy cards. The Olshan team included Activist Partners Steve Wolosky and Elizabeth Gonzalez-Sussman, with Thomas Fleming and Adrienne Ward on the litigation.
Olshan Obtains Injunction Blocking Proposed Three-Way Merger: Court of Chancery Finds that Conflicted Directors Breached Fiduciary Duties by Agreeing to Preclusive Deal Terms in an “Informational Vacuum”
On March 11, 2019, Olshan clients FrontFour Capital Group LLC and FrontFour Master Fund, Ltd. prevailed after an expedited trial on the merits on class action claims that the Board of Directors of Medley Capital Corporation (“MCC”) breached their fiduciary duty in approving a merger transaction with two of MCC’s affiliates, including MCC’s investment adviser (MDLY), which was controlled by twin brothers Brook and Seth Taube, MDLY’s Co-CEOs. After a two-day trial, the Court concluded that the Special Committee lacked independence and the Taubes pushed the merger through on an “aggressive timeline” while withholding material information from the Special Committee in order to alleviate the “enormous financial pressure” facing MDLY and secure “lucrative employment contracts” for themselves. The Court found that the Special Committee “sat supine” during negotiations over the proposed transaction, allowing the Taube brothers to dominate the process and extract a “huge premium” on behalf of MDLY stockholders while MCC stockholders received none. The Court further found that “that the price being offered is well below” MCC’s fair value. Applying the entire fairness standard, the Court enjoined the proposed transaction pending corrective disclosures. Under the settlement that followed the Court’s decision, FrontFour entered into a Corporate Governance Agreement with MCC and received board representation. In a separate decision, the Court also awarded legal fees to Olshan and Delaware counsel, recognizing the corporate benefit provided to MCC. Partners Lori Marks-Esterman and Adrienne Ward led the litigation effort, supported by members of Olshan’s Shareholder Activist team, including Steve Wolosky, Ron Berenblat and Ryan Nebel. The decision can be read here.
- Lori Marks-Esterman Quoted in Delaware Business Court Insider on Shareholder Options Regarding Corporate Officers’ Limited LiabilityNovember 8, 2022
- February 28, 2022
- Olshan Client IsZo Capital Achieves Monumental Victory Replacing Majority of Nam Tai Property’s BoardDecember 1, 2021
- March 5, 2021
- July 26, 2019
- Bed Bath & Beyond Inc. Continues Transformation and Announces Appointment of Four New Directors to the BoardMay 29, 2019
- Olshan Obtains Injunction Blocking Proposed Three-Way Merger: Court of Chancery Finds that Conflicted Directors Breached Fiduciary Duties by Agreeing to Preclusive Deal Terms in an “Informational Vacuum”March 15, 2019
- Olshan Client City of London Investment Management Company Limited Reaches Mutual Agreement with China Fund, Inc. to Withdraw LawsuitsJuly 2, 2018
- February 12, 2018