Delaware Supreme Court Affirms Olshan Client Glenhill Capital’s Trial Victory
On November 18, 2019, the Delaware Supreme Court upheld the August 2018 ruling by the Delaware Court of Chancery, reached after a five-day trial, that plaintiffs had no standing to bring claims that Olshan client Glenhill Capital Management LP, former controlling stockholder of furniture company Design Within Reach, Inc. (DWR), had unfairly diluted minority stockholders of the latter prior to its acquisition by Herman Miller, Inc. As reported by Law360 (subscription required), the presiding three-justice panel of the Supreme Court also let stand the Chancery Court’s decision that the $170 million merger with Herman Miller Inc. should not voided due to inadvertent mistakes made by DWR in effecting a reverse split of Glenhill’s preferred stock and its later conversion into common stock, which were only discovered after the litigation was filed. Instead, the Supreme Court affirmed the Court of Chancery’s judicial validation of DWR’s ratification of the defective acts under 8 Del. C. § 205. In denying plaintiffs’ claims attacking the merger, Chancellor Andre Bouchard held that the suing investors were not challenging the fairness of the merger but instead were trying to “secure a larger portion of the merger consideration for themselves by challenging transactions that occurred before the merger.” The Supreme Court also upheld the Court of Chancery’s April 2019 decision declining to award legal fees under the corporate benefit doctrine to plaintiffs for having identified the defective acts, based on “plaintiffs’ steadfast opposition to curing all of the Defective Acts in order to pursue an inqeuitable windfall for themselves.” The Supreme Court Justices concurred: “Having considered this matter on the briefs and oral arguments of the parties and the record below,” the order said, the decision “should be affirmed on the basis of and for the reasons assigned by the Court of Chancery in its memorandum opinion.” Olshan litigation partners Adrienne Ward and Brian Katz represent Glenhill Capital Management LP in this matter.