Delaware Supreme Court Reaffirms Passive Market Check May Satisfy Director Revlon Duties and Provides Guidance on “Blue Pencil” Injunctions Modifying Merger Agreements
12.23.14
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In an important decision written by Chief Justice Strine and issued on December 19, 2014, in C&J Energy Services, Inc., et al. v. City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, et al., the Delaware Supreme Court reaffirmed that enhanced judicial scrutiny under Revlon requires that directors of a company make reasonable, but not necessarily perfect, decisions in pursuing a change-of-control transaction; that a passive, post-signing market check period may be sufficient to satisfy directors’ Revlon duties; and that “blue penciling” of an agreement by courts, to the detriment of the acquiror’s rights under the agreement, should be limited to instances where it is clear after trial (or based on undisputed facts) that there was misconduct by the acquiror, such as aiding-and-abetting a breach of a fiduciary duty.