Chancery Court Grants Rare Motion to Dismiss Suit Governed by Entire Fairness
In Short The Case: The electric vehicle company Canoo went public in a de-SPAC transaction in December 2020. After its stock price fell, a stockholder in the SPAC who chose not to redeem his stock sued the SPAC board and its controller for breaching their fiduciary duties. The Outcome: In an unusual development, the Delaware Court of […]
Randi Lesnick and Andy Levine are Co-Chairs of Corporate Practice, and Nick Walter is Of Counsel at Jones Day. This post is based on Jones Day memorandum by Ms. Lesnick, Mr. Levine, Mr. Walter, Ryan Andreoli, Evan Singer, and John Tang, and is part of the Delaware law series; links to other posts in the series are available here.
In Short
The Case: The electric vehicle company Canoo went public in a de-SPAC transaction in December 2020. After its stock price fell, a stockholder in the SPAC who chose not to redeem his stock sued the SPAC board and its controller for breaching their fiduciary duties.
The Outcome: In an unusual development, the Delaware Court of Chancery granted defendants’ motion to dismiss, ruling that even though the transaction was subject to entire fairness review, the plaintiff had failed to plead that the defendants had impaired his right to choose whether or not to redeem his stock.
Looking Ahead: Pleading-stage dismissals of claims that are subject to the entire fairness standard are rare. The court’s ruling, however, serves as a reminder that they are possible —and that, no matter what the standard of review, a stockholder plaintiff challenging a transaction must still plead a viable non-exculpated claim.
