Mergers

New York Extends Common Interest Privilege Protection to Non-Litigation Communications

Ordinarily, when a communication between an attorney and her client is disclosed to a third party, that communication loses its privileged status.  The common interest privilege operates as an exception to that rule that allows the privilege to extend to communications with certain third parties.  For the common interest doctrine to apply, the communication must be in furtherance of a legal interest that is shared by the client and the third party.  Historically, New York courts additionally required that the communication relate to legal advice regarding pending or prospective litigation.  On December 4, 2014, in a landmark decision, a New York appellate court did away with this additional requirement.

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“We’re Considering Selling the Company – How Can a Special Committee Help?”

Chairs Around a Table

In any change-of-control business transaction, the decision by the target company’s board of directors to approve the deal is subject to heightened scrutiny by the courts. These days, virtually every M&A deal is sure to attract at least one strike suit challenging the board’s decision, so it is essential that the board’s decision-making process be robust and untainted by any conflicts of interest.

One way in which a board can insulate its decision-making process is to employ a special committee of independent, outside directors to evaluate and negotiate any potential sale. Although boards are not required by law to use special committees when brokering change of control transactions, Delaware courts have repeatedly held that the use of a special committee can be powerful evidence of a fair and adequate process. That is especially true where (i) the contemplated transaction is with a controlling stockholder or (ii) a majority of the directors are conflicted, two situations where courts will employ the even-more exacting “entire fairness” standard of review. As the Delaware Supreme Court recently noted, “the effective use of a properly functioning special committee of independent directors” is an “integral” part “of the best practices that are used to establish a fair dealing process.” READ MORE

Federal Trade Commission Announces New Hart-Scott-Rodino Thresholds

Merge Sign

The Federal Trade Commission has announced the following new Hart-Scott-Rodino (HSR) filing thresholds, which will be effective for transactions closing on or after Feb. 11, 2013.

Any acquisition of voting securities and/or assets requires premerger notification to the FTC and the Department of Justice under the HSR Act and the regulations promulgated thereunder (16 C.F.R. Sections 801 – 803) if the following tests are satisfied and if no exemption applies (15 U.S.C. Section 18a(a)(2)).

Where a premerger notification is required, both parties must file, the acquiring person must pay a filing fee ($45,000 for transactions valued in excess of $70.9 million but less than $141.8 million, $125,000 for transactions valued at $141.8 million but less than $709.1 million or $280,000 for transactions valued at $709.1 million or more) and the parties must observe a 30-day waiting period prior to closing. READ MORE