Kevin Miller, a partner in Alston & Bird’s Corporate Transactions & Securities Group and head of the firm’s Financial Advisors Practice, sat down with David Marcus of The Deal to discuss the latest developments in Chen v. Howard-Anderson, a case relating to the acquisition of Occam by Calix. The case is currently before the Delaware Court of Chancery on a motion by plaintiffs to amend their complaint to add both Occam’s legal counsel and its financial advisor as defendants for allegedly aiding and abetting breaches of fiduciary duty by Occam’s board of directors.
“This is probably one of the most interesting cases in the Delaware Court of Chancery,” said Miller. “It’s been around since 2010, with a long and tortured path.” According to Miller, that tortured path has included allegations of insider trading by plaintiffs and discovery abuses by Occam, its legal counsel and its financial advisor.
Asked if shareholders suing company counsel for aiding and abetting breaches of fiduciary duty will become more common, Miller said, “We may see a little bit more of it, but I don’t really think this reflects a new trend. I think this is a relatively special circumstance. The primary claim here is the failure to disclose certain information in the merger proxy, in this case projections. Given the central role of company counsel in drafting the merger proxy and the alleged discovery abuses, it seemed a lot more likely plaintiffs might go after company counsel.”
Miller noted that the most important takeaway from Chen may be tied to last year’s damages ruling by the Delaware Court of Chancery in In re Rural/Metro.
“I think the real significance of this motion to bring company counsel and financial advisors in as aiding and abetting defendants relates directly to the damages decision in Rural/Metro where Vice Chancellor Laster held that the defendant couldn’t get contribution or credit for settlement payments against codefendants unless it had shown they were liable at trial,” Miller said. “It creates a prisoner’s dilemma situation where the defense can’t present a united front and makes it more likely that other defendants will bring cross-claims against company counsel.”
Click here to watch the full video (requires subscription).