The Clement Decision: Implications for Controlling Shareholders

In this episode of S&C’s Critical Insights, S&C litigation partner John Hardiman discusses Vice Chancellor J. Travis Laster’s recent ruling in Sarah Clement v. Apollo Global Management and its implications for controlling shareholders in M&A transactions. Despite the Delaware Chancery Court’s intense scrutiny of transactions involving controlling shareholders, the Court gave the controller a rare win and dismissed a complaint alleging that a merger was unfair because the controller allegedly extracted unique benefits to the determinant of minority shareholders. Along the way, the court also elaborated upon two issues of Delaware “unique benefit” law in controlling stockholder transactions of interest to Delaware practitioners: (i) whether the unique benefit received by the controller has to be at the expense of the minority; and (ii) the framework for analyzing challenges to a merger where the claimed benefit is the elimination of litigation exposure.