You don't see a lot of mergers these days — unless you mean mergers with the infinite, acquisitions by oblivion, pacts with ferryman Charon.  Deal lawyers all over find themselves brushing up on things like the Uniform Commercial Code chapters that concern the calling of notes, foreclosures upon collateral, and the undoing of fraudulent transfers.

So — to grasp the context of a new decision by the Supreme Court of Delaware – you'll need to go back with Blawgletter to that happy place a couple years ago when M&A work kept our transactional sisteren and brethren busy, busy, busy.

In 2007, Robert Kanner, the 90-percent owner of Pubco Corporation, decided to buy out the company's minority shareholders through a "short form" merger.  Delaware law gave Kanner the right to cash them out simply by telling them, after the fact, that he'd merged Pubco into another corporation, that they'd get $X a share for their Pubco stock, and that they could, if they wanted, demand an "appraisal" should they think Kanner ought to have paid more than $X.  The appraisal would judicially fix the price at $X, below it, or above it.

One other thing:  Kanner also had to give his now-former co-owners all information "material" to their decision whether to seek the appraisal remedy.  But Kanner made a mere pretense of disclosing that stuff, deigning not even to say how he came up with $X.  Plus he sent an out-of-date version of the Delaware appraisal statute.  Kanner plainly liked secrets.

The Delaware Chancery Court took a different view.  It held that Kanner broke his duty to disclose material facts.  And it ordered a "quasi-appraisal remedy", which gave the minority shareholders a second shot at opting for appraisal even if they hadn't chosen that route in the first place.  But it required them, after receiving the material info Kanner left out, to (a) give notice that they now wanted an appraisal (to "opt in") and (b) put some of the money they got in the short form merger into "escrow" in case the appraisal valued their shares at less than $X apiece.

The Supremes of Delaware affirmed the liability part of the Chancery order but reversed on the remedy side.  The Court agreed with the idea of a quasi-appraisal approach but concluded that the minority should not have to opt in or put money in escrow.  Berger v. Pubco Corp., No. 509, 2008 (Del. July 9, 2009).

Today the Seventh Circuit deflected a barrage of darts from an order that certified class treatment of Commodity Exchange Act claims.

The plaintiffs alleged that Pacific Investment Management Company drove up the price of 10-year U.S. Treasury notes.  PIMCO did the deed by buying more than 40 percent of the note inventory.  The cornering strategy hurt the plaintiffs because they'd speculated on the price of the notes — guessing it would fall — by selling them short.  The plaintiffs lost $600 million, they said, when they covered the difference between the "short" price — $100, say — and the market price on the delivery date — $150 or so, perhaps.

PIMCO could hardly contain its outrage at the district court's decision to grant class certification.  It insisted that plaintiffs had to, but failed to, show that all class members sustained injury.  Their Honors didn't agree:

Pressed at argument, PIMCO's counsel retreated, conceded or at least seemed to concede that the issue was not jurisdictional, and clarified that his argument was only that the class members lacked "statutory standing."  Then he took back his concession, arguing that if any class member would have no jurisdiction over that class member, who would therefore not be bound by any judgment or settlement and so could bring his own suit for damages.  That is to say that if a plaintiff loses his case, this shows that he had no standing to sue and therefore can start over.  That would be an absurd result, and PIMCO need not fear it.

Kohen v. Pacific Investment Management Co. LLC, No. 08-1075, slip op. at 8-9 (7th Cir. July 7, 2009) (citations, including one involving ex-Governor Blagojevich, omitted).

The court also rebuffed PIMCO's "repeated, indeed obsessive, citations to the Supreme Court's decision in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), a case that does not involve class certification", noting that the tack "suggests desparation."  Id. at 12.

Nor did the panel favor PIMCO's point that the interests of class members could lead them to prefer different arguments about when the effects of PIMCO's illegal conduct ended.  Blawgletter doesn't understand the point and so can only say we agree with the outcome.

Our feed can explain it to you but can't understand it for you.

 
I'll huff, and I'll puff!

Frank Churchill and Ann Ronnell wrote the lyrics to a Depression-era favorite, Who's Afraid of the Big Bad Wolf.  Walt Disney's Silly Symphony cartoon, "Three Little Pigs", featured the song. 

The title reminds Blawgletter of an Obama-era antitrust probe, which features Google as the likely bad guy that may — or may not — climb down the third pig's brick chimney into a boiling caldron.

On April 29, we noted:

Google Book Search Will Get Antitrust Look

The Paper of Record today reports that the Department of Justice has opened a file on a license pact between Google and people who write and publish books.  The licensing deal would settle copyright claims against Google for its Google Book Search service.   Google describes the "groundbreaking agreement with authors and publishers" here.

Critics contend that the deal gives Google too much power over the online book search market.

The federal judge handling the copyright lawsuit, a class action, extended the "opt out" date for class members to September 4, 2009.  That means copyright owners can choose to exclude themselves from the pending settlement by giving notice of their choice by that date.

The Paper of Record reported last month:

“Up to now, Google has been very careful to avoid predatory behavior,” said Christine A. Varney, a partner at the law firm Hogan & Hartson and a former member of the Federal Trade Commission. “But a transaction like this [a now-kaput deal with Yahoo on search ads], I think, is fundamentally anticompetitive.”

Ms. Varney since has become the head of the Antitrust Division in the DOJ.  Uh-oh.

The WSJ reports today (actually, tomorrow):

The U.S. Justice Department said it is investigating a settlement between Google Inc. and authors and publishers, saying that antitrust issues raised by the deal warrant scrutiny by the agency.

Deputy Assistant Attorney General William Cavanaugh disclosed the investigation in a letter to U.S. District Court Judge Denny Chin, who is scheduled to review the settlement. Mr. Cavanaugh wrote that the Justice Department hasn't yet reached any conclusions on "what impact this settlement may have on competition."

*  *  *  *

The agreement, which was struck to resolve a copyright lawsuit between Google, authors and publishers, gives Google copyright licenses over millions of digital books it has scanned since 2004 to include in its book search service and to sell in digital form to consumers and libraries. In exchange, it has agreed to share revenue earned by selling access to digital copies and advertising against books with rights holders.

Hmmm.  We'd like to see a tad more flesh on the antitrust bones here.  Does the Department of Justice suspect, for example, that the deal may give the Don't Be Evil people undue control over online demand for digital copies of paper-and-ink publications?  And so what if the pact does create — or leverage –market power?  Does that make Google the modern-day big bad wolf?

It might.  It just might.

 What do you think?