Skadden, Weil Win Dismissal of Claims From NYMEX-CME Merger
By Andrew Longstreth
October 01, 2009
After months of skittishness, titans of industry are reportedly getting more comfortable with making deals. A recent decision by a Delaware Chancery Court, available here, dismissing two actions contesting CME's acquisition of NYMEX Holdings should do nothing to darken the mood of would-be dealmakers.The deal, which is completed, was called into question by a group of former NYMEX shareholders and former seat holders of the NYMEX Exchange, which was a subsidiary of NYMEX. In suits seeking damages, they claimed, among other things, that former chair of NYMEX Richard Schaeffer didn't tell his board about merger discussions with the New York Stock Exchange and that "NYSE ultimately declined to make a formal proposal for purchasing NYMEX because Schaeffer personally demanded a senior executive position for himself as a precondition to the deal."
They also alleged that prior to any formal agreement with CME, Schaeffer and one of his colleagues pledged to CME executives that there would be no attempt to renegotiate the economic terms, a promise that was not revealed to NYMEX's board. Further, according to the plaintiffs, NYMEX’s board agreed to CME's offer "without obtaining, soliciting, or attempting to solicit other, higher bids."
Despite the numerous claims, Vice-Chancellor John Noble was unimpressed. "To some extent, one cannot help but wonder if the plaintiffs in both actions have sought to present a litany of claims with the hope that in the aggregate they will support a theme that something untoward occurred," wrote Noble in a footnote. "In this instance, the court is not persuaded that it can reasonably infer that the collective whole is greater than the sum of the individual parts."
The decision is another win for the Delaware office of Skadden, Arps, Slate, Meagher & Flom, which represented CME. Earlier this year, the firm was also on the winning side of a decision in the Activision-Vivendi case and the precedent-setting decision in the Lyondell matter. Skadden partners Ed Welch and Ed Micheletti said Thursday that the Activision and CME decisions cement the principles established in Lyondell that conclusory claims about lack of good faith won't cut it in Delaware.
"Bottom line is, those three decisions make Delaware law all that much more precise, more predictable, and more desirable," said Welch.
NYMEX and its executives were represented by Weil Gotshal & Manges, led by John Neuwirth.
Denis Shelis of Kohn, Swift & Graft, who represents former NYMEX seat holders, told us he had yet to read the entire decision. Mark Rifkin of Wolf Haldenstein Adler Freeman & Herz, an attorney for former NYMEX shareholders, said he was disappointed with the decision and was studying his options.
