[The following post comes to us from Andrea Tinianow, who is a vice president and assistant general counsel at Corporation Service Company. She is also a Delaware attorney.
This post relates to the Delaware Supreme Court’s decision upholding the Chancery Court in Martin Marietta Materials inc. v. Vulcan Materials, Inc. We had earlier discussed some of the substantive aspects of the Chancery Court’s opinion here]
In a case that began in December of 2011, was argued before the Delaware Chancery Court in April of 2012, and argued on appeal to the Delaware Supreme Court on May 31, 2012, the Delaware courts have addressed a complex piece of litigation in under six months in order to ensure that the parties could have finality before a critical June 1, 2012 shareholders’ meeting.
In confirming the Court of Chancery’s decision, the Delaware Supreme Court also reconfirmed that Delaware courts are not only “open for business” for companies who need the assistance of the courts in resolving their disputes, but also that Delaware courts are capable of making decisions at the speed of business.
In 2010, Martin Marietta Materials, Inc. and Vulcan Materials, Inc. – two of the world’s largest producers of sand, gravel and similar materials used in construction - began discussing a consensual merger. That transaction was scuttled in June of 2011 as the stock prices of the two companies diverged and disputes arose over the location of the merged companies’ headquarters and who would occupy the executive suite in those offices. However, during those consensual negotiations, the parties signed a confidentiality agreement – governed by Delaware law - limiting the use of information about each of the companies conveyed to the other during their negotiations.
On December 12, 2011, Martin Marietta commenced a $4.8 billion hostile takeover bid for Vulcan, premised on Martin Marietta obtaining 80% of the shares of Vulcan through a tender offer. Martin Marietta also launched a proxy battle, attempting to have four individuals supportive of the hostile takeover appointed to Vulcan’s board at Vulcan’s June 1, 2012 shareholders’ meeting.
Vulcan’s board opposed the hostile takeover and asserted that Martin Marietta improperly used information obtained during the consensual negotiations to structure its hostile bid, in violation of the confidentiality agreement. On the same day it launched its hostile bid for Vulcan, Martin Marietta commenced an action before the Delaware Chancery Court asking the court to find that Martin Marietta had not violated the confidentiality agreement. Vulcan counterclaimed, arguing that Martin Marietta had violated the confidentiality agreement and should be enjoined from proceeding with the hostile takeover.
Clearly time was of the essence for both Martin Marietta and Vulcan. Martin Marietta needed certainty that its hostile bid and proxy effort would not be overturned by a finding of breach of the confidentiality agreement after the fact. Vulcan, on the other hand, required a finding that Martin Marietta had breached the confidentiality agreement prior to the June 1, 2012 meeting and an injunction lasting long enough to prevent Martin Marietta from misusing the confidential information to take control of Vulcan.
In an extraordinarily detailed and well-reasoned opinionissued on May 4, 2012, just three weeks after argument by the parties and a month before the critical Vulcan shareholders’ meeting, Chancellor Strine of the Delaware Chancery Court concluded that Martin Marietta had breached the confidentiality agreement and that it should be enjoined from pursuing its hostile tender or proxy efforts for four months – past the time for Vulcan’s shareholders’ meeting, effectively delaying Martin Marietta’s efforts until another shareholders’ meeting could be called.
The Delaware Supreme Court heard oral argument on an expedited basis on May 31, 2012 and issued a preliminary opinionupholding Chancellor Strine that same day, providing Martin Marietta and Vulcan the certainty both needed ahead of Vulcan’s June 1, 2012 shareholders’ meeting.
The Martin Marietta/Vulcan case is yet another example of why companies choose to litigate in Delaware, where the Court of Chancery quickly and ably responds to the needs of companies at the speed of business with careful and thorough opinions, and the Delaware Supreme Court is open to those parties and flexible enough to ensure that the court’s calendar does not harm their interests. Once again, the importance of choosing Delaware for incorporation and the governing law for contracts has been illustrated by Delaware’s courts.
- Andrea Tinianow