C&J Energy Services, Inc. v. City Of Miami General Employees And Sanitations Employees Retirement Trus

107 A.3d 1049 (2014)

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Nature of the Case

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Facts

City (P) brought a class action on behalf of itself and other stockholders in C&J Energy Services (D)to enjoin a merger between D and a division of its competitor, Nabors Industries Ltd. ('Nabors'). D, a U.S. corporation, will acquire a subsidiary of Nabors, which is domiciled in Bermuda, but Nabors will retain a majority of the equity in the surviving company. The surviving entity will be based in Bermuda, and thus subject to lower corporate tax rates than D currently pays. To temper Nabors' majority voting control of the surviving company, D negotiated for certain protections, including a bye-law guaranteeing that all stockholders would share pro rata in any future sale of New C&J, which can only be repealed by a unanimous stockholder vote. D also bargained for a 'fiduciary out' if a superior proposal was to emerge during a lengthy passive market check, an unusual request for the buyer in a change of control transaction. The Court of Chancery found that the D board harbored no conflict of interest and was fully informed about its own company's value, the court determined there was a 'plausible' violation of the board's Revlon duties because the board did not affirmatively shop the company either before or after signing. The Court of Chancery enjoined the stockholder vote for 30 days, despite finding no reason to believe that C&J stockholders - who must vote to approve the transaction - would not have a fair opportunity to evaluate the deal for themselves on its economic merits. It is undisputed that a deal with Nabors made strategic business sense and offered substantial benefits for C&J's stockholders.