Third Point LLC v. Ruprecht: Practical Implications of Sotheby’s Two-Tiered Poison Pill Having Survived Preliminary Judicial Review in Delaware
18 June 2014M&A Update
In Third Point LLC v. Ruprecht, et al.1, the Delaware Court of Chancery denied the motion of Third Point LLC and its co-plaintiffs for a preliminary injunction to enjoin Sotheby’s from holding its annual meeting. Third Point had claimed that Sotheby’s directors had violated their fiduciary duties in order to obtain an impermissible advantage in a proxy contest with Third Point by (i) adopting a stockholders right plan (commonly referred to as a “poison pill”) in anticipation of the proxy contest and (ii) refusing to provide a waiver to Third Point from certain of such poison pill’s terms. The Court held that Third Point was not reasonably likely to succeed on the merits on such claims based on its findings that the Sotheby’s board of directors had identified legitimate and legally cognizable threats to the company’s corporate policy and effectiveness and that the board’s actions were proportionate responses to the threats posed and were not preclusive of a proxy contest.