June 10, 2014

Protecting Protective Provisions: Lessons from the Recent Delaware Chancery Court Opinions Spanish Broadcasting

Protecting Protective Provisions: Lessons from the Recent Delaware Chancery Court Opinions Spanish Broadcasting

June 10, 2014

As part of its ongoing webinar series, the PEVC committee will be hosting a webinar discussing the implications of two cases in which preferred stock investors discovered that their protective provisions did not provide them with the leverage they thought they had bargained for.  In Fletcher v. Ion, the Court awarded just $300K in breach of contract damages to a preferred stockholder that was seeking nearly $80M in damages arising out of an issuance of debt securities in violation of its blocking rights.   In Lehman Brothers v. Spanish Broadcasting, the Court denied the preferred stockholders' requested relief for, among other things, monetary damages based on an alleged breach of their protective provisions arising out of Spanish Broadcasting's debt issuances.  In denying the relief, the Court applied the doctrine of acquiescence, essentially finding that the preferred stockholders failure to assert their rights under the certificate of designations over a period of years resulted in their waiver of the rights.  Practitioners are still processing the implications of these decisions for private equity and venture capital stockholders.

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