February 2022 in Brief: Business Litigation & Dispute Resolution

Business Litigation

Delaware Court of Chancery Applies Entire Fairness Review to Conduct of SPAC Board and Sponsors

By Sara Bussiere, Cadwalader, Wickersham & Taft LLP

In In re MultiPlan Corp. Stockholders Litigation, Cons. C.A. No. 2021-0300-LWW, 2022 Del. Ch. LEXIS 1 (Jan. 3, 2022), Vice Chancellor Lori Will addressed for the first time the applicable standard of review for breach of fiduciary duty claims arising from a de-SPAC merger. In denying defendants’ motion to dismiss, the Court applied entire fairness, Delaware’s “most onerous” standard of review, to the director-defendants’ conduct due to the economic benefits they received from the business combination that were not shared by all SPAC stockholders. The Court also found that the directors were self-interested in the business combination because they held founder shares that provided additional unique benefits, and because they had significant ties to Michael Klein, the CEO and Chairman of the SPAC sponsor, Churchill Capital Corp. III. Given that the deal structure at issue in MultiPlan is similar to many other de-SPAC transactions, this decision serves as a cautionary signal for SPAC sponsors and directors that heightened scrutiny may apply to investor challenges to de-SPAC transactions.

Dispute Resolution

Congress Passes Landmark Bill Prohibiting Employers from Mandating Arbitration of Sexual Harassment Claims

By Leslie Ann Berkoff, Partner at Moritt Hock & Hamroff LLP, Chair of Dispute Resolution Practice Group

On February 10, 2022, the US Senate passed H.R. 4445, entitled the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”), which is a piece of landmark legislation that seeks to prohibit employers from requiring arbitration of workplace sexual harassment or assault claims in any cases filed under federal, state, or tribal law. The bill is expected to be signed by President Joe Biden and will take effect immediately. This legislation parallels legislation passed in several states, such as California and New York, which also limit or outright prohibit employers from requiring arbitration of these kinds of claims.

Under the Act, employers will be prohibited from enforcing pre-dispute arbitration provisions and/or class or collective action waivers within employment contracts or similar agreements, to address sexual assault and sexual harassment claims, absent agreement by the employee bringing such claims. The Act only covers pre-dispute provisions, and thus if the parties enter into an agreement after a dispute arises, it will not govern those types of agreements. Moreover, the Act is limited specifically to sexual harassment or sexual assault disputes as defined in, inter alia, Section 2246 of Title 18, and as such other employment-related disputes are not impacted and can still be subject to forced arbitration. The question arises: what if the suit contains multiple claims some based upon sexual harassment and others not—will the claims need to be segregated (absent agreement to arbitrate both)?

Thus, while employers can still include these kinds of compulsory arbitration provisions in their agreements, they should be mindful that they cannot simply presume they will govern a dispute.