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.